How to negotiate equity in a job offer

Someone just told you the grant is worth a hundred thousand dollars, and you're probably about to negotiate the share count. That's the wrong number to push on. You don't yet know what percentage of the company it is, what you'd have to pay to own it, how long you'd have to buy it after you quit, or who gets paid first if the company sells for less than it raised.

This article covers what options and RSUs actually are, and the questions that tell you whether a grant is good. It also covers which terms you can move, how to ask without sounding like you're accusing anyone, and when to take cash instead. Read it before you reply to the offer email, because your leverage is highest before you say yes.

Most of the detail comes from an episode of The Skip where Nikhyl Singhal, a former VP of Product at Meta, spent an hour on equity with two lawyers from Goodwin Procter: Anthony McCusker, a corporate partner who co-chairs the firm's technology practice, and Linda Galligan, a partner who works on executive and employee compensation. Singhal also did a full episode on comparing offers. Jacob Warwick, who negotiates executive packages for a living, and Phyl Terry, who wrote Never Search Alone, both appeared on Lenny's Podcast with tactics for the conversation itself.

What you're actually being offered

A private company usually has three kinds of stock. Investors buy preferred stock. Founders hold common stock. Employees get options or restricted stock units that turn into common stock. McCusker explained that preferred stock carries rights the common doesn't have, including liquidation preference, voting rights, and anti-dilution protection, which is why the company can legally price common stock well below what investors just paid. He said early-stage startups often price common at an 80 or 85 percent discount to the preferred price, with the gap narrowing as the company matures.

An option gives you the right to buy stock at a fixed price, called the strike price, and that price comes from a third-party valuation known as a 409A.

Galligan made the follow-on point that matters for timing. Your strike price pegs the value of the company on the day you join, so you get the appreciation from that point forward and no credit for the value created before you showed up. The later you join, the more you pay.

Restricted stock units work differently. Singhal described private RSUs as an instrument built to take the good parts of both stock and options. There's no strike price and nothing to buy, so if the company is worth less when you leave than when you joined, an RSU is worth less without being worthless, while an underwater option is worth nothing at all. The IRS lets RSUs vest without triggering tax, because technically you don't receive the stock until there's an exit.

Singhal flagged two catches. You generally can't sell private RSUs into a secondary market the way you can with exercised options, so the early liquidity that sometimes shows up at private companies isn't available to you. And they expire, often seven years after the grant, whether you still work there or not. If the company hasn't gone public or been sold by then, the grant goes to zero and nobody can do anything about it.

Why a big-sounding number can be worth nothing

Liquidation preference is the part of the deal most candidates never look at. Investors get their money back before common stockholders get anything. In a big exit there's plenty left over, so it rarely comes up. In a middling exit it can absorb everything you were counting on.

McCusker laid out both failure modes. In one, the company sells and the preferred stock takes all or nearly all of the proceeds, leaving little or nothing for common. In the other, your strike price was set when the company was worth two billion, the company exits at a fraction of that, and you're deciding whether to pay three dollars a share for something worth a dollar fifty. You don't pay, and the grant evaporates.

He also pointed to a number you can track over time. A 409A valuation is only good for twelve months, or until something material happens, so companies revalue at least annually, and the direction of that number tells you what outside auditors think the common stock is worth.

The questions that tell you whether the grant is good

A share count on its own means nothing. Galligan pointed out that a thousand-share option can represent more of the company than a million-share option, depending entirely on how the cap table is carved up.

Singhal said he's shocked by how few candidates ask. Both lawyers agreed the question is reasonable at an early-stage company, especially for a senior role, and that most companies will share the 409A price once you're actually negotiating. Galligan added a caveat worth knowing: at a large late-stage private company or a public one, the percentage is meaningless, and those companies think about grants in dollars instead.

Galligan's own checklist was simpler. She wants to know whether the rest of the terms are standard, meaning a four-year vest with a one-year cliff and monthly vesting after that, and then what the exercise period looks like if you leave with vested options. Anything that deviates is worth a question.

The term almost nobody asks about

When you leave a private company with vested options, you typically have 90 days to write a check for all of them or lose them. Galligan called 90 days the most common post-termination exercise period. Singhal thinks it's the term that matters most in a private-company offer.

Here's the trap in full. You join a company valued at a billion dollars, so your strike price is high. Two years later you've vested half a percent and you want to leave. Exercising costs hundreds of thousands of dollars, and on top of that you owe tax on the spread between your strike price and the current fair market value. Singhal has watched people work out that they can't afford to quit. Ninety days after they do, everything they earned is gone. He also said this term usually sits in the option agreement rather than the offer letter, and that plenty of founders don't know 90 days is the default, so asking about it isn't an accusation.

McCusker explained why the default exists. The 90-day rule comes from the tax code's requirements for incentive stock options, so extending the window converts the ISO to a non-qualified option and hands the company a withholding problem for someone who no longer works there. Galligan added that many companies prefer identical terms for everyone, and she said the market on this term is genuinely all over the place, unlike most terms she can call quickly.

McCusker said negotiated windows usually land at one or two years. The theoretical maximum is the option's original expiration, normally ten years from grant, and he called the full ten-year extension uncommon but not unheard of. If you ask on the way out instead, you're relying on a CEO feeling generous enough to take it to the board.

How the company decided on that number

Startups don't pull equity grants out of the air. Matt Mochary, who coaches founders and publishes his operating playbook publicly, describes the method most of his clients use. Find the market compensation for the role at a big company. Find the amount of cash the person needs to live comfortably. Pay the cash, then bridge the difference with equity.

His worked example: a Level 3 engineer paid $300,000 at Google needs $120,000 in cash. The difference is $180,000 a year, times four years, which is $720,000. Divide that by a factor between 1 and 2 representing how much the equity is expected to appreciate over those four years. Mochary says 1.5 is the most common factor, so the grant comes out at $480,000 of stock at the current valuation.

Two things follow. The company already has a number in mind for the total, so a conversation about the split between cash and equity is often easier than a conversation about the total, and Mochary recommends offering candidates a menu of two or three mixes. You can ask for that menu even if it isn't offered. The optimism factor is also a guess the company chose, so if they used 2, they've already discounted your grant on the assumption the stock doubles.

What you can actually negotiate

Not everything in an equity package is a real variable, and spending your leverage on the fixed parts wastes it.

Early exercise deserves its own note. Galligan explained that it lets you buy shares before they vest, which starts your capital gains holding period early and can mean little or no taxable spread at the moment of exercise. Getting that treatment requires an 83(b) election filed with the IRS within 30 days of exercise, on paper, by mail, with no late filing and no correction available if you miss it. The obvious risk is that you're spending real money on stock that might be worth nothing, which is why McCusker and Galligan both said early exercise mostly makes sense when the strike price is tiny, at the founding or seed stage. Singhal described executives joining two years after the early team, when the price per share has gone from a penny to forty-four cents, discovering that the move everyone before them made is now unaffordable.

How to ask without sounding naive

Singhal separates the two conversations. Asking questions is the first step of negotiating, so you can find out what the piece of paper means without passing judgment on any of it. Then, when you do negotiate, take the items in order of size.

His example runs like this. The offer is 1 percent and $150,000 base. You ask for 2 percent, explaining that at 1 percent you can't see a path to your market rate. They come back at 1.5. You accept and move to the next item: the terms say 90 days to exercise, and if you work here three years and then leave you can't afford the stock, so can we make it two years? They offer one year. You take it and move to base salary, ask for $200,000, get $175,000, and suggest covering the last $25,000 as a signing bonus.

The failure mode he warns about is asking for 2 percent plus seventy-seven other changes at once. A redlined offer letter with nine open items makes the company decide you're going to be difficult, and they stop moving. One prioritized ask at a time makes it easy for them to respond. Singhal's phrase for it is that you stay on the same side of the table and help the company close you by being clear about what matters to you.

Jacob Warwick, who has negotiated more than a billion dollars in executive compensation, adds two habits. Open with gratitude and enough enthusiasm that the company believes the deal will get done, so no ask you make afterward feels like a threat. And don't put a number out too early. He described a common sequence where a candidate anchors at a senior IC number, the scope grows through the interview process into something closer to a director role, and the company quotes the original number back at them. Once you've named a figure, that's the ceiling. He also has a specific question for when the paperwork doesn't match what you agreed.

The executive's instinct was to split the difference, which would have cost him about $90,000. Warwick's question assumes good faith and still gets the term corrected. It works for equity terms too. If you agreed to a two-year exercise window and the option agreement says 90 days, ask whether that was a mistake before you assume anyone is playing games.

What to ask for before you talk about money

Phyl Terry, author of Never Search Alone, wants you to spend the first part of the offer conversation on something other than compensation. Go to the hiring manager and say you want to talk about money, but first you want to talk about what will set you up to succeed. He gave an example of two CPOs interviewing at similarly sized private-equity-owned companies, one facing $20 million in tech debt and one facing $10 million. He told both to raise it during the negotiation. One did, and the company wrote a check for it on day one. Asking what you need in order to succeed signals that you intend to succeed, and it earns you goodwill right before you ask for more money.

Terry's phrasing is deliberately mild. "Are you open to 450? That's really what I was hoping for." Most of the time, he says, you get a yes or a counter. For the cash side of the same conversation, the specific wording is in our salary negotiation scripts.

When to take the cash instead

Singhal does this math out loud on the podcast. Start with what the role pays at market. If a director-level offer at a late-stage company comes to about a million a year in cash plus liquid RSUs, then a startup offering $150,000 base and 1 percent needs that 1 percent to be worth roughly $850,000 a year to match. Then apply your own odds. At a one-in-three chance the stake ends up worth $8 million, the expected value lands near the liquid million and you're being paid for the risk. If the best case is a million and you'd put that at one in five, the expected value is a few hundred thousand and you're working for less than half your market rate.

Take the cash when the exercise cost is more than you can comfortably lose, when nobody will tell you the percentage or the last round price, when the last preferred round was priced well above where the company trades in secondaries, or when you'd need the equity to pay bills within four years. Lean toward the equity when the company is public and the stock is liquid, when you'd take the same job for the cash portion alone, or when the strike price is low enough that you can afford to exercise on the way out. Singhal's caution is that liking the company doesn't count as a reason, though a specific view on why the company is undervalued does.

He also has a view on when compensation should matter at all. Early in your career he'd rather you optimized for learning and skill, because the difference between $150,000 and $175,000 is small next to what those skills compound into. Once you're ten years in and moving into leadership, comp starts mattering more, because more money buys you the freedom to take bigger professional risks later. That's the same logic behind positioning yourself for the role you want rather than the one you can get today.

Traps to watch for

Frequently asked questions

How much equity should I ask for?

There's no universal number, and the honest answer depends on stage and role. Singhal's benchmark for the case he discussed was that around 1 percent is roughly in range for a head-of-product hire at an early-stage company, and that at a company with hundreds of employees 1 percent is generous because there usually isn't much of the option pool left. The more useful move is to work backward: figure out what the role pays at market in cash, subtract the cash you're being offered, and ask whether the grant plausibly covers the gap over four years given your own odds on the company.

Is it rude to ask for the 409A price and the cap table percentage?

No. Galligan said most companies will eventually share the 409A once you're down the path of negotiating an offer, and that understanding what percentage your grant represents isn't a ridiculous ask for a senior role. You're asking to understand the percentage, not to see the cap table.

What if I already accepted and only now realize the exercise window is 90 days?

You have less leverage but not none. McCusker described people asking the CEO to take an extension to the board, and boards often defer to the CEO on that call. Others take a loan, sell some shares in a private secondary transaction to fund the exercise and the tax, or exercise only part of the grant. Exercising isn't all or nothing.

Should I bring in a lawyer to negotiate for me?

Galligan noted that companies react differently when your lawyer contacts them directly, and that these negotiations tend to go more smoothly when you handle the conversation yourself. McCusker's version: get advisors to arm you with what you need before the discussion rather than putting them on the front line.

Your equity negotiation checklist

If you've already been doing the bigger job and want the compensation to catch up, that case is built differently from an offer negotiation. It's covered in asking for a raise after taking on more responsibility.