How to Evaluate a Startup Equity Offer: The Math Most People Skip
Startup equity is either worth a lot or nothing at all. Here's how to figure out which one you're looking at before you sign.
By JobPost Team · Jul 3, 2026 · 8 min read
Most candidates evaluate startup equity by the number of options or shares they're offered. That number is almost meaningless without context. Here's how to actually assess what you're looking at.
The Questions That Matter
What percentage of the company does my grant represent? This is the only number that matters. 100,000 options sounds great. 0.01% of a $50M company is worth $5,000 at exit. Always ask for your grant as a percentage of fully diluted shares outstanding.
What was the last 409A valuation? The 409A is the IRS-approved fair market value of the company's common stock. Your strike price (the price you pay to exercise) should be at or near this value. A high strike price relative to the current 409A means less upside.
What's the vesting schedule? Standard is 4 years with a 1-year cliff — meaning you get 0% for the first year, then 25% at month 12, then monthly after that. Some companies use backloaded schedules (more shares in years 3–4) which is worse for you if you leave early.
What's the preferred share structure? This is the most overlooked question. If the company has raised money with a liquidation waterfall, investors get paid back before common stockholders (you). A $100M exit can produce nothing for employees if investors have $80M in liquidation preferences and participate in the upside.
Red Flags in Equity Offers
- The company can't tell you your percentage of fully diluted shares
- Strike prices much higher than the 409A (this happens after fundraises where the valuation jumps but the 409A hasn't caught up)
- No information about preferred share structure
- Options with a 10-year exercise window at grant but a 90-day post-termination exercise window — you may not be able to afford to exercise when you leave
The Realistic Scenarios
Most startups fail. Of those that don't, many return capital to investors but little to employees. A small number have large exits. When evaluating startup equity, mentally assign probabilities: what's the expected value given the stage, market, team, and traction?
Early-stage (pre-seed/seed): treat equity as lottery tickets — possibly valuable, not bankable. Series A/B: real potential but still significant risk. The percentage and liquidation terms matter a lot. Series C+: meaningful probability of return, but valuations are high and upside may be more limited.
What to Negotiate
In addition to the percentage, negotiate: - Early exercise rights (lets you start the clock on long-term capital gains) - Extended post-termination exercise window (30–90 days is standard; 1–5 years is better) - Acceleration on acquisition (ask about double trigger acceleration)
Startup equity is a complex instrument. Don't accept it without understanding what you have.