An equity grant is one of the hardest parts of a job offer to evaluate honestly, because the number presented to you — "10,000 shares" or "0.1%" — is almost never the same as its actual, current, spendable value. This is general education about how equity typically works, not financial or tax advice; the specific terms of your grant and their tax treatment depend on your situation and should be reviewed with a professional before you make a major decision based on them.

The headline number is not the value

A share count or percentage means very little without a price attached to it, and for a private company, that price isn't a real market price — it's usually a valuation set by the company's most recent funding round or an internal 409A valuation, which can differ significantly from what the company would actually be worth if sold or taken public. Ask directly for the current strike price (what you'd pay to exercise an option) and the most recent 409A valuation, if the company will share it — a reasonable, normal question at the offer stage, not an overreach.

Options are a right to buy, not a grant of stock

Stock options give you the right to purchase shares at a fixed strike price, not shares outright. If the company's value never exceeds that strike price, the options are worth nothing regardless of how many you were granted — this is the single most commonly misunderstood part of an equity offer, and it's why a large-sounding option grant at an early, unproven company carries real, meaningful risk of being worth nothing.

Vesting determines what you actually own, and when

Equity typically vests over a period (four years with a one-year "cliff" is a common default), meaning you own none of it until the cliff passes, then it accrues gradually afterward. Leaving before the cliff typically means walking away with nothing, which matters if you're comparing a startup offer against a role you might realistically leave within the first year for any reason.

Dilution reduces your percentage over time

Future funding rounds typically dilute existing equity holders, including employees, meaning your percentage ownership shrinks as the company raises more money, even if the number of shares you hold stays the same. A 0.1% grant today can be meaningfully smaller by the time (if ever) it converts to real money, depending on how much additional funding the company raises.

Liquidity: when, if ever, can you actually access the value

Equity in a private company is illiquid — you generally can't sell it — until a specific liquidity event: an acquisition, an IPO, or occasionally a secondary sale the company facilitates. Ask directly about the company's stage and realistic path to a liquidity event; a reasonable, well-informed answer is a good sign, and a defensive or evasive one is worth weighing carefully.

Questions worth asking before accepting

  • What's the current strike price and most recent valuation?
  • What's the vesting schedule, and is there a cliff?
  • How much runway does the company have, and when did the most recent funding round close?
  • What happens to unvested equity if I'm let go versus if I resign?
  • Realistically, what does the path to any liquidity event look like?

How to weigh it against a more traditional offer

Treat the equity component as a high-variance bonus you might reasonably value near zero for planning purposes, not as guaranteed compensation — if the guaranteed salary alone isn't enough to live on and meet your goals, the equity shouldn't be the thing that closes that gap in your own mental math. See our guide on evaluating a job offer beyond the salary number for the broader framework this fits into, and use our Job Offer Comparator to weigh a startup offer's guaranteed compensation and growth potential against a more traditional offer side by side, entering equity conservatively rather than at its optimistic headline value.