How to negotiate equity and stock options in a job offer

You got a job offer and it includes equity. Maybe 10,000 stock options at a startup. Maybe 50 RSUs at a public company. Maybe something called "phantom equity" that you've never heard of. The number looks impressive on the offer letter.

You have no idea what it's actually worth.

That's normal. Equity compensation is deliberately confusing. Companies benefit when you don't understand it, because confused candidates accept whatever's offered. According to data from Carta, roughly 73% of startup stock options expire worthless. People leave before they vest, or the company never has a liquidity event. The number on the offer letter and the number in your bank account are often very different things.

This post explains what you're looking at, how to figure out what it's worth, and how to ask for more.

The four types of equity

RSUs (Restricted Stock Units) are the simplest. The company promises to give you shares of stock on a set schedule, usually over four years. You don't pay anything to get them. When they vest, you own the shares and can sell them immediately if the company is public.

If you get 100 RSUs and the stock trades at $150, your grant is worth $15,000 at today's price. The actual value when they vest could be higher or lower. RSUs at a large, stable company are close to a cash bonus paid in stock. RSUs at a volatile tech company could swing 30% in either direction by the time they vest.

One thing people miss: RSUs are taxed as ordinary income when they vest, not when they're granted. The tax bill comes whether you sell the shares or not.

ISOs (Incentive Stock Options) give you the right to buy company stock at a locked-in price, called the strike price. Common at startups. If you get 10,000 ISOs with a $2 strike price and the company eventually goes public at $20 per share, each option is worth $18. Your 10,000 options are worth $180,000.

The catch: ISOs are only valuable if the stock price exceeds your strike price. At a startup, that is not guaranteed. It's not even likely, statistically.

ISOs have favorable tax treatment. If you hold the shares for at least one year after exercising and two years after the grant date, your profit is taxed as long-term capital gains instead of ordinary income. That's a meaningful difference.

NSOs (Non-Qualified Stock Options) work the same way as ISOs mechanically. You buy shares at a strike price, profit on the difference. The only difference is tax treatment: the profit when you exercise NSOs is taxed as ordinary income. NSOs are common for contractors and advisors.

Startup options vs. public company RSUs. This distinction matters more than anything else on this page. RSUs at a public company have a concrete, liquid value. You can sell them the day they vest. Stock options at a private startup have a theoretical value based on the company's last valuation, but you can't sell them until there's an IPO, acquisition, or secondary sale. That could be years away. Or never.

Figuring out what it's worth

For public company RSUs: Multiply the number of RSUs by the current stock price. Divide by the vesting period (usually four years) to get the annual value. 200 RSUs at $300 per share is $60,000 total, or $15,000 per year. Look at the stock's performance over the last few years for context on how stable that number is.

For startup options: This requires asking questions the company may not volunteer.

What's the current 409A valuation? This is an independent appraisal used to set the strike price. Ask for the number and when it was last done.

What percentage of the company do your options represent? 10,000 options sounds impressive until you learn the company has 100 million shares outstanding and you own 0.01%. Ask for your ownership percentage on a fully diluted basis.

What's the latest preferred stock price? This is what investors paid in the most recent funding round. Compare it to your strike price. A big gap means there's built-in value, assuming the company keeps growing.

What's the company's runway and path to liquidity? Options are only worth something if you can eventually sell them. A pre-revenue startup with 12 months of cash is a very different risk profile than a profitable company preparing for an IPO.

If the company won't share this information, that's a red flag. They're asking you to make a major financial decision blind.

Vesting schedules

Most equity uses a four-year vesting schedule with a one-year cliff.

The four-year part means your total grant vests incrementally over four years. The cliff means you get nothing during your first year. On your one-year anniversary, 25% vests all at once. After that, the remaining 75% vests monthly or quarterly over the next three years.

The cliff protects the company from giving equity to people who leave early. From your side, it means year one is all-or-nothing.

Not every company uses this structure. Amazon backloads their vesting: 5% in year one, 15% in year two, 40% in year three, 40% in year four. Always ask for the specific schedule, not just the total grant.

How to negotiate

Equity is often more negotiable than base salary because it doesn't hit the company's immediate cash flow. That's your opening.

Do the math first. Add up base salary plus the annual equity value plus bonus. Compare that total to market rates on Levels.fyi, Glassdoor, or Blind. If the total falls short, you have a data-backed reason to ask for more.

Frame it that way: "Based on my research, total compensation for this role at comparable companies is $180,000 to $220,000. The base is strong, but the equity brings the total to about $160,000. Could we discuss increasing the equity grant to bring the package closer to market?"

This works because it's grounded in numbers. Not feelings. Not entitlement.

Negotiate the structure, not just the number. Beyond asking for more shares, consider:

Accelerated vesting on change of control. If the company gets acquired and your role is eliminated, accelerated vesting protects your unvested equity. Some companies offer one year of accelerated vesting in this scenario.

Early exercise. At startups, exercising options before they vest (filing an 83(b) election) can save a lot on taxes. Not all companies allow it. Worth asking.

Refresh grants. Ask whether the company gives additional equity after your initial grant vests. Many public companies do annual refreshes, but the size varies widely.

A shorter cliff. If the one-year cliff feels risky, some companies will do six months for senior hires.

Use competing offers. A competing offer with better equity is your strongest card. You don't need to share exact numbers. "I have a competing offer with a stronger equity package" gives the company a reason to improve. Most companies would rather increase equity than lose a candidate they've decided to hire.

Startup equity vs. public company equity

This comes down to your risk tolerance and your finances.

Public company RSUs are predictable. You know what they're worth. You can sell them the day they vest. If you have a mortgage, kids, or any financial obligation that depends on steady income, RSUs remove uncertainty from the equation.

Startup equity is a bet. Early employees at Stripe, Coinbase, and Datadog saw their options increase 50x to 100x. Those stories are real. But for every one of them, there are hundreds of startups where the options ended up worth zero. The expected value might be similar, but the variance is enormous.

A reasonable approach: make sure your base salary and benefits cover your financial needs comfortably. Treat the equity as upside potential, not money you're counting on.

Taxes (briefly, because this matters)

RSUs are taxed as ordinary income when they vest. Companies often withhold shares to cover the tax, so you'll receive fewer shares than your total grant.

ISOs can trigger the Alternative Minimum Tax (AMT) when you exercise, even if you don't sell. If the spread between the strike price and market value is large, the AMT hit can be substantial. People have been blindsided by six-figure tax bills from exercising ISOs at startups that later crashed.

NSOs are taxed as ordinary income on the spread at exercise.

Early exercise with an 83(b) election converts future gains from ordinary income to capital gains rates, but you're paying taxes on unvested shares you could forfeit if you leave.

All of this is complicated enough that a tax advisor who specializes in equity compensation is worth the fee. The cost of professional advice is almost always less than the cost of a tax mistake.

The question to keep asking yourself

When evaluating an equity offer, keep coming back to this: if the equity turned out to be worth zero, would you still be satisfied with the base salary and the role?

If yes, the equity is genuine upside. If no, you're taking a compensation cut disguised as a bet. That's not always wrong, but you should make that choice with your eyes open.

For a deeper look at how to structure counter-offers and handle pushback in salary negotiations, Four-Leaf's comp negotiation tool walks through the process step by step.

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Related reading:

• Salary negotiation mistakes that cost you money covers the most common errors candidates make at the offer stage.
• How to answer "What are your salary expectations?" helps you navigate the comp conversation before you even have an offer.