Imagine joining a startup as employee number 10. Your salary is a bit below what the market pays for your role, but, in exchange, you get equity. How much? 0.25% of the company to be exact. You do the math in your head—if the company sells for $100M in a few years, you'll make $250,000. Not bad, right? Wrong, and for quite a few reasons. Once you take into account how startup equity typically works, that initial equity grant is worth $97,500, not $250,000. Let's walk through why this is the case and then answer an even bigger question: is startup equity a bad deal? Why Initial Equity Isn't Exit Equity Startup equity is confusing because most of what determines its value happens behind the scenes (outside of an employee's control). This is why, as an employee, your equity at exit is rarely what your initial grant was. This happens for the following reasons: - Vesting : Most startup equity vests over four years with a one-year cliff. This means you get nothing if you leave within th