By Harry Prabandham · Updated September 27, 2026
Equity Compensation
How to Evaluate the Equity in a Tech Job Offer
Equity in an offer is worth a range, not a number. Value depends on award type, strike price, dilution, liquidation preferences, and whether an exit occurs.
How to Evaluate the Equity in a Tech Job Offer
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What is the equity in a job offer actually worth?
- An equity grant is a claim on future value whose worth depends on award type, price paid, dilution, investor preferences, and an eventual exit.
- Public-company RSUs have a market price today; private-company options and RSUs do not, and they may never become sellable.
- Private equity can end up worth nothing, so it is safer to think in scenarios than in a single headline figure.
- Comparing offers on a risk-adjusted basis often changes which one looks better.
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What is the equity in a job offer actually worth?
- An equity grant is a claim on future value whose worth depends on award type, price paid, dilution, investor preferences, and an eventual exit.
- Public-company RSUs have a market price today; private-company options and RSUs do not, and they may never become sellable.
- Private equity can end up worth nothing, so it is safer to think in scenarios than in a single headline figure.
- Comparing offers on a risk-adjusted basis often changes which one looks better.
How do RSUs, ISOs, and NSOs pay out and get taxed?
- RSUs are generally taxed as wages when they vest; private-company RSUs often use a second trigger, such as an IPO, before tax is due.
- NSOs create ordinary income on the spread between fair market value and strike price when you exercise.
- ISOs owe no regular income tax at exercise, but the spread counts toward the alternative minimum tax (AMT).
- ISO shares held at least two years from grant and one year from exercise can qualify for long-term capital gains; confirm your facts with a CPA.
Which questions should you ask the recruiter?
- What type of award is it, how many shares or units, and what is the strike price and date of the latest 409A valuation?
- How many fully diluted shares are outstanding, so you can calculate your ownership percentage?
- What was the last preferred share price, and how large are the liquidation preferences ahead of common stock?
- What are the vesting schedule, cliff, refresh policy, and post-termination exercise window, and is early exercise allowed?
How can you build a value range?
- Multiply your ownership percentage by several possible exit values, including one where common stock receives nothing.
- Subtract investors' liquidation preferences first, since preferred shareholders are typically paid before common in a sale.
- Reduce your percentage for future funding rounds, which usually dilute existing holders.
- Subtract the cost to exercise and the taxes owed; option terms usually run up to 10 years but often expire about 90 days after you leave.
When does early exercise and an 83(b) election come up?
- Some startups let you exercise unvested options and file an 83(b) election, which must reach the IRS within 30 days.
- If the strike equals current fair market value, the taxable spread at that moment is zero, and the holding-period clocks start early.
- The trade-off is paying cash for shares that could become worthless, and unvested shares are typically repurchased at cost if you leave.
- Missing the 30-day deadline cannot be fixed, so confirm the filing with a CPA before relying on it.
What else is negotiable?
- Base salary, sign-on bonus, number of shares, and refresh grants are all common points of negotiation.
- An extended post-termination exercise window can be as valuable as extra shares if you might leave before an exit.
- Some candidates trade equity for cash, or vice versa, depending on how much risk their household can carry.
- Get any negotiated terms in writing in the offer letter or grant documents.
Key takeaways
- Treat private-company equity as a range of outcomes that includes zero.
- Ask for strike price, 409A date, fully diluted shares, and liquidation preferences before comparing offers.
- RSUs, ISOs, and NSOs are taxed differently; review the tax effects with a CPA.
- Exercise windows, refresh grants, and cash components can matter as much as the share count.
Related Topics
Equity Compensation
How to Evaluate the Equity in a Startup Job Offer
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Equity CompensationDown Rounds and Employee Equity: What Actually Changes
A down round sells new shares below the prior round's price; for employees, the key effects run through dilution, preferences, the 409A, and repricing.
Equity CompensationEarly Exercise and the 83(b) Election, Explained
Early exercise lets you buy unvested option shares now. An 83(b) election, due within 30 days, taxes them at today's value instead of at each vest.