Equity Guide

Equity 101 (Still Worth Knowing).

When Betty joined her first startup, she was offered a $130K base salary… and something she didn’t fully understand: 0.5% equity. She nodded like she got it, but she wasn’t totally sure what she was agreeing to, or what that half a percent might actually mean.

Betty’s not alone.

Equity compensation can be confusing, even for people who’ve been through multiple startups. It’s easy to gloss over terms like “vesting” or “strike price” during offer conversations. And hiring managers often assume candidates know what these terms mean. But the truth is, most people are figuring it out as they go.

This chapter is here to change that. We’re breaking down the basics so hiring teams and candidates can speak the same language and make smarter decisions together.

Betty’s First Offer

0.5%

$130K

0.5 % Equity

$ 130K Base Salary

Equity mean

Base Salary

What is equity, really?

At its simplest, equity is a way to give employees partial ownership in the company. Instead of (or in addition to) a big salary, companies offer stock in the business. The hope? That equity will be worth something big one day, ideally after a liquidity event like an IPO or acquisition.

For early-stage startups, equity helps balance out lower cash comp. For late-stage companies, equity is often a bigger chunk of the total comp and a signal that you’re being hired for long-term impact.

Stock Options

Let’s say Betty joins a seed-stage company and is granted stock options. These give her the right to buy a certain number of shares at a fixed price (the strike price) in the future. She doesn’t own them yet. She has to earn them over time and pay to exercise them.

If the company grows, her shares might be worth a lot more than that strike price. That’s the upside.

RSUs

If Betty had joined a Series D company, she might have received RSUs instead — Restricted Stock Units. These don’t require her to buy shares. Once she’s vested, she owns them outright. That makes RSUs more predictable and sometimes better for folks who want less risk.

Vesting, cliffs, and other real-talk terms

Here’s what often gets lost in startup equity conversations:

Vesting

You earn your shares over time, usually over 4 years. If you leave before then, you don’t get everything.

Cliff

Typically a 1-year wait before any shares vest. Leave before that, and you walk away with zero.

Strike price

What you’ll pay to buy each share (if you have options).

Fully Diluted Shares

The total number of shares that could exist based on the current number of issued shares and shares reserved under the equity incentive plan. Your percentage ownership may be further diluted as more shares are issued and reserved in the future.

So when Betty sees “0.5% equity,” that number is based on the fully diluted total. And that 0.5% may shrink if the company raises more money later.

Early-stage

At earlier-stage companies, equity is higher risk but potentially higher reward. but potentially higher reward. Your 1% at a seed-stage startup could one day be worth millions… or nothing at all.

Late-Stage Equity

Later-stage companies tend to offer less equity (in terms of %), but the value may feel more real. Maybe they just raised a big Series C. Maybe they’re prepping for IPO. These companies may also offer liquidity events windows where you can actually sell your shares before an exit.

Betty’s takeaway

At a seed-stage company, her 0.5% might sound small but could be meaningful if the company takes off. At a more mature company, she may prefer RSUs or a bigger cash salary. It depends on her goals, financial situation, and risk appetite.

Why this matters?

Equity is one of the most misunderstood parts of the offer process. And the most likely to create tension later if expectations aren’t aligned. At Betts, we believe everyone from first-time founders to first-time startup hires, deserves to understand how this stuff works. We also know that when both sides speak the same language, better hires happen faster.
And with tools like our Comp Engine, we’re giving hiring teams and job seekers a way to see real-time data on equity and salary so conversations don’t have to rely on guesswork.

Equity Ranges by Role & Stage

If you’ve ever tried to guess what a “normal” equity offer looks like, you know the truth: there’s no such thing as normal.

A Director of Marketing at a seed-stage startup might get 1%. At a Series B company, they might get 0.3%. An early AE could get more equity than a VP of Sales hired two years later. It all depends on the stage, the role, the risk, and the story the company is telling.

The goal of this chapter isn’t to simplify something inherently complex. It’s to give you real numbers , straight from our Comp Engine, so you can make smarter decisions and avoid surprises on either side of the offer.

Let's break it down.

Equity Ranges by Role & Stage

Equity by Role & Stage

Here’s what equity typically looks like by function, based on 2025 Comp Engine data.  
Remember: these are directional ranges, not fixed rules.

Marketing Equity by Stage

Below is the equity information you’ve been waiting for. Please note: for Series A, B, and C companies, equity is shown as percentages of business. For Series C+ companies, equity is shown as a multiple of OTE.

Sales Equity by Stage

Customer Success Equity by Stage

Cash + Equity: What Actually Changes by Stage?

Let’s say Betty is evaluating two offers. One from a Series A startup offering her $125K + 0.8%, and one from a Series C offering $165K + 0.15%.
It’s not just about the size of the equity slice, it’s about what that slice might be worth someday. And what tradeoffs Betty’s making in risk, growth opportunity, and immediate income.

As a general rule:

Earlier stage

Higher equity, lower cash

Later stage

Higher cash, lower equity

Big brand

Less upside, more stability

New startup

More room to shape the company (and outcome)

Today’s candidates are asking smarter questions about these tradeoffs and today’s hiring managers need to be ready with answers.

What’s Changed in Today’s Market?

In the current funding environment, we’re seeing a few trends:

Less aggressive equity offers. Many companies are preserving runway and offering narrower bands, especially if they raised in the 2021 peak.

More focus on total comp. Candidates care just as much about base salary, health benefits, and remote flexibility.

Greater skepticism around valuation. People are asking, “When was this company last valued, and by whom?”

Executives negotiating for cash bonuses or management retention plans, especially if the equity upside looks uncertain.

Want Real-Time Data?

The numbers in this chapter are just a snapshot in time. If you want to compare your own offers or benchmark comp before extending one, check out Comp Engine, a free tool that shows current comp ranges by role, stage, and function. Built with our real-time hiring data, and updated live.

What These Numbers Really Mean

Let’s say Betty gets a job offer. The company’s offering her 0.25% equity. That number looks clean and important, like a slice of something big. But what does it really mean?

It depends:

Equity isn’t a static thing. It shifts depending on what’s happened at the company, how it's structured, and what could happen next. In this chapter, we’re digging into what percentage ownership actually tells you, how to interpret the dollar value (and when not to), and why the timing of a company’s valuation matters more than you might think.

What does percentage ownership actually mean

When someone offers you “0.25% ownership,” they’re usually talking about fully diluted shares, meaning your slice of the pie if every possible share were already issued (including future hires, investors, etc.).

But here’s the catch:

That 0.25% sounds like a lot at a small startup…

But it might not mean much if the company raises a ton of money later and your stake gets diluted.

Or if the company is already heavily diluted and no one’s updated the cap table view.

So percentage ownership is a signal, not a guarantee. It gives you a rough sense of your stake relative to everyone else, but you need context to make it useful.

The dollar value of your equity and when to ignore it

A lot of candidates (and recruiters) like to translate equity into dollars right away. Something like:

“The company is valued at $100 million. You get 0.25%. So your equity is worth $250,000.”

That’s tempting math, but it’s almost always wrong or at least misleading.

Here’s why:

You usually hold common stock. Investors likely paid for preferred stock, which has different terms and rights. 

The $100M figure is probably the last round valuation. And that could be years out of date. 

The company might not sell, IPO, or exit at that same number or anytime soon.

So if you’re trying to put a number on your equity, use caution. It’s smarter to treat equity as a long-term upside, not as part of your base comp.

Why valuation timing matters

Say the company offering her equity last raised money in 2021, at the peak of the market. Investors bought shares at a $500 million valuation.

Let’s go back to Betty:

If you don’t know how recent it is, and who set it, you’re guessing. That’s why we recommend candidates always ask:

When was the last
priced round?

Are you planning
to raise again?

What kind of
investors led it?

It’s 2025 now. No new round. Just “internal growth.”

That 0.25% might technically still be based on that old number, but what if the market corrected? What if a down round happens next year?

The truth is:

The last valuation only tells you what someone was willing to pay then.

Who priced the company, and how long ago?

“The value of your equity is only as real as the most recent, credible round. Ask how it was priced, who priced it, and when.”

Not all valuations are created equal.

A priced round from a top-tier VC last quarter? That’s pretty reliable.

A SAFE note from 2022 with no valuation cap? Much harder to gauge.

The value of your equity is only as real as the most recent, credible round. Ask how it was priced, who priced it, and when.

Sometimes founders self-assess their company value, or use an outdated 409A report (which is for tax purposes, not investing). So again, context is everything.

How dilution and funding affect your slice

Equity is like a pizza and every funding round adds new people to the table.
When the company raises more capital, they often issue more shares. That can reduce your percentage unless you get additional grants or refreshes (which many companies don’t automatically give). So even if you start with 0.25%, by the time there’s an exit, you might be sitting at 0.13%.

Equity isn’t worthless. It’s also not guaranteed. It lives somewhere in between and the better you understand what those numbers really mean, the more informed your decision becomes.

This doesn’t mean equity isn’t worth it - it just means you should understand the mechanics:

Ask about dilution plans. Will they raise again? Are refreshes common?

Look at historical rounds. Do early employees still have meaningful stakes?

Ask about refresh policies. Especially after major fundraises or promotions.

Equity Trends We’re Seeing Now

Let’s check in on what’s changed with equity offers over the past couple of years. Between 2023 and 2025, the world of startup compensation is shifting and it’s worth understanding what that means for both candidates like Betty and the companies trying to hire her.

Moving away from the “get rich quick” mindset

Back in the days when startups were hitting IPOs and big exits left and right, equity felt like a golden ticket. The story was simple: join early, hold on, and you could become a millionaire overnight.

Betty remembers that feeling well. Her first equity offer was all about “potential upside” and it sounded amazing. But today? The market’s a bit more realistic.

Exits aren’t as frequent or predictable. That means candidates aren’t just dreaming about jackpots, they want clarity and a more grounded picture of what equity means for their paycheck today and in the near future.

More balanced comp packages are the new normal

Because of this shift, companies are now focusing on balanced packages. Cash, equity, and benefits all matter more and they work together.

So instead of just saying “here’s a big equity grant,” hiring managers are offering competitive salaries, clear bonus structures, and strong benefits to keep people like Betty feeling secure.

Betty’s now seeing job offers where the cash feels solid enough to pay rent, and equity is the added bonus, not the main reason to join.

Equity is less attractive without a clear exit timeline

One big trend we’re seeing is that candidates ask, “When will I actually get to cash out?”
Without a clear IPO or acquisition plan, equity becomes less exciting.
Betty asked her last potential employer for the timeline and was honest: “If this is a long hold, I need to understand that.”
This kind of question is becoming common and it’s smart. The value of equity depends on liquidity. If you can’t sell your shares in the foreseeable future, it’s less of a perk and more of a guessing game.

Candidates are asking harder questions about liquidity

Gone are the days when candidates just accepted equity at face value.

Betty, like many others, now digs into the fine print:

These questions help candidates understand the real value of their equity and make smarter decisions about job offers.

Can I sell my shares in secondary markets?

Does the company offer any buyback or liquidity events?

What happens if the company stays private for years?

Investors are more conservative and that affects founder offers

Finally, investors themselves are more cautious.
The days of sky-high valuations and generous founder equity grants are tempered by a more careful approach to capital.
That means founders might have less equity to give away, which trickles down to employees.
Betty’s seen it firsthand, equity pools are tighter, refresh grants smaller, and companies want to preserve value for future rounds.

The Rise of Performance-Based Equity

Equity isn’t just a one-size-fits-all anymore. You might have heard about something called performance-based equity and it’s becoming more common. But what exactly is it?

What is performance equity?

Think of it like this: instead of getting a fixed chunk of equity upfront, your equity “unlocks” only if certain goals are met. These goals might be tied to the company hitting revenue targets, growing the team, or reaching an exit like an acquisition or IPO.

Imagine Betty again. Instead of just being promised 1% of the company’s shares, she’s told she’ll get that 1% only if the startup reaches $10 million in annual revenue or successfully sells within a set timeframe.

Common milestones companies use

Performance equity usually comes with clear milestones, like:

These milestones make sure everyone is aligned, the company gets to grow, and employees like Betty get rewarded for hitting the targets that matter.

Hitting specific revenue numbers

Reaching user or customer growth goals

Timing of an exit event like an IPO or acquisition

For companies, this setup helps conserve equity until key goals are hit, which is important in a cautious funding environment.

For employees, it offers a chance to earn more if they help drive the company’s success. It can feel motivating and give a clear connection between effort and reward.

So Betty knows she’s not just holding shares; she’s working toward something concrete that will unlock real value.

Why performance equity can be a win-win

With investors and companies watching cash flow carefully, handing out equity that’s tied to results is safer. It avoids over-promising and helps manage expectations on both sides

If the company doesn’t hit its goals, it doesn’t hand out as much equity, protecting existing shareholders and keeping the company’s future solid.

Why is performance equity replacing fixed equity in some offers?

Watch out for the pitfalls

Performance equity sounds great, but it comes with risks if the terms aren’t clear.

Vague milestones or unclear metrics can leave employees confused or feeling misled.

Lack of a clear evaluation or review process means no one really knows if targets were met.

Betty once had a friend who got performance equity tied to “growth” but never knew exactly what numbers she needed to hit. She ended up frustrated and unsure what her equity was worth.

If you’re offered performance-based equity, ask questions. Make sure the milestones are clear, measurable, and have a set timeline. Knowing what you need to do, and when, makes all the difference.

When Equity Ages Out

What happens when your company doesn’t exit for 5+ years?

A few years ago, people used to joke that equity was a “lottery ticket.” Stick around long enough, and you might hit it big.
But these days, a lot of people are holding onto equity for much longer than expected. IPOs are rarer, exits are slower, and the dream of a fast payout often gets pushed back year after year.
So what happens when your equity just… sits there?

The reality of long holding periods

Let’s check in with Betty again. She joined a high-growth startup five years ago and was granted options with a four-year vesting schedule. She’s fully vested now but the company still hasn’t exited. No IPO. No acquisition. Just more waiting.
This is a common story. Especially post-2022, more companies are staying private longer. That means longer holding periods and more uncertainty about when (or if) your shares will become liquid.

Do options or RSUs lose value over time?

Technically, equity doesn’t have a built-in expiration date once it’s vested. But that doesn’t mean it holds the same value forever. For example:

If the company’s valuation drops, your equity may be worth less than it was when granted.

If the business model has shifted or momentum has stalled, investor appetite at exit may be lower.

And for options specifically, there’s a real expiration clock once you leave the company, usually 90 days to exercise them or lose them.

The role of refresh grants

Some companies offer refresh grants, new stock grants meant to reward tenured employees and keep them around. If you’ve been at your company for a while and your original grant is feeling stale, it’s okay to ask about this.

Betty’s team just brought in a new VP with a shiny equity package. She’s been there longer and feels under-leveled so she schedules a conversation with her CEO to ask about a refresh. That’s exactly the kind of situation where it makes sense to bring it up.

Around a work anniversary

After a promotion or major milestone

If a new hire comes in with a bigger grant than yours

When to bring it up:

Role of refresh grants

Risk of expiration for unexercised options

Let’s say you leave a company after four years. Your options are vested - great. But if you don’t exercise them within the post-termination window (usually 90 days), they’re gone for good.

Some companies offer extended exercise windows, but many don’t. Don’t assume you’ll have forever to decide.

Know your exercise deadline

Understand the cost to exercise

Factor in tax implications

That’s why it’s so important to:

Risk of
expiration

Planning around stale equity

Executives especially need to plan for the possibility that their equity may not be as valuable, or as liquid, as they hoped.

At some point, you may need to make a decision: do I wait it out, or is it time to move on?
Equity is only as valuable as its path to liquidity. The longer you wait, the more important it becomes to understand where things stand and how to protect what you’ve earned.
Betty’s advice? Stay hopeful, but be proactive. Know your timeline, ask smart questions, and don’t be afraid to advocate for yourself if the clock keeps ticking.

Negotiating a management retention plan (we covered this earlier)

Asking for cash comp or bonuses to rebalance an outdated equity-heavy offer

Being more aggressive about liquidity events, even secondary sales, if allowed

That might mean:

Stale
equity

Valuation Nuance: Clean vs. Dirty Term Sheets

Valuation is not one-size-fits-all. Let’s say two startups are both valued at $500 million. On the surface, that seems like a helpful data point especially when you're comparing offers or looking up equity benchmarks.

But here’s the catch: Not all $500M valuations are created equal. The difference often comes down to something most candidates and frankly, a lot of hiring managers never see: the term sheet.

Clean vs. dirty: What’s the difference?

When investors fund a company, they negotiate terms in a legal document called a term sheet. These terms determine what happens to the money and who gets what, if the company gets acquired or goes public.

A clean term sheet is pretty standard

Clean

A dirty term sheet loads the deal with investor-friendly terms that can dilute or delay common stock payouts

Dirty

1x liquidation preference (investors get their money back before common stock)
No special multipliers or rights
Easy to model what you might walk away with

2–3x liquidation preferences
Participation rights (they get paid again after the preference)
IPO ratchets that boost investor returns if the IPO price is low

These terms don’t change the headline valuation but they do change what that valuation means for employees and candidates holding common stock.

Let’s go back to Betty.

Betty’s been at her Series C startup for two years. She hears the company just raised at a $600M valuation and gets excited, her equity might be worth more now, right?

But what she doesn’t know is that this round came with 3x liquidation preferences and participation rights for the new investors.
Translation: if the company sells for anything less than a major win, Betty may see very little of that $600M on paper.

Here’s the tricky part: employees almost always hold common stock, while investors hold preferred stock. In clean deals, preferred and common end up with roughly similar outcomes at exit. In dirty deals? Not so much.

That’s why it’s misleading to judge an equity offer purely on valuation, especially in this market, where down rounds and investor protections are more common.

If you’re being told your shares are worth X because of a recent valuation, a fair follow-up is: “What were the terms of that round?”

Why preferred stock ≠ your payout

Red flags to ask about

Multiple liquidation preferences (more than 1x)

IPO ratchets

No recent valuation, or last round was over 2 years ago

Participation rights

Stacked preference from multiple rounds

No access to option grant paperwork or plan summary

You don’t need to be a lawyer to protect yourself, just know the red flags:

If someone’s explaining your equity in vague or overly rosy terms, ask for clarity or ask your recruiter to help decode it.
When it comes to term sheets, simple is usually better.

And if it’s not simple, it’s fair to ask:

“What does that mean for me?”

Betty did and while the answer was a little disappointing, she was glad she asked. It helped her negotiate a better bonus structure to make up for it.

Alternative structures emerging in place of high-value equity.
When equity is the star of the offer, most execs pay close attention. But in today’s market, some of that equity just doesn’t shine like it used to.
That’s where Management Retention Plans (MRPs) come in. A growing trend among seasoned executives who’ve seen enough cap tables to know when something’s off.

A Management Retention Plan is a contract that promises a cash bonus if the company exits or is acquired, typically paid out at the same time investors get their returns. Think of it as a safety net when your equity might not be enough to make joining worthwhile.
These aren’t sign-on bonuses. They’re not tied to quarterly performance. They’re specifically designed to reward execs who stick around and help drive a successful exit, especially when the equity package doesn’t reflect the risk or effort involved.

What’s an MRP?

Management Retention Plans & Executive Bonuses

Why are execs asking for this now?

Because they’re doing the math.

Let’s revisit Betty. She’s offered a VP role at a later-stage startup that’s raised a lot of money but on a dirty term sheet (see Chapter 7). Her equity package looks decent on paper, but between stacked preferences and limited upside, it might be worth very little at exit.
So, she negotiates a $250K management bonus if the company is acquired while she’s still employed an arrangement that ensures she shares in the win, even if her stock doesn't convert into a meaningful payout.

When to ask for one and how to frame it

MRPs aren’t just handed out. But if you’re a senior hire, especially in product, revenue, or operations, roles that materially impact company outcomes, they’re worth discussing.

You might frame the ask like this:

“Given the current equity structure and exit uncertainty, I’d like to propose a retention bonus tied to an acquisition or IPO. My goal is to fully commit for the long haul, and this structure gives us aligned incentives.”

It doesn’t need to be adversarial. It’s about clarity and alignment.

Common structures & best practices

Vesting

Most MRPs kick in only at an acquisition, IPO, or other liquidity event.

Trigger

Some bonuses vest over time (e.g., 25% per year), while others pay out all at once if the exec is still employed at exit.

Amounts

Bonuses range widely, from $100K to $1M+, and can be tiered based on outcome ( higher payout for a higher valuation).

Approval

Often, the board or investors need to sign off, especially in later stages.

In the past, people joined companies dreaming of a “life-changing” equity payout. In 2025, execs are more likely to ask: What happens if that doesn’t pan out?

MRPs are one answer. Not the only one but increasingly, a smart one.

The Quiet Wealth of Equity (Still Real)

🔗 KF News recently reported that KKR’s GeoStabilization International exit included a $75 million payout to 900 workers, about $83k each, even outside the executive ranks. That’s meaningful money for people on the ground.

At Monzo 🔗 long-standing employees are nearing millionaire status as institutional investors prepare to buy shares on the secondary market. This shows equity isn’t just for founders or VPs, real value can happen lower in the org if the company succeeds.

Equity still changes lives, just with more patience. Just because you don’t see splashy headlines doesn’t mean equity stopped working. For many employees, equity is quietly building real wealth, even in a slower market.

Real-world wins

Millionaire creation: shifting numbers

From 2015 to 2021, startup and public market tech booms fueled a wave of new millionaires, over 🔗 1 million net-new millionaires in the U.S. alone.

Since 2021, things have cooled but not stopped Early 2025 🔗data from UBS shows about 379,000 new millionaires in 2024, driven largely by equity appreciation in tech and real estate. While slower, meaningful wealth creation via equity is still happening.

The long game wins out

Equity payouts take patience. Many companies now stay private longer, but that doesn’t halt progress, it just presses pause.
People working in private companies today earn meaningful equity value through:

Employee ownership programs in PE-backed firms 🔗 like those KKR and Blackstone have rolled out
Secondary liquidity events: 🔗 Private-share trading volume in late 2024 rose by 50%, giving employees access to real cash without waiting for an IPO

Why it still matters for you

If you’re patient and strategic, equity can still pay off

Even without a blockbuster exit, equity programs are yielding life-changing payouts.

Companies are increasingly offering structured paths to liquidity before exit via secondaries or internal share distributions.

That payoff might arrive quietly, but it’s coming. And if you’ve balanced equity with sensible cash comp, it can be a powerful addition to your overall compensation.

Equity isn’t flashy right now but it doesn’t have to be. For many employees, it’s delivering real, quiet value. Stick with the long view, ask smart questions, and let that compound.

This guide is designed to give you the language and confidence to evaluate equity. But if you’re hiring, negotiating, or considering multiple offers, you might want to go deeper. Here are two tools we’ve built to help you do just that and they’re free to use.

We’ve gathered real-time compensation and equity data from across the startup ecosystem, broken down by role, seniority, and company stage.

Benchmark salary and equity for specific roles

Compare comp packages by company stage

See how your offer stacks up

You can use the Comp Engine to:

Whether you’re making an offer or considering one, this is the data we’d want on hand. 🔗 Access Comp Engine here

10.

Want to Learn More?

Equity can feel theoretical until you do the math. Our calculator helps you translate percent ownership into possible outcomes.

Model different exit values

See what your equity might be worth over time

You can:

Use this when you’re weighing offers, considering a job change, or preparing to negotiate. 🔗 Access Equity Calculator here

Betts Equity Calculator

Led by startup attorney Mary Russell, this site is packed with practical, easy-to-follow resources on topics like:

Equity gets complicated fast, especially when you’re navigating term sheets, evaluating multiple offers, or trying to make sense of preferred stock language. That’s where Stock Option Counsel comes in.

Whether you’re an executive, a first-time candidate, or a founder trying to make fair offers, this is one of the best equity education hubs out there. We recommend it often and we use it ourselves. 🔗 Access SOC Here

Understanding your equity grant

Negotiating a new offer

Planning for exit or IPO

Avoiding common mistakes with options and RSUs

Stock Option Counsel