What your equity is actually worth: a realistic guide

Most startup equity is worth less than the paper it's written on. Here's how to assess it honestly — and how to use it in your negotiation.

Startup equity is one of the most misunderstood components of compensation. Founders use it to offset lower base salaries. Candidates accept it as though it's real money. And most of the time, it turns out to be worth nothing.

That's not cynicism — it's math. About 75% of VC-backed startups don't return the capital invested, which means most equity granted to employees also returns nothing. Before you trade salary for equity, you need to understand what you're actually getting.

The equity calculator startup companies don't want you to use

When you receive an equity grant, the company will tell you two numbers: the number of shares (or options) and the current valuation. What they won't tell you is what that grant represents as a percentage of the company — or what that percentage is worth after the inevitable dilution from future funding rounds.

A 0.5% stake at a $20M valuation sounds like $100,000. But after Series B, C, and D dilution, that 0.5% is likely 0.15%. And the preferred liquidation preferences from investors mean common stockholders (employees) often get zero even in a modest exit.

Use Hayven's Equity Calculator to model your grant across conservative, base, and optimistic exit scenarios — with dilution and liquidation preferences factored in. It's the number you need before any negotiation.

ISOs vs NSOs vs RSUs: what's the difference

ISOs (Incentive Stock Options): Common at early-stage companies. You have the right to buy shares at a set price (the strike price). If the company exits above that price, you profit. Tax treatment is favorable if you hold long enough.

NSOs (Non-qualified Stock Options): Similar to ISOs but with worse tax treatment. The spread between strike price and fair market value at exercise is taxed as ordinary income.

RSUs (Restricted Stock Units): Common at later-stage and public companies. You receive actual shares (not options) that vest over time. No exercise needed. You pay income tax when they vest. Generally safer and more predictable than options.

The 5 questions to ask about any equity grant

• What percentage of the fully diluted cap table does this represent? Don't let them give you a share count without context.
• What is the current 409A valuation? This is the fair market value of common stock, which is often much lower than the company's stated valuation.
• How much has the company raised, and what are the liquidation preferences? Preferred investors get paid first. You need to know how much they've put in.
• What does the company need to exit at for employees to see meaningful returns? This is the honest question that most people never ask.
• What is the post-termination exercise window? Some companies give you only 90 days to exercise after leaving. This can cost you significant tax advantages or make the options unexercisable.

When to negotiate equity vs. base

If you're joining a pre-Series A startup, equity is speculative — treat it that way. Negotiate for the best base you can get and treat equity as a lottery ticket. If you're joining a Series C+ company with a clear path to IPO, equity becomes more meaningful and worth fighting for. At public companies, RSUs are cash equivalents and should be treated as such in your total comp calculation.

When evaluating where your offer stands overall, don't just look at equity in isolation. Use Hayven's Offer Evaluator to score your complete package — base, bonus, equity, and benefits — so you know exactly what you have before you decide what to push on.

How to negotiate equity

If you want more equity, ask for it directly and explain why. “I'm excited about the company's trajectory and I'd like to increase my ownership stake. Is there flexibility to increase the grant from X to Y shares?”

If they can't move on the grant size, negotiate the vesting schedule instead. A 1-year cliff with monthly vesting after is standard — but you can sometimes negotiate a shorter cliff or an accelerated vesting provision if the company is acquired.

And if you're leaving unvested equity behind at your current company to take this role, that becomes leverage for a signing bonus. Calculate what you're leaving behind and present the specific number.

The bottom line on startup equity

Equity can be life-changing — but only at companies that actually exit at significant multiples. Before you accept a lower base salary in exchange for equity upside, run the math honestly. Most of the time, the base salary compounds more reliably than the equity.

The candidates who come out ahead are the ones who negotiate both — they push for the highest base the company will support, then push for equity on top. Don't accept a false choice between the two.

For a complete guide to evaluating everything in your offer package, read how to evaluate a job offer beyond the base salary.