What to do after a startup layoff

The first thing to do after a startup layoff is read two documents before you sign anything: your separation agreement and your stock option grant. The separation agreement controls your severance, your health coverage, and any release you are being asked to sign. The grant controls a clock you may not know is running: at most startups you have only 90 days from your last day to exercise vested options, or they expire. Everything else (the search, the story, the timing) can wait a few days. Those two documents cannot.

This post is the practical checklist, not a pep talk. Layoffs at venture-backed companies are common and have nothing to do with your ability. A company that raised 18 months ago and did not find its next round runs out of runway on a schedule. If you want the bigger picture on why that schedule exists, see how funding cycles affect engineering hiring. Here we stay on what you do this week.

What should you do in the first 72 hours?

Move in this order. The early items are time-sensitive and reversible only at a cost; the later ones are not going anywhere.

1. 01Do not sign the separation agreement on the spot. It is almost always negotiable, and you are allowed to take it to a lawyer. If you are 40 or older in the US, federal law (the OWBPA) gives you 21 days to consider it and 7 days to revoke after signing. Younger workers often get a few days by asking.
2. 02Download everything personal now. Pull your pay stubs, your offer letter, your option grant, your most recent 409A or cap-table statement, and any performance reviews. Access to your work email and HR portal usually gets cut within hours.
3. 03Find your option exercise deadline. Look in the grant or plan document for the post-termination exercise (PTE) window. The default is 90 days. Some companies extend it to 5 or 10 years. This single fact drives a four-figure-to-six-figure decision, so confirm it in writing.
4. 04Confirm your last day and what is paid out. Unused PTO payout depends on your state (California requires it; many states do not). Get the final paycheck date and the severance schedule in writing.
5. 05Handle health insurance. In the US you will get a COBRA notice. COBRA is expensive because you pay the full premium. Compare it against an ACA marketplace plan, where a job loss is a qualifying event that opens a special enrollment window.
6. 06File for unemployment. A layoff (not a firing for cause) almost always qualifies. Benefits are modest but they are real, and the claim takes a few weeks to process, so start it early.

What actually happens to my equity?

Two things are separate and people conflate them: vesting and exercising. Vesting is how much of your option grant you have earned. When you are laid off, vesting stops. Anything past your last day, including the rest of a cliff you had not crossed, is gone. Exercising is paying to convert vested options into actual shares. That is the part with the 90-day clock.

For the mechanics of grants, strike price, and cliffs, how stock options and vesting work is the deeper reference. Here is the layoff-specific math.

Say you joined a Series A company and vested 12,000 ISOs at a $1.00 strike. The current 409A (the company's official fair value) is $4.00. To exercise all of them you pay 12,000 times $1.00, which is $12,000 out of pocket. The $3.00 per share spread (409A minus strike, so $36,000 total) counts as income for the alternative minimum tax, even though you cannot sell the shares and have no cash from them (illustrative, not advice). That AMT exposure is the trap that catches people who exercise on autopilot.

The honest default for most early-stage grants is to not exercise unless you believe in the outcome and can lose the money. A company that just laid off engineers to extend runway is, by definition, a company that did not raise on the timeline it planned. For when exercising can be worth it, see is startup equity worth it in a down market and what happens to options when you leave.

How do I talk about the layoff in interviews?

Plainly, in one or two sentences, then move on. Hiring managers at startups have laid people off and been laid off themselves. The layoff is not the interesting part of your story; what you shipped is. A clean version sounds like this:

The company raised a Series A in 2024, did not close the next round in time, and cut about a third of the team to extend runway. My whole squad was part of it. I owned the payments service, and here is what I built.

Notice what that does. It names the cause (runway, not performance), states the scope (a structural cut, not just you), and pivots immediately to the work. Do not apologize, do not editorialize about leadership, and do not volunteer a long backstory. If you were one of the few cut while most stayed, say it was a reorg of your area and keep it short. For the rest of how your materials should read, resume tips for startup engineers covers framing the work itself.

When should I start applying, and where?

Start the search immediately, but aim it well. The mistake is spraying applications across every open role. The better move is to point yourself at companies that have money and a fresh mandate to hire, which is exactly the signal the roles.cc board is sorted by: how recently each company raised. A company that closed a round in the last few weeks has budgeted headcount and a reason to move fast. You can watch those closes land on the recent raises page.

This is the counterintuitive part of timing a search after a layoff. Layoffs cluster when funding tightens, so it can feel like nothing is hiring. But hiring does not stop; it concentrates in the companies that just raised. The same funding cycle that ended your last job is filling someone else's hiring plan right now. For the broader read on timing, see best time to job search software engineer and how to find startups that are hiring.

• Prioritize post-raise companies. A seed or Series A close from the last 60 days usually means open, budgeted engineering roles. Filter the board by city and level.
• Use your severance as runway, not pressure. If you have 8 to 12 weeks of pay, you can afford to interview for the right role instead of grabbing the first offer. Treat severance the way the company treated its own: as a window to find the next thing.
• Tell people you are looking, specifically. A targeted message to ten former colleagues beats 100 cold applications. Most startup hires still come through referrals.
• Do not undersell on comp out of fear. A layoff does not lower your market value. Anchor to current numbers in senior software engineer salary SF NYC 2026.

Should I negotiate the severance?

Often yes, and the ask is low-risk because the worst answer is no. Cash-strapped startups may have little room on the dollar amount, but other terms cost them nothing and matter to you. Reasonable, common asks:

• An extended option exercise window. Moving the PTE from 90 days to 12 months or longer costs the company nothing today and buys you time to decide.
• A few more weeks of severance or COBRA coverage, especially if you were there a while.
• A neutral or positive reference, and agreement on how the departure is described.
• Accelerated or kept vesting through a specific date, if your last day lands just before a vesting milestone.

Put the asks in one calm email, frame them as routine, and give the company an easy yes. If the agreement is large or the equity is meaningful, an employment lawyer's flat-fee review (often a few hundred dollars) pays for itself.

A layoff is a hard week and a survivable one. Beat the document clocks, frame the story in two sentences, and aim the search at companies that just got funded. The funding cycle that ended one job is already opening the next.