Joining a Startup? 7 KEY Questions To Ask/Know About Your Equity Grant

Just got an offer from a startup? Congrats! Some parts of the offer are really easy to understand (salary, target bonus, commission). But what about the equity comp/stock options part.....

In a typical scenario, the recruiter has discussed some stock numbers like “We’re offering you 50,000 shares, which were worth (some number) in the last round”

BUT....while you know some things, odds are that you're also missing some critical info in order to truly understand the value of the grant.

In startup land, not all stock grants are created equal. So below we've listed 8 key questions to ask/know about your equity compensation before you sign on the dotted line!

1️⃣ What percent of the company do my shares represent?

It’s not about how many shares you have—it’s about how big of a slice of the pie they represent. For example, 50,000 shares may sounds amazing…but its only half the equation.

• If the company has 5 million shares outstanding, your grant represents a full 1.0%

• But if there are 5 billion shares outstanding—you own a paltry 0.0001%. 😞

WHAT TO ASK: "What percentage of the company does my grant represent on a fully diluted share count?"

RESOURCES: Once you know how much of the company your grant represents, it's still not always clear if it's a "fair" or "good" offer depending on your level/experience. Two good resources to learn more on that are:

• www.Levels.fyi-- a great website

• www.carta.com/friend/-- Carta gives away a lot of compensation data for free if you ask for it

2️⃣ What’s my vesting schedule?

This info is usually provided (and most tech workers know how vesting works) -- but it's critical info to know (so we include it in this list). A 4-year vesting schedule with a 1-year cliff is most common, but there can be lots of variation (different vesting length/years; vest different amounts each year; no cliff, or a longer cliff; performance-based-vesting; etc.)

WHAT TO ASK: "What vesting schedule will my option grant (or RSU grant) have?"

RESOURCES: If you are unfamiliar with vesting schedules, or prefer to learn more, the Vesting Schedules page on the 30-40 Knowledge Base should cover everything you need to know!

3️⃣ Can I early exercise my options (aka 83(b) election)?

In our experience, whether or not you can early exercise your options is (frustratingly) not commonly provided in an offer...unless you ask. While it may not matter to you (depending on the company stage, valuation, your financial resources, and opinion of the company) -- the ability to early exercise a grant can be a huge plus in certain situations.

• Some companies allow early exercise, meaning you can buy your options before they vest -- which has a cost, but allows you to start the clock on long-term capital gains (and possibly QSBS)

• Others don’t… which means if you wanted to exercise/buy all your options now to optimize for taxes, you cant (and have to wait until they vest)

WHAT TO ASK: "Am I able to exercise my option grant early via an 83(b) election?

RESOURCES: See the 83(b) election page on the 30-40 Knowledge Base to learn more!

4️⃣ If I leave, how long do I have to exercise my vested options?

Most people don’t stay at startups forever. The real question is what happens to your stock when you leave.

• Most startups: You get 90 days to exercise your vested options, or they expire. It's tough...

• Some companies offer an option extension (PTEP): This gives you extra time post departure to exercise options, avoiding that "buy now or lose everything" pressure when you leave.

WHAT TO ASK: "Does my grant have a PTEP? aka, if I leave the company, how long will I have to choose whether or not to exercise my vested options?

RESOURCES: See the PTEP entry on the 30-40 Knowledge Base to learn more!

PRO TIP: Many individuals have been successful negotiating a PTEP as part of their equity grant; it's definitely something to consider! We've also worked with multiple individuals who have negotiated a PTEP prior to their departure from the company (e.g. extended notice prior to departure in exchange for a PTEP).

5️⃣How much does the company need to be worth for me to actually make money? (aka do investors have liquidation preferences?)

This is the part they don’t tell you in the rah-rah startup town hall meetings.

When most companies raise money from VC funds, the preferred shares the VCs get usually stipulate a 1.0 liquidation preference -- meaning if/when a liquidity event occurs (excepting an IPO), the VCs get up to 1.0 (i.e. 100%) of their invested money back before any common stock shareholders (e.g. you the employee with stock options or RSUs) get anything.

This is especially important here in 2025, given the high valuations (and large dollar raises) many companies completed in the 2021/2022 time frame. For example:

The company is acquired for $500m, but previously raised a total of $600m.

• The VC's will collectively get 5/6ths of their invested money back

• Common stockholders (a.k.a. YOU) will get nothing

WHAT TO ASK: "Most startups raise VC funds with liquidation preferences? Given that, can you tell me how much the company would need to be worth/sold for in order for my shares to have any value?

RESOURCES: See the FAQ: What is VC Liquidated Preference? on the 30-40 Knowledge Base to learn more!

6️⃣ Can I sell my shares before an IPO on secondary exchanges?

A minority of startups have policies in place that allow you to sell vested options/shares on secondary markets (while most don't allow it). Knowing your soon-to-be employer's policy on this -- as it gives the option for liquidity much sooner than the "wait for an IPO or acquisition game" -- can be really important.

WHAT TO ASK: "If I wanted to sell my vested options/shares in the future on a secondary exchange, is that something the company has/will approve of?

RESOURCES: See the FAQ: What It Means When Your Company Allows Secondary Market Sales on the 30-40 Knowledge Base to learn more!

PRO TIP: In most situations, this applies to option grants only, not RSUs (as most RSUs are double-trigger, and the second trigger will not have been met, and thus you don't own shares to sell)

7️⃣ What’s the latest 409A valuation & preferred price?

This is a "core knowledge" question. In nearly all situations, your stock option grant will have the strike price be equal to the 409A valuation (for tax reasons). And its common for the preferred price (if it was recent) to be 2-4x the 409A valuation (but not always)

WHAT TO ASK: "Can you tell me your most recent 409A valuation, most recent preferred price, and the dates for each?

RESOURCES: See the 409A Valuations vs Preferred Price on the 30-40 Knowledge Base to learn more!

Final Thought: Make Sure You Get The Details!

Equity from a startup can be an amazing wealth builder in select upside scenarios, but sadly most fail. To improve the odds of success for yourself, make sure you get the key details, and where possible, negotiate!

BONUS RESOURCES: See Negotiation Strategy on the 30-40 Knowledge Base to learn more about the items you can negotiate for a job offer (both equity comp related and other items)!