Equity is the most misunderstood part of startup compensation. Here's how to structure grants that actually motivate.
Equity math is a shared language between founders and hires. Get it wrong and the same grant that feels generous to you feels stingy to them — usually because they don't have the context to value it, and you didn't provide it.
First engineer: 1-2%. Employee #5-10: 0.25-0.75%. First VP: 0.75-1.5%. All 4-year vest, 1-year cliff. Refresher grants at year 3 to keep runway forward. Numbers shift with stage, market, and role scarcity.
US private-company grants are almost always ISOs (incentive stock options). Convert to NSO if grants exceed $100K FMV vest per year. RSUs mostly used at late-stage private or public companies. Explain the tax treatment — hires who don't understand exercise costs disengage silently.
Standard is 90 days post-termination. Extended (7-10 years) removes a huge trap for departing employees who can't afford to exercise. More companies offering this in 2026. Trade-off: some tax status changes (ISO → NSO after 90 days).
Show percentage, share count, FMV, strike price, vest schedule, and a realistic scenario ("if we exit at $500M in year 5, this grant is worth X after taxes"). Don't hide the dilution math. Sophisticated hires will do it themselves — better to be the source of truth.
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