Startup equity at seed, Series A, and Series B: what to ask before you sign
The questions that tell you what an equity grant is worth, stage by stage, and the silences that should worry you.
By the roles.cc team··5 min read
Cash is easy to compare; we publish what startups pay straight from their own postings. Equity is where offers are won and lost, and where companies count on you not asking. You do not need a finance degree. You need eight questions and the nerve to ask them. One note before the list: this is general education, not financial or tax advice, and the tax pieces are worth an hour with a professional before you exercise anything.
The eight questions
- 01How many fully diluted shares are outstanding? Your grant means nothing as a share count and everything as a percentage. If they will not give the denominator, that silence is the answer.
- 02What is the strike price, and when was the last 409A? You profit on the spread above the strike. A 409A older than a year, or one straddling a new round, changes your math.
- 03What was the preferred price last round? Preferred minus strike is the paper spread today. It is also the cleanest way to sanity-check the company's own optimism.
- 04What is the vesting schedule, and is there a cliff? Four years with a one-year cliff is standard. Anything backloaded (10/20/30/40) is a retention trick priced against you.
- 05What happens when I leave? The post-termination exercise window is the single most engineer-hostile term in standard paperwork: 90 days to find the cash or lose the options. Companies offering 7 to 10 year windows are telling you something good about themselves.
- 06What is the liquidation preference stack? At 1x non-participating, investors take their money back before common sees anything. Above 1x, or participating, your equity is worth less than it looks in every outcome short of a blowout.
- 07Can I early-exercise, and does an 83(b) election apply? Early exercise plus a timely 83(b) filing can dramatically change tax outcomes. The filing deadline is 30 days and unforgiving; this is the question that most needs a professional.
- 08Is there any refresh or evergreen policy? Your initial grant decays in percentage terms with every round. Companies serious about keeping senior people have an answer.
How the answer changes by stage
Seed: the grant should be measured in tenths of a percent, the strike is pennies, and the whole bet is the team. Negotiate percentage, not share count. Series A: the company has a 409A history and a real preference stack; ask questions five and six hardest here. Series B and later: grants shrink, cash rises toward the posted bands, and the equity conversation becomes about refreshes and secondary opportunities rather than the initial grant.
A worked example: what 0.5% is worth
Numbers make this concrete. Say a Series A offer is 0.5 percent fully diluted, on 40 million shares outstanding: that is 200,000 options. The strike, set by the last 409A, is $1.50; the preferred price last round was $6.00. The paper spread today is $4.50 a share, about $900,000, before tax, before vesting finishes, and before the dilution every future round adds. Multiply it out with the company's real numbers, out loud, on the call. The grant that cannot survive being multiplied out is the one to ask hardest about. (Illustrative figures, not advice.)
| Stage | Typical senior grant | Strike | Where the conversation goes |
|---|---|---|---|
| Seed | 0.2% to 1.0% | Pennies | Percentage and team. Negotiate the number, not the share count. |
| Series A | 0.1% to 0.5% | Low, with a 409A history | Preference stack and the exercise window. |
| Series B+ | 0.05% to 0.25% | Higher | Refreshes, secondary, and cash. |
Ranges vary widely with team size and the cash trade-off. The denominator, fully diluted shares, matters more than any single figure here.
Red flags that end the conversation
- Refusing to share the fully diluted count after an offer. You cannot value what they will not denominate.
- A 90-day exercise window they describe as non-negotiable while calling you a future owner.
- Vesting schedules that backload, or cliffs longer than a year.
- Equity pitched at an internal valuation with no 409A or round price to anchor it.
Questions people ask
What percentage of equity should a senior engineer get at a seed startup?
Typical senior-engineer grants at seed run from roughly 0.2 to 1 percent fully diluted, varying with team size, cash trade-off, and how early you are. The denominator matters more than the share count: always ask for fully diluted shares outstanding.
What is a 409A valuation?
A 409A is an independent appraisal of a private company's common stock, used to set the strike price of employee options. Your potential gain is the spread between future value and that strike.
What is a fair post-termination exercise window?
The legacy standard is 90 days, which forces departing employees to pay to keep vested options. Engineer-friendly companies now offer 7 to 10 years. Ask before you sign, not before you resign.
Is startup equity worth anything?
Sometimes, and the terms decide. A modest grant with a 1x non-participating preference and a long exercise window is a real asset. A large-sounding grant behind a participating preference stack can be worth little outside a major exit.
What is an 83(b) election?
An 83(b) election tells the IRS to tax restricted stock at grant rather than as it vests, which can sharply lower the bill if you early-exercise while the stock is cheap. The deadline is 30 days from the grant and is unforgiving, so take this one to a tax professional before you sign.
Should I early exercise my stock options?
Early exercise can lower your eventual tax and start the capital-gains clock, but you are spending real cash on a private company that may go to zero, and the 83(b) timing is strict. It suits some people and not others. This is the equity decision most worth an hour with a tax professional.
What happens to my startup equity if the company is acquired?
It depends on the deal and the preference stack. Investors take their money back first, sometimes a multiple of it, before common stock sees anything. A strong exit pays out your vested options; a modest one can leave them worth little even when the headline price sounds large. Ask about the liquidation preference before you value the grant.
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