Startup Equity Explained: How to Structure Offers That Close

Equity is your secret weapon as a startup. Used well, it lets you compete with companies offering 2x your cash compensation. Used poorly, it confuses candidates and creates resentment.

The Basics: Stock Options vs RSUs

Stock Options (Most Common at Seed-Series B)

RSUs (More Common at Series C+)

How Much Equity to Give

Here's a benchmark for first-time grants at VC-backed startups:

Seed Stage

Series A

Series B

Vesting Schedules That Work

The standard is still 4-year vesting with a 1-year cliff. But modern startups are experimenting:

- 4-year, 1-year cliff (standard): 25% after year 1, then monthly

- 3-year, no cliff (aggressive): Monthly from day 1, attracts competitive candidates

- 4-year, 6-month cliff (balanced): Lower risk than no cliff, more candidate-friendly than 1-year

Common Mistakes

1. Not explaining total value: Show candidates what their equity could be worth at various valuations

2. Ignoring the option pool: If your pool is almost empty, grants will be diluted at next raise

3. No refresh grants: Annual refreshers retain top performers

4. Vague exercise terms: Clearly state the post-termination exercise window (90 days is standard, 10 years is generous)

How to Present Equity in Offers

Include in every offer letter:

This transparency builds trust and closes candidates faster.

Use Our Tools

Our Salary Research Tool includes equity benchmarks alongside cash compensation. Use it to ensure your offers are competitive across all components.