Salary vs Equity: Which Offer Should You Actually Take?

When a company presents an equity-heavy offer, they're making an implicit argument: our upside potential is worth more than the salary gap you're accepting today. Sometimes that's true. A well-timed option grant at a company on a genuine growth trajectory can dwarf years of salary differential. More often, the equity is worth far less than the headline number suggests — because most startups fail, most options expire underwater, and most RSU packages come with vesting schedules designed to keep you in place, not to reward you.

The salary trap runs the other direction. Some professionals reflexively favor the higher base salary without ever modeling what happens at the high end of the equity scenario. If there's even a 20 percent chance of a 10x outcome, the expected value of the equity offer may be significantly higher than the salary premium of the competing offer.

The only way out of both traps is to do the math — specifically, to calculate the break-even multiple. That's the exit multiple the equity offer's equity needs to reach for its total compensation to match the competing offer. Once you have that number, you can make a judgment about whether your probability of hitting it justifies accepting the salary discount.

Public company RSUs against a higher salary: This is the cleaner comparison. RSUs have a market price and a clear expected value. The question is purely financial — does the RSU value plus salary exceed the competing offer's salary? Model the RSU at the current stock price plus or minus your growth assumption.

Startup options against a higher salary: This requires the probability discount. Research the company's last 409A valuation and the option strike price. If the current fair market value already exceeds the strike price, there is built-in value. If the strike price equals the FMV, you have an at-the-money option that needs the company to grow.

Early-stage equity against a late-stage salary: The variance is extreme in both directions. A Seed-stage company offering $400k in options at a $1m valuation has a possible 100x outcome — and a 90% chance of returning zero. The expected value calculation is critical here. Do not be seduced by the headline number.

Comparing headline grant numbers without modeling the exit multiple needed to break even. A $500k option grant that needs a 10x exit to match a competing offer is not a good deal at a company where a 3x exit is most likely.

Ignoring vesting cliffs and schedules. Most people leave jobs within 3 years. If a 4-year vesting schedule has a 1-year cliff and you typically change roles every 2–3 years, you may capture only 25–50% of the stated equity value in practice.

Treating all equity types the same. ISOs, NSOs, and RSUs have fundamentally different tax treatments that can change the after-tax value by 10–20 percentage points.

Not modeling dilution. Future funding rounds dilute all existing shareholders. If the company raises a Series C, D, and E before IPO, your ownership percentage may be 40–60% of what it was at the time of the grant.