How to Negotiate Startup Equity in a Job Offer
Negotiate startup equity by first getting the numbers: shares granted, fully diluted shares, strike price, preference stack, and post-termination exercise window. Then ask for the terms companies can actually move, usually share count, salary mix, vesting start date, exercise window, early exercise, and acceleration. The strike price and preference stack are generally fixed.
Get the numbers before you negotiate
An equity offer stated only as a number of options, or only as a percentage, cannot be evaluated or negotiated. Ask for the following, in writing, before making any counter.
Shares granted and fully diluted shares. Fully diluted means all issued shares plus the full option pool, outstanding options, warrants, and convertible instruments on an as-converted basis. Shares outstanding alone overstates your percentage. Ask which denominator the company used.
Strike price and the latest 409A value. The strike sets your exercise cost. The 409A date tells you how stale it is.
Price per share in the last priced round, and total preferred capital raised. This shows the gap between what investors paid and your strike.
The liquidation preference stack. Aggregate preference, any multiple above one times, and whether any series participates. This decides what common stock receives in a mid-sized exit.
Vesting schedule, cliff, and post-termination exercise window. The window decides whether you can keep vested options if you leave.
Option type. ISO or NSO, since the tax treatment differs.
A company that will not share fully diluted shares or the preference stack is asking you to price an asset blind. That is information in itself.
An illustrative offer, translated
Illustrative numbers only. An offer of 20,000 options against 10,000,000 fully diluted shares is 0.2 percent. At a 1.00 dollar strike, exercising all of it costs 20,000 dollars, plus tax for NSOs. On a four year schedule with a 90 day post-termination window, leaving after two years means finding 10,000 dollars for the vested half, plus any tax, within three months of your last day. Written that way, the offer becomes something you can actually negotiate against.
What moves and what does not
Companies have more room on some terms than others, and asking for an immovable term spends goodwill for nothing.
Usually negotiable.
- Share count. The most common ask. Grants are typically set within bands by level, so the realistic range is the top of your band or a case for the next one.
- Salary and equity mix. Many companies will trade one for the other. Know which you can afford to give up before asking.
- Vesting commencement date. If you have already been working with the company as a contractor or advisor, ask for vesting to start from when that work began.
- Post-termination exercise window. The common default is 90 days. Some companies extend it, sometimes to several years. Note that an ISO exercised more than three months after employment ends is taxed as an NSO.
- Early exercise. The right to exercise before vesting, so an 83(b) election can start the tax and holding clocks early, while the spread is small.
- Acceleration. Double trigger acceleration, on a sale followed by termination, is a reasonable request for senior hires. Single trigger is rarely granted.
Usually fixed.
- Strike price. It must be at least fair market value on the grant date, set by the board using a 409A valuation. Discounted options create tax penalties under section 409A.
- The preference stack. Set by investor documents, not by your offer.
- Plan level terms that apply to every holder, such as repurchase rights or transfer restrictions. These can sometimes be varied in an individual grant, but expect resistance.
How to make the ask
Negotiate in shares, compare in value. Ask for a specific share count, and justify it with your own calculation of what the grant would pay in a realistic exit after preferences. A number grounded in the company's own figures is harder to dismiss than a request for more.
Pick one or two asks. A list of six signals that you have not prioritised. Choose the term that most changes your outcome. For someone likely to leave before an exit, the exercise window may matter more than an extra thousand options.
Ask what refresh grants look like. Few companies commit to refreshes in an offer letter, but the answer shows whether equity is a one-time hiring tool or an ongoing part of pay.
Get it in writing, then read the grant. The offer letter usually says the company will recommend a grant to the board. Nothing exists until the board approves it, and the strike price is set at that date, not at the offer date. When the grant agreement arrives, check the share count, type, vesting start, exercise window, and any acceleration against what was agreed. The equity plan and grant agreement control over anything said in the negotiation.
This page is general information, not legal or tax advice. Equity terms and their tax treatment depend on the plan, the documents, and personal circumstances, and US rules are assumed. Review the grant agreement with counsel or a tax adviser before accepting.
Frequently asked questions
- Can I negotiate the strike price on stock options?
- Generally not. US tax rules put a floor under the strike price: it cannot sit below what the board, relying on a 409A valuation, judges common stock to be worth the day it grants the option. Options granted below that value can trigger penalties under section 409A. The practical lever is timing: a grant approved before a new valuation will carry a lower strike than one approved after.
- Is negotiating equity likely to cost me the offer?
- A specific, reasoned request rarely does. Companies expect experienced hires to ask about equity, and grants are usually set within bands that leave some room. What damages goodwill is asking for many things at once or for terms the company cannot change, such as the strike price. Ask for one or two terms, grounded in the company's own numbers.
- What is an extended post-termination exercise window?
- It is a longer period to exercise vested options after leaving, beyond the common 90 day default. Some companies offer several years. It reduces the pressure to find exercise cash and tax money quickly. The trade-off is tax: an ISO not exercised within three months of employment ending is treated as an NSO, so its spread becomes ordinary income at exercise.
- Should I ask for more equity or more salary?
- Decide based on what you can afford to lose. Salary is certain and survives the company failing; equity is contingent and illiquid. If lower salary would make your finances fragile, take the salary. If you can absorb the risk and believe in the outcome, more equity may be worth more. Calculate the equity's value after preferences before choosing.