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MillionaireGuide

Buying & Building Companies

Startup Equity

Trade salary for ownership at a company that might become valuable

Updated 2026-08-04

At a glance

Capital needed
No capital$0
Time to first income
YearsFull-time
Income ceiling
UncappedNo practical ceiling
Risk
High4 out of 5
Effort model
Active
Route to wealth
Equity
Scalability
4 out of 5
Competition
3 out of 5
Typical earnings
Usually zero. Occasionally life-changing
Startup cost
The salary you give up, which is a real and often large cost

How it works

Early-stage companies cannot pay market salaries, so they offer equity instead. If the company is eventually sold or goes public, that equity converts to money. Most of the time it converts to nothing. It is the one path to meaningful ownership available to someone with a skill but no capital.

How to start

  1. 01

    Evaluate the company, not the pitch

    Revenue, growth rate, runway, who the customers are and whether the founders have done this before. Enthusiasm is not information.

  2. 02

    Understand exactly what you are being given

    Options, restricted stock and phantom equity behave completely differently. Ask what percentage of the fully diluted company it represents — never just the share count.

  3. 03

    Model the outcome honestly

    0.5% of a company sold for $20m is $100,000 before tax, spread over four years of below-market salary. Compare that to the salary you gave up before deciding.

  4. 04

    Negotiate the terms, not only the amount

    Vesting schedule, cliff, exercise window after leaving, and acceleration on acquisition. A short exercise window can make vested options worthless in practice.

  5. 05

    Get the tax treatment right early

    Exercise timing and elections have enormous tax consequences that differ by country. Advice at grant is far cheaper than a bill at exit.

Honest trade-offs

What works

  • The only realistic route to meaningful equity without capital
  • Genuinely uncapped upside from a single outcome
  • Early-stage work compresses experience dramatically compared with large companies
  • Network and credibility that opens doors regardless of the outcome

What does not

  • Most startup equity ends up worth nothing, and this is the expected case
  • Below-market salary for years, which is a real and compounding opportunity cost
  • No control over the outcome, dilution or the decision to sell
  • Illiquid, and often unsellable even when the company is doing well

Risks and failure modes

  • Company failure, which is the most likely single outcome
  • Dilution across funding rounds reducing your stake substantially
  • Liquidation preferences meaning common shareholders receive nothing in a modest sale
  • Exercise costs and tax bills on paper gains that never become cash

Common questions

It depends heavily on stage and role. Very early employees at pre-seed companies might receive 0.5–2%; later hires far less. What matters more is the percentage of the fully diluted company and the realistic exit value, not the headline number.

Only with eyes open. Calculate the total salary sacrificed over four years, then ask what probability of what exit value would justify it. For most roles at most companies the honest answer is that the equity is a lottery ticket and the salary cut is certain.

A right giving investors their money back before common shareholders receive anything. In a modest sale it can mean employees with vested equity receive nothing at all, even though the company sold for a real sum.

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$10k+
First income
Years
Risk
Ceiling
Uncapped

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First income
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Six figures