Equity in a company is a percentage ownership claim, worth whatever that percentage of the company is worth when it is realised. A bare percentage tells a candidate almost nothing; showing the same stake as a range of dollar outcomes across plausible exit values is what actually lets them evaluate an offer.
Why the percentage on its own is close to meaningless
Ten percent of a business worth two million dollars is $200,000. Zero point one percent of a business worth two hundred million dollars is also $200,000. The percentage tells a candidate nothing about which offer is actually better, and comparing two percentages across two different companies is comparing numbers that do not share a scale.[1]
Show it as economic outcomes instead
The fix is a simple table: the candidate’s stake, priced against a small range of plausible exit values, so they see the actual dollar figure at each one rather than a raw percentage.
The table does two things a percentage cannot. It makes the upside concrete, and it makes the downside honest, because a candidate can see for themselves what the stake is worth if the exit is modest rather than assuming every startup exits at a billion dollars. A range built on realistic numbers earns more trust than a single optimistic one.
What determines the real number
Four things move the final figure, and a candidate should ask about all of them before weighing an offer: the fully diluted share count (a raw percentage before dilution from future rounds overstates the eventual stake), the strike price if the grant is options rather than shares, the vesting schedule, and whether the plan is structured for the ESS start-up concession, which changes the after-tax outcome materially.
I set out what real option grants have looked like on the finance roles I place, with current values by stage.
An alternative worth knowing: profit share
Not every business wants to give up equity at all, and there is a legitimate alternative: a percentage of profit paid out once the business hits agreed targets, without transferring any actual shares. It carries less upside than real equity if the business does very well, but it is lower risk for the recipient and simpler for the company to unwind if the arrangement does not work out.[2]
I go through how that compares to phantom equity, the formal version of the same idea, separately.
Common questions
What does having equity in a company actually mean?
A proportional ownership claim on the company's future value, realised through a sale, listing or dividends. Its worth depends entirely on what that percentage translates to in dollars when it is eventually realised, not on the percentage itself.
Why is a percentage a bad way to present an equity offer?
Because it strips out the scale. 10% of a small business and 0.1% of a much larger one can be worth exactly the same dollar figure. A percentage alone gives a candidate no way to compare two offers meaningfully.
How should a founder present an equity grant instead?
As a small table showing the candidate's stake priced against a realistic range of exit values, from modest to strong. It shows the actual dollar outcome at each point rather than asking the candidate to do the maths themselves on an assumption they cannot check.
What is the difference between equity and a cap table?
Equity is the ownership itself, the share or option someone holds. A cap table is the full record of who owns what across every class of share and option in the company. A candidate's equity offer is one line on that larger table.
References
- From offers I have reviewed: presenting equity as a bare percentage, with no reference to the company's actual value, is the single most common reason a genuinely strong equity component fails to land with a candidate.
- From structuring conversations I have been part of: a profit-share arrangement, paying a percentage of profit once agreed targets are hit without transferring shares, is a real alternative for founders who do not want to give up equity at all.
These guides set out how we see it, drawn from the searches we run and the finance leaders we place. They are general information about the market, not financial, accounting or legal advice, and they are no substitute for advice on your own circumstances.