Questions to Ask About Equity
For anyone offered equity in a startup or another private company, as stock options or as RSUs, who wants to know what the grant is really worth before signing. These 49 questions to ask about stock options and equity run in the order the decision does: what the grant is, how it is priced and valued, how it vests, what exercising costs and the tax it can trigger, how you would ever sell, and a last group to put to yourself. Written for candidates and employees, not for investors.
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The questions
Each question, and why to ask it
The grant
What type of equity is this: incentive options, non-qualified options, or RSUs?
Why ask it
Each is taxed at a different moment and under different rules, so the label decides most of the rest of the conversation. Those three are United States terms, so in another country ask what the scheme is called and whether it has any tax-approved status. If nobody at the company can say which you are getting, the plan documents probably have not been looked at in a while.
How many shares is the grant, and how many shares are outstanding fully diluted?
Why ask it
A share count on its own means nothing. Fully diluted includes the option pool, warrants, and convertible notes, and companies sometimes quote a smaller denominator that makes your slice look bigger than it is.
What percentage of the company does my grant work out to?
Why ask it
Asking makes someone do the division out loud. Some companies decline to say, and that is still informative: without the denominator you cannot value the grant, so judge the offer on its salary.
Is the grant fixed in the offer letter, or does it still need board approval?
Why ask it
Stock options are normally approved by the board after you start, and until then the number in your letter is a recommendation. Ask when the next board meeting is, because the strike price is usually set on the approval date and not on the day you signed.
Can I read the stock plan and my grant agreement before I accept?
Why ask it
The transfer restrictions, repurchase rights, and exercise window live in those documents, not in the summary you were emailed. Reluctance to share them before you sign is worth taking seriously.
How did you arrive at this number of shares for my role and level?
Why ask it
A company with equity bands can show you where the grant sits inside one. Without bands, the figure is whatever the last negotiation produced, and that usually leaves room to ask for more.
If I wanted more equity and less salary, or the reverse, what would the exchange rate be?
Why ask it
The rate reveals what the company itself thinks a share is worth, a figure it rarely states outright. Some startups offer two or three fixed packages to choose between, and that is easier than negotiating a custom one.
Are refresh grants given, and when did someone at my level last receive one?
Why ask it
Once the first grant has finished vesting, your total pay drops unless a newer grant has been layered on top. A dated example from a real colleague is worth more than a policy saying refreshers are considered every year.
Does a promotion come with additional equity?
Why ask it
A grant sized for the level you join at can look small two promotions later. Find out whether the top-up brings you to the band for the new level or is a fixed token amount.
Where will my grant be recorded, and who answers equity questions once I have joined?
Why ask it
The recruiter usually stops being your contact on the day you start. Get the name of someone in finance or legal, plus a login or a signed copy that shows your share count and vesting dates, so a question about exercising or leaving is answered before a deadline passes.
Price and value
What is the strike price, and when was the last 409A valuation?
Why ask it
The strike is normally set at fair market value from the most recent 409A, the independent valuation that United States companies obtain. One that is more than a year old, or that predates a funding round, suggests a new price is coming before your grant is approved. In other countries, ask how the exercise price is set and who signs it off.
What was the price per share in the most recent funding round?
Why ask it
Investors buy preferred shares and your options convert into common, so the round price and the strike are different numbers, often by a wide margin. Neither is what the option is worth today, but you need both to see how the headline valuation relates to what you would pay.
How long ago was the last priced round, and has the company raised a bridge or a down round since?
Why ask it
A price agreed two or three years ago, in a different market, may not be one the company could raise at today. Bridge notes and down rounds are not always announced, and either one makes the last headline valuation a poor guide.
How much has been raised in total, and what is the liquidation preference?
Why ask it
Invested capital is roughly what gets repaid before common stock receives anything. Compare it with the exit price you are quietly imagining, because a respectable acquisition can still return nothing to employees.
Do any investors have participating preferred, or a multiple on their preference?
Why ask it
Participating preferred means investors take their money back and then share the remainder as well. A 2x or 3x preference has a similar effect, and neither appears anywhere in your offer letter.
How much would the company have to sell for before common shareholders were paid anything?
Why ask it
Below the preference stack, common shareholders can receive nothing at all while the deal is still announced as a good outcome. This is one number that whoever keeps the cap table should be able to give, and it is the floor under every scenario you run afterwards.
At what sale price would my grant be worth one year of my salary?
Why ask it
Working backwards from a sum you care about produces a company value you can judge for plausibility. Have them include the preferences and the dilution they expect, and treat the result as a scenario, never a promise.
How big is the unallocated option pool, and how much dilution do you expect in the next round?
Why ask it
A pool that is nearly empty gets topped up, typically at the next round, and both the top-up and the new investors' shares shrink every existing holder's percentage. A rough expected figure lets you mark your own slice down now and not be surprised by it later.
How many months of cash does the company have, and when do you expect to raise again?
Why ask it
Runway sets how soon the company needs new money, and the terms of that money decide what startup stock options end up being worth. Follow up with what it would have to show to raise at a higher price, because those milestones are what your equity is really a bet on.
Have employees' options ever fallen below their strike price, and what did the company do?
Why ask it
Options that are underwater cost more to exercise than the shares are judged to be worth. Whether the company reset the strikes, issued fresh grants or left people where they were shows how it treats staff when the equity story goes badly.
Vesting
What is the vesting schedule, and is there a cliff?
Why ask it
Four years with a one-year cliff is common but far from universal. Watch for back-weighted schedules that push most vesting into years three and four, and for cliffs longer than twelve months.
When does vesting start: my first day, the board approval date, or another date?
Why ask it
The vesting commencement date is normally your start date even when approval comes months later, but that is not automatic. A grant that vests from the approval date quietly costs you whatever time the board took.
After the cliff, do shares vest monthly or quarterly?
Why ask it
With quarterly vesting, leaving a week before a vesting date forfeits nearly three months of equity. It is a small term that matters most on the day you are choosing a resignation date.
What happens to vesting if I take parental leave, long sick leave or move to part time?
Why ask it
Plans differ: some keep vesting through protected leave, some pause it after a set number of weeks, and reduced hours can slow the rate. Local employment law may also have a say, so ask how it works where you would be employed.
If I were laid off shortly before the cliff, would any of the grant vest?
Why ask it
The plan's default is usually no, so a layoff in month eleven leaves nothing. Some companies have waived the cliff when they cut jobs, so ask what was actually done the last time and not only what the document allows.
Does any of my equity accelerate if the company is acquired?
Why ask it
Single trigger vests the rest on the sale itself, double trigger only if you also lose your job afterwards, and many employee grants carry neither. With no acceleration, an acquirer can end your role soon after closing and the unvested portion simply disappears.
For RSUs, does vesting depend on time alone, or also on a sale or listing?
Why ask it
Private companies often attach a second condition to RSUs: nothing is delivered until a liquidity event, and the units can expire if none happens within a set number of years. Ask for that expiry date, and what becomes of time-vested units if you leave first.
Exercise and tax
What would it cost me in cash to exercise everything once I am fully vested?
Why ask it
Shares multiplied by strike price is a real bill, and it can fall due on short notice if you leave. Add any tax the exercise would trigger and compare the total with your savings, because options that cost more than you can pay are forfeited however long they took to earn.
If I leave, how long do I have to exercise what has vested?
Why ask it
Ninety days is a common default and often means abandoning options you cannot afford to buy. Companies with extended windows of several years usually volunteer it, so ask directly if they have not.
Is the exercise window different if I resign, am laid off, or am dismissed for cause?
Why ask it
Many plans cancel even vested options on a termination for cause, and the definition of cause sits in the plan document. Read that definition yourself, because a broad one gives the company more discretion than the word suggests.
When do the options expire if I never leave?
Why ask it
Options carry a fixed life, often ten years from the grant date, and lapse after it even for someone still employed. Long-serving staff at companies that stay private for a long time do reach that date, so ask what was done for them.
Could I pay the exercise price through a cashless or net exercise?
Why ask it
A net exercise lets you give up some shares to cover the cost of the rest instead of writing a cheque. Plans often allow it only at the board's discretion or only at an exit, so find out whether it has ever been approved for an employee.
Can I exercise early, and would you support an 83(b) election?
Why ask it
Early exercise with a timely 83(b) filing, a United States election with a strict deadline, can start the capital gains clock while the spread is still small. It also puts your cash into shares that may never be sellable, so go through both sides with a tax adviser before using it.
Would exercising create a tax bill before I can sell anything?
Why ask it
In the United States, exercising non-qualified options is generally taxed on the paper gain, and incentive options can bring in the alternative minimum tax, all while the stock stays illiquid. The rules elsewhere are different again, so ask what the company tells employees in your country and confirm it with an adviser.
How is tax withheld when I exercise or when RSUs vest?
Why ask it
Withholding might come out of your salary, be covered by holding back or selling some shares, or be left for you to settle when you file. The method decides how much cash you need on the day, and it varies by country and by grant type.
Does the company offer employees any tax guidance or time with an adviser?
Why ask it
Most employers say they cannot give personal tax advice, which is fair. Some still run sessions with an outside firm or pay for an hour with one, and that hour is worth having before a large exercise.
If I moved to another country or worked remotely from abroad, what would happen to my grant?
Why ask it
A grant designed for one tax system can lose its favourable treatment, or become taxable in two places, when you relocate. Raise it now if a move is at all likely, since some plans cannot be offered in every country.
Selling and exit
Has the company run a tender offer or secondary sale, and at what price?
Why ask it
A secondary shows a price that an outside buyer actually paid for common stock, which no valuation slide can. Ask who was eligible, since some sales are open only to founders or to staff past a tenure threshold.
Could I sell exercised shares to an outside buyer myself, or would the company have to consent?
Why ask it
Transfer restrictions in the plan or the bylaws decide whether a private sale is possible at all. A right of first refusal is not a ban, but it lets the company step in and match a buyer's offer, which slows a sale and can put buyers off.
Does the company have a right to buy back shares I have vested or exercised if I leave?
Why ask it
A repurchase right can let the company take back shares you have already paid for, sometimes at the price you paid and not at their current value. How common it is varies from market to market, and it is the clause most worth finding in the plan before you sign.
Which outcome are the founders and board working towards: a sale, a listing, or staying private?
Why ask it
Private shares generally turn into money only through a sale, a listing or a buyback, so the intended path sets your timeline. A founder content to stay private for a decade is offering a different asset from one preparing to sell.
After a listing, how long would I be locked up before I could sell?
Why ask it
Employees are commonly barred from selling for some months after an IPO, and the price can move a great deal in that time. Tax on RSUs or exercised shares may fall due before the lock-up ends, so ask whether the company would help employees cover it.
In an acquisition, could my unvested options be cancelled, cashed out or swapped for the buyer's equity?
Why ask it
The plan document lists what the board may do with unvested grants in a sale, and it reads as a menu, not a commitment. Knowing everything on that menu stops you from assuming the kindest item.
What information will I get as a shareholder after I leave?
Why ask it
Former employees are often startled by the silence. You may have to make an expensive exercise decision years later with no current financials, so establish now what you are entitled to see.
Ask yourself
If this equity turned out to be worth nothing, would I still want this job at this salary?
Why ask it
Answer it before the percentage and the valuation have had time to work on you. If the answer is no, you are accepting a pay cut in exchange for a lottery ticket, which is a fine trade to make deliberately and a poor one to make by accident.
How much salary am I giving up over the vesting period compared with my best alternative?
Why ask it
Multiply the yearly gap by the length of the schedule and you have the price you are paying for the grant. Seen as a purchase, it becomes easier to ask whether you would buy these shares with that money.
How long do I realistically expect to stay, and how much of the grant would have vested by then?
Why ask it
A grant is quoted at its full size, but you keep only what vests while you are there. If your jobs have tended to last two years, value half of a four-year grant, and nothing at all if you might leave before the cliff.
Could I cover the exercise cost and any tax from savings, without borrowing?
Why ask it
If the honest answer is no, the options may be out of reach on the day you leave, whatever they are worth on paper. That makes the exercise window and early exercise rights the terms to negotiate hardest.
How much of my net worth would end up tied to one private company?
Why ask it
Your salary already depends on this employer, and a large exercise adds your savings to the same bet. Settling on a ceiling in advance keeps the choice from being made in an optimistic week.
How to use these questions
Practical guidance for the conversation itself
Who to ask, and when
The recruiter, when the offer arrives
A recruiter can usually give you the grant type, the share count, the vesting schedule and the plan documents, which covers most of The grant and Vesting. Ask for the fully diluted total at the same time. If the recruiter does not have it, that is your cue to ask who does.
Finance or a founder, before you answer
Preferences, the option pool, the last round and the next one belong to whoever keeps the cap table. Ask for twenty minutes with that person once the offer is in hand. A startup is usually more forthcoming with a candidate it is trying to close than with someone already on the payroll, so Price and value and Selling and exit are best asked now.
A tax adviser, before you exercise
The company can tell you what its plan says under Exercise and tax, but not what the bill would be for you. Take the grant agreement and the current valuation to someone who handles stock options where you live, before an early exercise and again before you leave.
Yourself, with the answers in front of you
Leave the Ask yourself group until the numbers are in. Fill in the salary gap, the exercise cost and the sale price at which the grant pays, then decide while nobody is waiting on the phone.
Handling the conversation
Ask in writing, once
Send the numeric questions as a short email rather than raising them live. You get considered answers and a written record, and a share count sent in writing is much harder to leave without its fully diluted total.
Value the offer twice
Once with the equity at zero and once at the last round price. If the first number is not acceptable on its own, you are relying on an outcome you do not control.
Negotiate the terms, not just the amount
An extended post-termination exercise window, early exercise rights, or double-trigger acceleration can be worth more than extra shares, and they are often easier to grant than a bigger number.
Get the answers into the paperwork
A spoken assurance about acceleration, a longer exercise window or the vesting start date is hard to rely on once the person who gave it has moved on. Ask for it in the offer letter or the grant agreement, and check the signed version against what you were told.
What tends to go wrong
Comparing offers by share count
Ten thousand shares at one company and a hundred thousand at another are not comparable without the fully diluted totals. Convert both to percentages before you compare anything.
Believing the headline valuation
A valuation quoted from a preferred round assumes the terms attached to that round. Common shares sit behind those terms, which is why the price used to set your strike is usually lower.
Forgetting refreshers exist
Your first grant finishes vesting when its schedule ends, often after four years. Ask when refresh grants are considered and on what basis, because a company without a refresh practice quietly cuts your pay the year after.
Letting the window close
The exercise deadline after leaving is often only a few months, and options not exercised by then are gone. Put the date in a calendar the week you resign, along with the cash the exercise would require.
A short version if you only get one exchange
Four questions that carry most of the value
- 1How many shares, out of how many fully diluted?
- 2What is the strike price and the date of the last 409A?
- 3How much has been raised, and what is the liquidation preference?
- 4How long do I have to exercise after leaving?