How much equity should you have?

Negotiating your equity grant at a startup can be SUPER intimidating. It’s maybe the single most important negotiation you'll have in your career.

Yet most startup employees forget that the most concentrated asset in their personal financial portfolio, other than maybe their home, is their Incentive Stock Option grant. And it’s probably sitting in a desk drawer, collecting dust.

So I wrote this guide to help friends in my network with their own negotiations. Why should you care? By my estimate, in the last 18 months this advice has generated between $4M and $6M in total upside for them.

Here are some tips to help you get paid:

TL;DR:

Identify your levers: Decide which lever(s) you’ll try to max out - Base pay, Variable pay, Title, Benefits, Equity.
Understand the ESOP: Figure out how crowded the cap table is.
Differentiate yourself: Pick specific skillsets you can address relative to the company’s lifecycle.
Get the numbers: Ask for the number of options, strike price, fully diluted percentage of equity, cash value of equity grant, post termination exercise period, and vesting schedule.
Understand the vesting structure: Know how many years you are signing up for, and where the cliff is.
Research the tax consequences: Anticipate when you’ll get hit with a tax bill, based on the security type.
Understanding dilution: Benchmark how much dilution is normal.
How dilution impacts me as an employee: Forecast how your outcome and ownership may change over time.
Do your homework: Decide on your own if the company is relatively over or undervalued.
Be realistic: Play hard, but play fair with your ask.