Salary vs Equity: Which is Better for Your Career?

# Salary vs Equity: Which is Better for Your Career? Should you take $120k + 0.5% equity or $160k with no equity? Here's the math. ## Understanding Equity Types ### Stock Options (Startups) - Right to buy shares at strike price - Worthless until exit (acquisition/IPO) - High risk, high reward - 4-year vest, 1-year cliff ### RSUs (Public Companies) - Actual shares that vest over time - Immediate value - Taxed as income when vested - Low risk (stock already liquid) ## The Startup Equity Bet ### Offer: $120k salary + 0.5% equity **Valuation**: $50M (Series B) **Your equity value**: $250,000 (on paper) **4-year vest**: $62,500/year **Total comp (paper)**: $182,500/year ### But What's It Really Worth? **Startup outcomes:** - **60% chance**: Worth $0 (company fails/down round) - **30% chance**: Worth 50% of paper value ($125k) - **8% chance**: Worth 100% of paper value ($250k) - **2% chance**: Worth 5x paper value ($1.25M) **Expected value**: (0.6 × $0) + (0.3 × $125k) + (0.08 × $250k) + (0.02 × $1.25M) = **$82,500** **Real total comp**: $120k + ($82,500 ÷ 4) = **$140,625/year** **vs the all-cash offer of $160k → Cash wins by $19,375/year** ## When Equity Wins ### Late-Stage Startup (Series D) **Offer**: $140k + 0.2% equity **Valuation**: $2B **Equity value**: $4M (paper) **Outcomes**: - 30% chance: $0 - 40% chance: 50% value ($2M) - 20% chance: 100% value ($4M) - 10% chance: 2x value ($8M) **Expected value**: $2.4M over 4 years = **$600k/year** **Real total comp**: $140k + $600k = **$740k/year** **This beats cash.** ### Public Company RSUs **Offer**: $150k + $100k RSUs/year **Total**: $250k/year guaranteed (stock already liquid) **Beats**: $180k cash-only offer ## Risk Tolerance Framework ### Choose Equity If: - Strong company fundamentals ($50M+ ARR, clear path to exit) - Late-stage (Series C+) or public company - You can afford lower cash salary - Young (time to recover if equity fails) - Already have savings ### Choose Cash If: - Early-stage startup (seed/Series A) - Need immediate income - Risk-averse - Close to retirement - Have dependents/debt ## The Tax Impact ### ISOs (Incentive Stock Options) - Taxed at long-term capital gains (20%) if held 2 years - AMT risk on exercise ### NSOs (Non-Qualified Stock Options) - Taxed as ordinary income (37% max) on exercise - Plus capital gains on appreciation ### RSUs - Taxed as ordinary income when vested - No tax advantage **Example**: $100k equity gain - ISO (LTCG): $20k tax → $80k net - NSO: $37k tax → $63k net - **Difference**: $17k ## Calculate Your True Comp See your total compensation breakdown: [Try TickrPay's free calculator](/) ## Related Articles - [FAANG vs Startup Salaries](/blog/faang-vs-startup-salaries) - [100k Salary Breakdown](/blog/100k-salary-breakdown)