At the earliest stages, most startups reserve 10% to 20% of the company in an option pool and hand out individual grants that run from under 0.1% for a junior hire up to 5% for a non-founder executive. That is the short version of how much equity to give early employees, and it is roughly where thousands of seed-stage grants actually land. The right number for any single hire depends on three things: what seat they are filling, how early they are showing up, and how much cash salary they are giving up to be there.
What Shapes the Size of Each Grant
Three variables drive almost every equity conversation: role, timing, and the salary trade-off.
Role is the most visible factor. A VP of Engineering building the core product from scratch contributes differently than a marketing coordinator, and the equity should reflect that. Senior hires bring networks, domain expertise, and credibility that help close funding rounds and recruit the next wave of talent. Their grants tend to be multiples of what someone in a junior seat receives.
Timing is nearly as important. Someone who joins a five-person team working out of a co-working space is taking a bet that a Series B employee never had to make. The company might fail, the product might pivot into irrelevance, and there is often no salary safety net. That uncertainty is the whole reason equity exists in startup compensation. It is the premium for showing up before the outcome is obvious. As a company raises successive rounds and proves its model, new-hire equity shrinks because the risk has already been partially absorbed by earlier employees and investors.
Salary trade-off rounds out the picture. A candidate willing to accept a below-market cash salary in exchange for more ownership is co-investing in the company with their labor. Document those trade-offs clearly, because the IRS cares whether the strike price on options reflects fair market value, and sloppy documentation can create tax problems for everyone involved.
Typical Ranges by Role at the Seed Stage
No universal formula exists, but industry benchmarks from thousands of startup grants cluster around predictable ranges. Before or just after a seed round, expect something close to this:
- Non-founder C-suite (CTO, CFO, COO): 1% to 5%, with most offers landing between 1.5% and 3%. These hires carry strategic accountability and often take significant pay cuts to join.
- Senior engineers and lead technical hires: 0.5% to 1.5%. A senior engineer joining as one of the first five employees typically falls near 1%.1Silicon Valley Bank. How Much Equity Should You Give Key Employees
- Mid-level engineers and experienced individual contributors: 0.25% to 0.7%.
- Junior engineers, designers, and early marketing or business development hires: 0.05% to 0.25%.1Silicon Valley Bank. How Much Equity Should You Give Key Employees
Within any single band, the top of the range is for a candidate taking a real pay cut, filling a rare skill gap, or joining before the seed round closes. The bottom is for a well-paid hire coming in after the company has money in the bank and a working product.
How Ranges Shrink at Later Stages
These numbers get smaller at each subsequent funding stage. A senior engineer who would get 1% at the seed stage might get 0.25% to 0.5% after a Series A, because the valuation is higher, the risk is lower, and more people are competing for the remaining pool. By Series B and beyond, individual contributor grants are often measured in fractions of a tenth of a percent.
A smaller percentage of a larger pie can still be worth more in absolute dollars. A 0.25% stake in a company valued at $50 million after a Series A is worth $125,000 on paper, while a 1% stake in a $5 million seed-stage company is only $50,000. The percentage alone does not tell the whole story, and candidates who fixate on it without asking about the valuation are usually missing the more important number.
Sizing the Option Pool
Before granting equity to anyone, carve out a pool of shares reserved for employees, advisors, and future hires. The common starting point is roughly 10% of the company’s fully diluted shares, though seed-stage companies often end up closer to 15% to 20% after investor negotiations.2Carta. Option Pools
Investors typically require the pool to be created or topped up before their money goes in, which means the dilution falls on the founders rather than the new investors. This is one of the more consequential terms in a term sheet, and it is worth pushing back if an investor demands a pool larger than you will realistically need before the next round. A pool that is too large dilutes founders unnecessarily. One that is too small forces an awkward re-negotiation mid-hire.
Sizing the pool starts with a hiring plan. Count the roles you will fill before the next raise, apply the range for each seat, add a cushion for advisors and refresh grants, and use that total as your target. Guessing high because it feels safer is expensive.
Advisors Are a Separate, Smaller Bucket
Advisor grants do not follow the same ranges as employee grants, and confusing the two is a common founder mistake. Advisors sit outside the core team but can provide introductions, technical guidance, or industry credibility that moves the needle at early stages. Their equity is much smaller. Carta’s data from the first half of 2024 shows median advisor grants of 0.21% at pre-seed, 0.12% at seed, and 0.05% at Series A.3Carta. Advisory Shares: A Founder’s Guide Only about 10% of pre-seed advisors received 1% or more.
Advisor equity typically vests over one to two years rather than four, often with no cliff. Tie the grant to specific deliverables or a meeting cadence, or you will give away equity for a relationship that goes quiet after the first introduction.
Vesting Structure That Comes With the Grant
Nobody gets their full grant on day one. The standard structure across VC-backed and bootstrapped startups is a four-year vesting schedule with a one-year cliff.4Carta. Vesting Explained: Schedules, Cliffs, Acceleration, and Types For the first twelve months, nothing vests. If the employee leaves or is fired before the one-year mark, they walk away with zero. On the one-year anniversary, 25% of the grant vests at once. The remaining 75% vests in equal monthly or quarterly installments over the next three years, and the grant is fully vested at month 48.
This structure is so widespread that deviating from it raises eyebrows with candidates and investors alike. Some companies experiment with five- or six-year schedules, especially later-stage companies trying to extend retention, but four years remains the default. If you are setting up your first equity plan, stick with the standard unless you have a specific reason not to.
Performance-Based Vesting
A less common alternative ties vesting to milestones rather than time. Performance-based vesting might accelerate a grant when the company hits a revenue target, launches a product, or closes a key partnership. The upside is that it rewards output rather than tenure. The downside is that milestone definitions are slippery, and disagreements about whether a target was “really” hit create friction at exactly the wrong time. Most startups use time-based vesting for rank-and-file employees and reserve performance triggers for specific executive arrangements.
What Happens on Acquisition
Acquisition is where vesting terms get tested. An acceleration clause can speed up vesting when the company changes hands, and there are two flavors worth understanding before you write one into an offer.
Single-trigger acceleration vests some or all of the unvested equity the moment the company is sold. It sounds great for the employee, but investors and acquirers dislike it because it removes the retention incentive. If everyone’s equity vests at closing, the acquirer has to build new retention packages from scratch, which either increases the deal cost or reduces the price paid to shareholders. Single-trigger provisions are relatively uncommon, even for executives.
Double-trigger acceleration requires two events: the sale of the company and the involuntary termination of the employee, usually within 9 to 18 months after closing. “Involuntary termination” typically means being fired without cause or resigning for good reason, such as a pay cut or forced relocation. This structure protects employees from being let go during post-acquisition integration while still requiring ongoing service for continued vesting. Double-trigger has become the dominant approach at early-stage companies because it aligns the interests of employees, investors, and acquirers.
If the offer letter or equity agreement says nothing about acceleration, unvested shares will be handled at the acquirer’s discretion.
Choosing the Grant Type
The form the equity takes determines when the employee pays taxes, how much they pay, and what happens if they leave. Founders picking a grant type should understand four vehicles.
Incentive Stock Options
Incentive Stock Options (ISOs) are the most tax-advantaged form of equity compensation, and federal law restricts them to employees only.5Office of the Law Revision Counsel. 26 U.S. Code 422 – Incentive Stock Options An ISO gives the employee the right to buy shares at a fixed strike price set at the time the grant is issued.
The advantage is significant. When the employee exercises an ISO, they do not owe regular federal income tax on the spread between strike price and current value.6Internal Revenue Service. Topic No. 427, Stock Options If they then hold the shares for at least two years from the grant date and one year from exercise, any profit on sale is taxed at long-term capital gains rates instead of ordinary income rates.7Carta. How Stock Options Are Taxed: ISO vs NSO Tax Treatments Sell too early and the spread gets taxed as ordinary income.
ISOs carry an annual cap. If the fair market value of shares for which ISOs become exercisable for the first time in a calendar year exceeds $100,000, the excess is treated as non-qualified stock options.5Office of the Law Revision Counsel. 26 U.S. Code 422 – Incentive Stock Options The $100,000 is measured by the stock’s value at the time of grant. For early-stage employees with low strike prices, this cap rarely bites, but it becomes relevant as the company grows and refresh grants stack up.
Non-Qualified Stock Options
Non-Qualified Stock Options (NSOs) work mechanically like ISOs but lack the favorable tax treatment. Anyone can receive them: employees, contractors, consultants, board members, and advisors. That flexibility is why companies use NSOs for non-employee service providers.
The tax hit comes at exercise. The spread between strike price and fair market value on the exercise date is taxed as ordinary income, subject to federal, state, and local income taxes as well as payroll taxes.6Internal Revenue Service. Topic No. 427, Stock Options The employee owes that tax whether or not they sell. Both ISOs and NSOs require paying the strike price to convert options into actual stock.
Restricted Stock Awards
Restricted Stock Awards (RSAs) skip the option mechanic entirely. The company issues actual shares at grant, usually at current fair market value. The shares are subject to the same vesting schedule as options: if the employee leaves before vesting, the company can repurchase the unvested shares, typically at the price originally paid.8J.P. Morgan Workplace Solutions. RSA vs RSU: Everything You Need to Know
RSAs are most common at very early-stage startups where the share price is still near zero. At that stage, the upfront cost and tax exposure are minimal, and the 83(b) election makes RSAs efficient.
Restricted Stock Units
Restricted Stock Units (RSUs) are promises to deliver shares (or cash equivalent) at a future date, usually when vesting conditions are met. No shares are issued upfront and the employee pays nothing at grant. When RSUs vest, the fair market value of the delivered shares is taxed as ordinary compensation income, subject to income and payroll taxes. RSUs are far more common at late-stage private companies and public companies than at seed-stage startups, because they only make sense once the stock has a clear and meaningful value.
The 83(b) Election and Early Exercise
If an employee receives restricted stock (RSAs or early-exercised options), the 83(b) election is one of the more consequential tax choices they will make, and the deadline is unforgiving. They have exactly 30 days from receiving the stock to file the election with the IRS. There are no extensions.
Without the election, the employee owes ordinary income tax each time a batch of restricted shares vests, based on the stock’s value at that vesting date. If the company has grown, that means paying income tax on a much higher value than what they originally paid. The 83(b) election moves the tax event to the grant date instead. The employee pays ordinary income tax on the stock’s current value right away, which at an early-stage startup is often close to zero, making the bill negligible.8J.P. Morgan Workplace Solutions. RSA vs RSU: Everything You Need to Know
The payoff comes at sale. Because income was already recognized at grant, all subsequent appreciation is taxed at long-term capital gains rates, assuming the shares are held at least a year after filing. Without the election, that same appreciation would be taxed at ordinary income rates as it vested. The difference between a 20% capital gains rate and a 37% top ordinary income rate on a stock that goes from $0.10 to $10.00 is life-changing money.
The risk is real. If the employee files an 83(b) and then leaves before vesting, or the company fails, they have paid tax on stock they never kept, and they cannot get that money back. The trade-off is almost always worth making at the earliest stages when fair market value is pennies, and it deserves more thought once the company has a meaningful valuation.
Some startups pair this with an early exercise feature, letting employees exercise options before they have vested. The employee pays the strike price upfront for all their option shares and receives restricted stock that remains subject to the original vesting schedule. If they leave before vesting, the company repurchases the unvested shares at the price paid. Pairing early exercise with an 83(b) election starts the long-term capital gains clock at a time when the spread between strike and fair market value is tiny or zero. It is the single best tax optimization available to early startup employees, but it requires cash upfront and the willingness to risk losing it. Not every plan permits early exercise, so employees should check the stock option agreement.
What Founders Should Model Before Sending Offers
Every time the company raises a new round, new shares go to investors and every existing stakeholder’s percentage shrinks. A 1% stake at the seed stage might become 0.5% after a Series A and 0.3% after a Series B. This is dilution, and it is a normal part of startup growth.
What matters is whether the value of the slice is going up. If the company was worth $5 million when the employee got 1% and is worth $100 million after two rounds that diluted them to 0.4%, their stake went from $50,000 to $400,000. Dilution reduced the percentage; the rising valuation more than compensated. The time to worry is when dilution happens without a corresponding increase in valuation.
Model dilution scenarios before making grants. If you plan to raise three rounds before an exit, a 1% grant today will likely be 0.3% to 0.5% by the time it matters. Say so to candidates. Sophisticated hires will appreciate the honesty, and less experienced ones deserve to understand what they are actually getting.