Why your startup equity offer is worth less than you think - and what to do about it

Okay, so you’ve been offered equity: 80 thousand options, with a pre-money valuation of $6M, a double trigger clause, a strike price of $0.60 and a 90-day post-termination exercise window. So… Is that good?

With salary, its value is immediate and obvious: you can benchmark the amount against peers and ultimately see it land in your bank account every month.

Equity is murkier: What needs to happen for it to have real-world value? What are the different scenarios? How much is it ultimately worth? When would I actually receive the money?

I’ve spent the past seven and a half years around startups. I’ve received equity, issued it, watched people approach it with everything from indifference to intensity, and seen how things have ultimately played out.

To help you appraise an equity offer, I’ll help you answer:

1. how much are my shares really worth?
2. what’s a reasonable amount to expect?
3. how can I get what I deserve?

And at the end, I’ll share a personal story to illustrate how despite following best practices, you might still not end up with what you expect.

Before I start, it’s worth calling out: equity and compensation is obviously only one reason you might join a start-up. There are many others (such as impact, enjoyment, learning) which are probably even more important - but which are outside the scope of this article.

The core idea behind equity is incentive alignment: a startup can’t always compete on base salary, so it offers you a stake in what you’re building together. Equity is usually granted as stock options or shares, and the value is only realised at a liquidity event - most commonly an acquisition or IPO - which means until that happens, your shares are worth nothing you can spend.

How much are my shares actually worth?

Your shares will have a nominal value, determined by how much investors are willing to effectively pay for those shares, but that’s not a value that you can actually sell them for today.

To estimate the real value of your shares, first calculate a top-line figure and then there are two main discounts you should apply.

The top line

The face value of your equity is actually pretty simple:

\[\text{total value} = \text{number of shares} \times \text{current price per share}\]

The price per share is usually derivable from the most recent funding round valuation divided by the total number of shares outstanding.

For example, if you have 80,000 shares and each share was valued at $1 in the last funding round (because investors bought 1,000,000 shares for $1 million), then the nominal value for your shares is $80,000.

However, don’t just accept the figure the company gives you. Do the maths yourself. Valuations can be stated ambiguously, share numbers can be cited selectively, and mistakes do happen. Understand the current valuation and the total share pool, and verify the arithmetic. You need to know: how many fully diluted shares exist, what is the total value of all those shares, how many of those shares are you being offered.

NOTE: This number is only the beginning.

Discount 1: vesting

You won’t own all your equity from day one. Most startup equity comes with a vesting schedule, typically four years with a one-year cliff. This means you earn nothing in your first year, then accrue monthly over the following three.

So to actually unlock all the value of the equity, you would need to stay for four years. This is completely feasible if you love the company and find a great home there. But there’s inherent uncertainty; companies evolve, leadership might change, what could have been a great place to work might stop being so. You might get bored or your circumstances might change. The company might decide that it doesn’t need you anymore. The average early-stage worker changes job on average every 2.7 years.

So it’s worth asking yourself: realistically, based on your best guess today, what fraction do you expect to vest?

Discount 2: probability of successful liquidation

You’ve probably heard the trope that “most startups fail”. Maybe you feel that this company might be one that makes it. Maybe it’s the great founding team, the great investors, the size of the market opportunity, etc etc.

The thing is; that’s already factored in. All start-ups are promising, or else they wouldn’t have raised. Investors are investing on the expectation that most of their portfolio will give no return.

Obviously, there’s no way to concretely quantify the risk here. Robert Heaton has a great article on this. He outlines a series of discounts to apply (common stock discount, strike price discount, mobility discount, risk discount, liquidity discount) and ultimately concludes that valuing options at ~20% their nominal value is reasonable.

Putting it together

Let’s carry our $80,000 example all the way through.

The optimistic scenario first: the company raises a Series A (3x valuation, ~20% dilution to existing shareholders), then a Series B (another 3x, another ~20% dilution), then a successful acquisition or IPO at a further 3x. Through that journey, your initial grant might reach around $1.4 million at the exit event.

That’s the ceiling. Now apply the two discounts:

Vesting: The average early-stage employee leaves after 2.7 years. With a four-year vest and one-year cliff, that’s about 67% of shares vested. Applied to the top-level, very positive scenario: $1.4 million × 67% = $945,000.

Liquidation probability: Applying the ~20% heuristic: $945,000 × ~20% = ~$189,000.

So: from an $80,000 headline, a $1.4M ceiling if everything goes perfectly, down to a realistic expected value of around $189,000. (And don’t forget you’ll need to pay tax on whatever you make.)

How much equity should I expect?

There is data to help you benchmark, though you should treat it as directional. Markets shift faster than datasets, and companies vary enormously in their compensation philosophy.

The best tool I know is Index Venture’s Option Plan, which lets you filter by country, stage, how technical the role is, and how many funding rounds are planned. Put your own numbers in - it’s most useful when personalised to your situation.

One consistent pattern: US companies are meaningfully more generous with equity than European ones. This reflects a stronger culture of treating equity as real compensation, combined with higher valuations and fiercer competition for technical talent. The UK and Europe are catching up, but the gap is real.

As rough ballparks: early hires in technical roles (pre-Series A) typically land in the 0.3–1.5% range. The very first employees at seed-stage companies may get as much as 2–5%, but it depends on the company’s philosophy. Post-Series A hires are usually in the 0.1–0.8% range. US companies skew toward the top of those bands; European ones toward the bottom.

To make those percentages concrete: at a $1 billion exit, 0.5% is $5 million before dilution and tax. Run that through the worked example from the previous section - apply future dilution from funding rounds, apply the liquidation probability discount - and the real expected value comes into view. The percentage is just the starting point.

How can I get what I deserve?

Getting what you deserve starts with knowing what you actually want.

First: figure out what you want

Get clear on where you personally fall on the salary-equity spectrum.

Some people genuinely don’t care about equity. They want reliable income, they’re skeptical about startup outcomes, and they’d rather have money in hand. Others are fully bought into the upside and willing to take a below-market salary to get a meaningful stake in something they believe in. Both are reasonable positions.

My honest take: if you’re joining an early-stage startup, it should be because you genuinely believe in it and want to take real ownership of making it succeed. If not, you could always take a job elsewhere that is more reliable and probably pays a higher salary. This means you should probably be optimizing for equity.

Life circumstance can be a factor here too though. If you have some personal expenses, but still have high conviction in a start-up, then it can make sense to sacrifice some equity in exchange for necessary upfront cash.

I recommend that, after considering the above, you come up with a number you’d be happy with (both on the salary and equity front). This is more helpful than “as much as possible”. It’s better to do this before you get an actual offer, to avoid anchoring bias. Use the benchmarks, consider your personal circumstances and talk to friends to help figure this out.

What constitutes good compensation is also impacted by your leverage:

• Do you have other options? Either other paths outside of full-time employment or other job offers?
• How comfortable are you walking away? Do you need a job to pay the bills right now, or do you have savings? How confident are you that you could find another job you’d be as excited by?

There should be a number which, when you look back on it in years to come, both you and the employer would consider a win. That is; a number that feels meaningful enough to get your buy-in (and that should change your life, if the company succeeds) and that makes sense for the company to offer given the expected value you can bring.

Then: negotiate for it

Others have written about negotiation, but a few principles worth keeping in mind:

(1) Your leverage is highest before you join

Before you sign, you have the clearest form of leverage available: the ability to decline. After you join, that option largely disappears. So if you’re going to negotiate meaningfully, now is the time.

The caveat: if you genuinely need a job right now, your leverage is lower, and you should be honest with yourself about that. Pretending you have options you don’t have is a risky thing to do.

(2) If your leverage is low, you’ll need to demonstrate value first

If you’re relatively junior or unproven, you may not have the standing to negotiate hard upfront. In that case, get clarity on what the path to more equity looks like once you’ve established yourself.

(3) Have a clear argument, not just “please can I have some more”

Reference the benchmark data you’ve looked at. Explain what you’re optimising for and why the current offer falls short of that. A reasoned ask is more persuasive and less off-putting than a bare request.

(4) Don’t overdo it

Make your case clearly, once. Then let it settle. Pushing too hard or bringing the subject up too much can give off bad vibes and become a source of friction. For me, as a hiring manager, when people try and talk too big a game here, it comes off as a lack of experience.

(5) Get everything in writing

A verbal agreement is not enough. If it’s not written down, it doesn’t exist. The high-level items (e.g., salary amount) will be in the contract, but there can be important details that aren’t explicitly documented; it’s your job to make sure that anything that matters is.

More on this below, but I once joined a company where the executives laughed at an incoming hire for requesting things to be documented; only for that employee to lean on that very writing 6 months later in a dispute.

How things can still go wrong - a cautionary tale

All of the above assumes the company actually issues what it promises. That assumption is not as safe as it sounds.

Now you might ask: “What? Of course they will! You’ve just signed a contract that’s legally binding etc.” Maybe this is indeed true in the majority of cases, but I’ve seen this go wrong often enough that this warrants its own section. Let me illustrate with a personal story here.

A while ago, I joined a start-up at an early stage. I followed my own advice from above. I had candid conversations with the hiring manager and ultimately landed on an equity amount that I believe was a win-win for both me and the company. I had to decide between working on my own start-up (where I’d have founder-level equity, but lower probability of success) or joining this one (lower equity, slightly higher probability of success). It was a tight call, but I ultimately decided to join the start-up, and the prospect of solid ownership played a role in tipping the scale in that direction.

I went all-in on the company for the subsequent 6 months and changed the early trajectory of the company. I worked long hours and weekends, I built a product that was the best out there, demo’d it to customers, iterated based on their feedback, and came up with approaches that are still used by the company today. I added a ton of value and was told by a co-founder that “expectations were sky high, but you’ve somehow exceeded them.. you are the best first employee we could have possibly hoped for”.

Then, as a result of the progress we’d made, the company raised another investment round. I looked at the cap table for the first time and… I saw that the equity I’d been issued was not what we’d agreed.

The total value was less than 2/3 of what I’d been told. (I.e., In salary terms, the equivalent of being offered a job for a £100k salary but then you get your first paycheck and it was only for £60k.)

I spoke to other early employees about it, and they were in the same boat. The majority of employees who’d joined the company at seed stage, across all functions in the company, had been misled: they had been verbally offered a stated dollar amount of equity, but then been issued less than 2/3 of that amount.

It turned out that the company had failed to account for dilution from earlier funding rounds when giving out their offers.

I raised this with the leadership, expecting to trigger an internal review and some kind of company-wide action or statement. I assumed they would respond collaboratively and with transparency. Instead, the company framed it as me asking for more equity, made no internal statement and outright refused any mistakes or miscommunication on their behalf.

I couldn’t believe it. The earlier communication had been so unambiguous and (as I found out) systematic across early hires.

I wasn’t sure what to do. By this point, I’d invested 6 months of my life. I’d made great friends in the company and was really enjoying my work. I had a ton of context on our product and problem space and opinions on how we could win as a company. So even though this felt like a betrayal of trust, and I did flirt with the idea, I wasn’t really going to just quit. A lawyer friend told me this is probably enough grounds to take legal action - but are you really going to sue your workplace? (Especially when you’re working with friends as part of a small start-up team - and for some equity that maybe has value in future, but is still only really worth £0 today?)

This kind of thing can happen with equity in the way it can’t really with salary. There’s the time delay; if you got a £60k salary paycheck at the end of your first month rather than a £100k one, you’d resolve this understanding pretty quickly. But with equity, you won’t see that money until much later, if ever, so misunderstandings can go unresolved for much longer. And the general complexity of equity vs cash contributes too.

I believe this played a factor here; my impression was that the initial mis-issuing of equity was a genuine misunderstanding on behalf of the company - just one that they later opted to double-down on.

What’s the takeaway here? A cynical view would be “well you just can’t trust people”, but I think it’s more nuanced than that. My takeaway is that while both you and the company can align on something equity-wise, something could happen (whether through bad intentions or an honest mistake) that affects you receiving the value that you agreed on.

In my story above, this was the company not factoring in dilution, but there are other ways it could go wrong. Accidentally missing a double-trigger clause might mean if the company gets acquired, you get fired and lose your unvested equity. A friend of mine told his investors that he had issued them S/EIS shares (a scheme to reduce their tax burden in UK), only to later realize he hadn’t registered it properly and they owed a ton of tax.

You can take actions upfront to guard against this. For instance, asking for the monetary value of your equity to be documented explicitly (not just the number of shares or percentage), and requesting access to the cap table early enough to verify dilution calculations yourself. But ultimately, when joining a start-up, you have to place a lot of trust in the leadership of that company.

In closing

After the maths, the benchmarking and the negotiation, there’s one more thing worth internalising: start-up equity is genuinely uncertain, in ways that no amount of preparation fully resolves. Markets shift, rounds don’t close, outcomes that looked likely don’t materialise.

The goal of this article isn’t to eliminate that uncertainty. It’s to make sure you’ve sized the bet correctly before you take it. Do that, and whatever happens next, you made a reasonable decision with the information available.

Then forget about it. The equity will materialise or it won’t. Maximise the chances it will by focusing on doing great work.