The equity line on an offer is the most over-interpreted and under-analyzed item in most compensation packages. Recruiters quote it in dollars. Candidates do mental math on the dollars. Then the dollars turn out to mean something completely different from what was assumed, sometimes a year later, sometimes four.

This post is the working framework for reading an equity grant honestly — without the company's slideshow, without the recruiter's pitch, and without the LinkedIn finance bros telling you to "just go to a startup."

The first split: public or private

Every equity question starts here. The two animals are not similar.

Public company RSUs (Restricted Stock Units) are real shares of a publicly-traded stock, vesting on a schedule, taxed as ordinary income at vest. They have a known market price. They're approximately liquid — at vest, you receive shares you can sell same-day. The math is messy but tractable.

Private company equity is usually ISOs or NSOs — options to buy shares at a fixed strike price, vesting over time, with an exercise cost. They're illiquid until an exit. The math is messy and speculative. The headline number on the offer letter is the company's hopeful estimate, not a fact.

This post focuses on public RSUs because the math is concrete enough to be useful. For private equity, the same principles apply but the discount factor is much larger and much less knowable. Treat private-equity offers' headline numbers as marketing copy, not as compensation.

What "$200k over 4 years" actually means

The breakdown above is the honest reading of a typical public-company RSU grant. The headline of "$200k over 4 years" implies $50k a year in compensation. That's almost never what shows up in your bank account.

Four discount factors compress the real value:

Departure probability. The median tenure at large tech companies is 2-3 years. If you leave at 2.5 years on a standard 4-year vest, you forfeit 37.5% of the grant. The expected realized value, weighted by departure probability, lands at about 65-70% of the headline.

Tax drag. RSUs vest as ordinary income, which means federal + state tax can take 35-50% of the gross value in high-tax states. The recruiter quotes pre-tax dollars; your bank account sees post-tax dollars. A $50k vest is more like $28-32k of net cash if you live in CA or NY.

Stock-price volatility. The grant value is calculated using the stock price at grant. By the time year 3 vests, the stock might be worth half or double what it was at grant. The risk-adjusted expected value, after volatility, is typically ~85% of the headline.

Cliff and timing. Many companies use 1-year cliffs (nothing vests in year 1) and back-load (4/8/12/16 quarterly tranches with the last year carrying more). If you leave at 11 months, you get nothing. If you leave at 13 months, you get 25%.

Stacked, these factors typically deliver 55-70% of the headline as real, after-tax, realized value over four years.

Public RSUs vs. private equity

The compare-list is the working filter for "is this offer's equity number remotely real?"

For public RSUs, the headline value is approximately real, modulo the discount factors above. You can mentally model "what is this worth" with reasonable confidence — multiply by 0.6-0.7 to get a realistic 4-year value.

For private equity, the headline is much more speculative. The grant is a number of options at a strike price. The "value" is calculated by assuming the company exits at some multiple of its current valuation, which may or may not happen. The honest expected value of a typical private-startup equity grant is wide — anywhere from $0 to many multiples of the headline, with the median outcome being closer to $0 than to the headline.

Two specific tactics for evaluating private equity:

• Ask for the strike price and total shares outstanding. Your percentage ownership is the only number that matters in an exit. If you're being granted "$200k" in equity but it works out to 0.01% ownership, the exit needs to be enormous for that to translate to $200k.
• Discount the headline by stage. Seed-stage: 0.1-0.2x expected value. Series B-C: 0.3-0.5x. Late-stage with a credible IPO path: 0.6-0.8x. Anything higher is the company's optimism showing.

How often the headline matches reality

The 55-70% figure for public-company RSUs is the consistent finding when researchers actually follow employees over a 4-year window. It's not a doomsayer's estimate — it's the average outcome for employees at well-performing public companies. For stocks that drop substantially during the vesting period, the realized fraction is lower.

For private startups, the distribution is wildly bimodal. A small minority of employees realize multiples of their headline. The majority realize zero or near-zero — most startups don't exit, and many that exit do so at valuations below the latest funding round.

For broader context on the rest of the offer, see total-compensation-base-bonus-equity.

The mental model for offer comparison

When comparing two offers, the equity comparison should use the discounted value, not the headline. A worked example:

Offer A: $180k base, $35k bonus target, $300k RSUs over 4 years (public co) Offer B: $200k base, $40k bonus target, $200k options over 4 years (Series C startup)

Headline year-1 comp: A = $290k. B = $290k. Look equal.

Discounted year-1 realized expectation:

• A: $180k + ($35k × 0.85 expected bonus payout) + ($75k × 0.65 RSU realization) ≈ $260k
• B: $200k + ($40k × 0.80 expected bonus payout) + ($50k × 0.30 expected realization) ≈ $247k, with much higher variance

Offer A is meaningfully better in expected value, even though both look the same in dollars on the offer letter. This is the kind of math worth doing for a 30-minute investment when you have multiple offers in hand.

For the broader offer-comparison framework, see multiple-offers-comparing-frameworks.

Questions to ask the recruiter about equity

A short list of questions that surface the real answer:

1. What's the vesting schedule? Standard is 4-year with 1-year cliff and monthly thereafter. Anything different (5-year vests, 25% in year 1 vs. back-loaded) changes the math.
2. How was the grant valued? Public RSUs: usually a trailing average of the stock price. Private: the latest 409A or the latest funding round.
3. What's the refresh policy? At public companies, annual refresh grants are standard. Without refresh, your effective equity comp drops 50%+ in year 4 as the original grant winds down.
4. What's the share count? Especially for private companies. "Options" without a count is a non-answer.
5. Is there a clawback or repricing provision? Rare, but it exists. Ask explicitly.

What this isn't

A few clarifications:

• It's not a reason to take less base. Equity is the riskier part of the package; base is the certain part. Negotiate base first.
• It's not a guarantee. Even at public companies, grants are subject to stock-price risk. At private companies, the grant could be worth zero.
• It's not a tax-planning guide. ISOs, NSOs, and RSUs each have different tax treatment. Get a CPA's advice before exercising private-company options.

The short version: discount the headline equity number by 0.6-0.7x for public RSUs and by 0.2-0.4x for private equity to get an honest expected value. Use the discounted number for offer comparison. The recruiter will quote the headline; your bank account will see something different.