Startup equity is a possibility, not cash compensation. Its value depends on the instrument, vesting, exercise cost, liquidity, dilution, and the time you can afford to wait.
The promise that does not fit on a payslip
A founder tells a candidate, “We want you to own a meaningful piece of this.” The phrase can be sincere and still be insufficient. In a Bengaluru offer call, the candidate hears “0.08 percent,” mentally converts it into a future number, and compares the promise with a safer salary. What remains unclear is more important than the percentage: what instrument is being offered, how many units it represents, what denominator was used, what it costs to exercise, and whether there will ever be a buyer. Carta’s Equity Compensation guide starts from a useful distinction: equity is non-cash compensation and needs separate analysis from salary. That is not a warning against startups. It is a warning against putting two unlike things in one mental column. Salary pays for this month’s obligations. Equity exposes you to a company’s future, capital structure, tax rules, liquidity and decisions you do not control. Treating the grant as a second salary makes every later surprise feel like a broken promise, even when the initial documents never promised cash.
The instrument is the first question
“ESOP” is often used as a friendly umbrella, not a complete description. An employee may receive an option to buy shares later, restricted stock units that settle under stated conditions, shares outright, or an arrangement whose legal and tax treatment needs specialist interpretation. In an Indian private company, the plan rules, grant letter, board approvals and applicable tax treatment matter more than the shorthand used in a recruitment deck. Ask what is granted, not what the grant is called in conversation. An option is not a share. It is a right, subject to conditions, to acquire a share at an exercise or strike price. Until exercise, the employee usually has no voting or economic ownership in the ordinary sense. A unit that settles later has a different timing and tax story. Request the plan document and grant agreement, not only a cap-table screenshot. If the company cannot explain the instrument without saying “it is basically cash,” that is a sign to slow down.
Percentages need a denominator
A percentage is meaningful only alongside the number of shares and the denominator. “0.05 percent” might refer to issued shares, outstanding shares, or a fully diluted share count that includes the option pool and certain convertible instruments. These are not interchangeable. If the company has 10 million fully diluted shares, 0.05 percent is 5,000 units; if the denominator changes, the same verbal percentage can describe a different economic position. Ask for the grant quantity and the fully diluted denominator as of a named date. It may not be possible for a private company to reveal every investor term, and confidentiality is legitimate. The request is still reasonable: what percentage does the grant represent on a fully diluted basis, and what assumptions are included? “Fully diluted” generally signals a wider count than currently issued shares, but the exact cap-table definition is in the company’s documents. Do not manufacture precision when the company cannot provide it.
Vesting is the calendar of possibility
The familiar four-year vesting schedule with a one-year cliff is a convention, not a universal rule. Under a cliff, nothing may vest until the first anniversary, after which a portion vests and the remainder follows a schedule. Monthly vesting, quarterly vesting, shorter grants, and refresh grants all exist. The offer should say when vesting begins, what happens on the first anniversary, and whether a leave of absence changes the clock. Write the schedule on a calendar. A candidate joining in February may have a meaningful first vesting date the following February, not after twelve months of vague employment. A person leaving one week before the cliff may receive nothing under the grant even after a year of demanding work. Ask whether vesting is conditional on continued employment through the date and whether any acceleration applies on acquisition or termination. Acceleration terms are not a prediction of a sale; they are a description of one possible event.
The exercise price is real money
When options vest, the employee may have a right rather than a windfall. Exercising can require paying the strike price for every vested unit, along with tax or transaction costs. A grant of 20,000 options at ₹10 has a ₹2 lakh exercise cost before considering tax and the fact that the shares may remain illiquid. A lower strike price is not automatically better if the company’s value or exit prospects are uncertain; a high quantity is not automatically better if exercising it would empty an emergency fund. Model three cases: exercise nothing, exercise only what you can lose, and exercise the full vested amount. Include the possibility that the shares cannot be sold for years. Do not borrow against a hoped-for exit without advice on the loan and the tax consequences. Carta’s guide is useful for explaining equity concepts, but it is not a substitute for an Indian tax adviser reviewing the instrument and the employee’s facts.
Tax arrives at inconvenient moments
Tax can arise at exercise, at sale, or through other events depending on the instrument and applicable rules. The value used for tax may not be the price at which an employee can actually sell. A private-company valuation can change while the shares remain locked. The difference between paper value and cash value is where many offer comparisons go wrong: the employee owes money at a moment when there is no market willing to buy. Ask the company which event it expects to be taxable and what valuation or fair-market-value process it uses. Ask when tax withholding occurs, who handles reporting, and what documents the employee receives. These are requests for orientation, not a demand that HR provide personal tax advice. Confirm the result with a professional familiar with Indian employee equity. A founder’s sentence that “tax is only at exit” should be treated as a claim to verify, not as a planning assumption.
The cap table moves after your offer
Your percentage can dilute when a company issues new shares to raise capital, expands an option pool, converts notes, or grants equity to new hires. Dilution does not mean the company has done something improper; financing changes the denominator and may fund growth that increases the value of each remaining share. It does mean that the percentage on the day of the offer is not a permanent ownership fraction. Ask whether the quoted percentage is before or after the proposed option-pool expansion and whether it is fully diluted. Ask what refresh grants look like at later levels. There is no simple “protection” question for an ordinary employee; investors and founders may have rights that employees do not. The useful conclusion is narrower: calculate the grant by units and scenario values, then leave room for dilution in every scenario rather than treating it as an unlikely footnote.
What Carta’s numbers do and do not tell an Indian candidate
Carta’s State of Startup Compensation H2 2025 reports a particular dataset and geography, not a universal Indian market table. Within its reported scope, Series D average headcount was down 29% from its 2023 peak to 131 in 2025, Series B headcount moved from 53 to 45, median initial IC equity grants rose nearly 11% over two years, and median IC salary rose 6.4%. The report also says AI/ML initial equity grant growth was 31% between January 2024 and February 2026. Those figures describe patterns in Carta’s data; they do not price an Indian ESOP. The context is still useful. It suggests that compensation and headcount shift by stage and function, and that a hot skill can attract changing grant practices. It does not justify telling a candidate that their offer is “below market” without matching stage, location, level, instrument and denominator. Use the report to ask a better question: what evidence explains this company’s grant, and which part of that evidence actually transfers to India?
The departure clock is part of the grant
Leaving changes the options in several ways. Unvested awards may lapse immediately. Vested options may have an exercise window that is short, long, or tied to a plan rule. The company may require exercise before the last working day, or may provide a post-termination period. A person who resigns after three years can therefore face a decision that a new joiner never sees: pay to exercise now, pay possible tax, or surrender the option. Get the departure scenario in writing before the grant becomes emotionally valuable. Ask what happens on resignation, redundancy, termination for cause, death, disability and a company sale. “Good leaver” and “bad leaver” language may have specific effects, but do not infer them from the label. A person can be proud of the work and still decide the exercise cost is too high. That is not a failure of loyalty; it is a liquidity decision.
Liquidity is the missing verb
An equity story needs a verb: sell, transfer, tender, buy back, or wait. Private shares do not acquire liquidity merely because a company has raised a new round. An acquisition, initial public offering, secondary sale, company repurchase, or approved transfer may create a path, but timing and eligibility remain uncertain. Secondary transactions can involve a limited group and are not a promise that every employee can sell. Ask whether employees have participated in a liquidity event, without demanding confidential names or prices. Ask what restrictions, approvals, lock-ups, or tax processes apply. “There may be an IPO” is a scenario, not a date. The honest upside case says what would have to happen before the employee could turn shares into money. The honest downside case says the company can grow, change jobs, and still leave the employee with no buyer.
A scene at the kitchen table
Consider Meera, a senior designer offered a slightly lower salary by a consumer startup. The founder presents a grant as worth ₹18 lakh at the latest internal valuation. Meera writes the number beside her rent, parents’ medical reserve, and a loan repayment. Then she replaces it with the questions the offer did not answer: Is that value based on a fully diluted denominator? What is the strike price? Which units vest? How long can she exercise after leaving? Could the valuation fall before liquidity? Her conclusion need not be “no.” She may accept if the fixed salary covers ordinary life, the exercise cost is affordable, and she wants the work even if the equity becomes zero. Or she may request more cash and fewer promises. The exercise has done its job. It has separated the reason to join from the reason to hope. A grant can be valuable without being usable, and a job can be right without its equity story being persuasive.
A counterargument worth taking seriously
Founders can reasonably object that employees who discount equity to zero miss genuine upside. A small team takes risk early, and a grant may become meaningful precisely because the company cannot pay large salaries. Equity can align decisions, reward patience, and make an employee a participant rather than a spectator. A rigid insistence on cash can exclude roles where the work, learning, and upside are unusually strong. That counterargument is strongest when the company is transparent. The employee can make an informed trade when the instrument, schedule, price and liquidity path are explained. It weakens when the company uses a large hypothetical valuation to disguise a thin fixed salary or refuses to state the denominator. “It could be worth a lot” is not wrong; it is incomplete. The candidate’s job is not to eliminate uncertainty but to decide how much of it their household can carry.
Questions that deserve actual answers
Ask for the grant letter, plan rules, number of options or shares, exercise price, vesting and cliff, fully diluted denominator, and treatment on departure. Ask whether the company has a recent valuation, whether the quoted value uses that valuation, and whether any liquidity event has occurred. Ask who pays administrative and tax costs, what approvals an employee needs, and how future grants are handled at promotion. Do not turn the conversation into an interrogation for its own sake. Explain the decision you are trying to make: “I can compare this with salary once I understand the cash required and the departure window.” A company may not be able to share its complete cap table. It should still be able to state the employee’s rights and obligations. Missing information is not automatically bad news, but it must be priced as uncertainty rather than silently converted into value.
The decision should survive a zero
The most robust startup offer works if the equity is worth zero. That does not mean the employee expects failure. It means rent, food, insurance, family obligations and a reasonable emergency reserve are funded by dependable compensation. Equity can then provide upside, learning and alignment without becoming the mechanism that keeps an employee in an unsuitable role. The final comparison has three lines: cash I can count on, cash I may need to spend to exercise, and value I might receive if a chain of events goes well. Keep those lines separate. Carta’s equity compensation guidance gives candidates a language for doing so; its startup compensation dataset gives context within its own scope, not a forecast for India. The candid conclusion is simple: ask for the instrument, denominator, dates and exit paths, then make a career decision that remains livable while the future stays unknown.
Valuation is a reference, not a cheque
A private-company valuation is useful for describing a financing or an internal estimate, but it does not mean every employee can sell at that price. A preferred investor’s price may include rights that ordinary employee shares do not have. A later round may value the business higher while the company remains years from liquidity. A down round, changed market, or new preference stack can alter the eventual economics. None of this makes an internal valuation meaningless; it makes the word “worth” incomplete. Ask what kind of price the company is quoting. Is it the latest preferred-share financing price, a fair-market value used for an exercise calculation, or an illustrative number in a recruiting deck? Ask whether the employee’s instrument has the same rights as the shares behind that price. If the answer is confidential, request a plain-language explanation of the difference rather than demanding investor documents. The goal is not to litigate the cap table in an interview. It is to avoid converting an investor price into a guaranteed employee outcome. Scenario math should therefore use a range. One case can assume no liquidity, another a sale below the latest reference, and another an exit that produces a meaningful return after exercise cost, tax and dilution. A range is not pessimism. It is a way to leave room for the company’s future to be genuinely different from the last financing announcement.
The grant is a relationship with time
Equity can change how an employee experiences time. A difficult quarter feels different when leaving means surrendering an unvested grant. A promotion discussion may carry a refresh grant that is valuable only if the employee stays through another cliff. The company benefits from retention, while the employee may become reluctant to move even when the role has stopped teaching or paying fairly. This is not necessarily manipulation; it is an incentive with a real psychological effect. Set review dates that are independent of vesting dates. At each review, compare the work, salary, manager, health and alternatives as though the unvested equity did not exist. Then assess the vested grant separately. If the only reason to stay is “I have already waited this long,” name that as a sunk-cost feeling rather than a financial thesis. If the work remains excellent and the grant is an affordable upside, staying may be right. Time should support the decision, not make the decision for you. For employers, clarity is part of the grant’s value. A person who understands departure rules can choose to stay with more confidence than a person who stays because nobody will answer. For employees, patience is not the same as faith. It is a resource to allocate deliberately, alongside cash, health and the chance to build work that travels beyond one company.
What a refresh grant can and cannot repair
A refresh grant can recognise new scope, but it does not automatically repair a low salary, a poor manager or an unclear instrument. Employees sometimes receive a new promise just as the original grant becomes less motivating. Ask whether the refresh is additional, whether it starts a new vesting clock, and whether the total percentage is being discussed on the same fully diluted basis as the first grant. A larger number of units may still represent a smaller percentage after a financing or pool expansion. Keep the compensation conversation in two lanes. In the salary lane, discuss the value of the work, market context, responsibilities and cash needs. In the equity lane, discuss units, dates, price and scenarios. The lanes can meet in the final decision, but combining them during negotiation makes it easier for a large hypothetical number to substitute for a modest fixed-pay correction. This is especially relevant when a promotion changes a role from execution to leadership. The employee may be asked to accept more risk because the new scope is “ownership,” while the grant remains too uncertain to fund that risk. A refresh can be part of a fair package. It is not a reason to stop asking what authority, support and cash accompany the expanded job.
The document trail is part of the value
An equity promise that lives only in a slide deck is difficult to evaluate later. Keep the offer, grant letter, plan rules, board approval or notice when supplied, exercise instructions, vesting statements and tax communications. Record which version of the cap-table explanation accompanied the offer. You do not need confidential investor material; you do need the documents that establish your own rights and obligations. When a company changes providers or equity platforms, download statements rather than assuming the history will remain easy to find. When an employee changes address, tax status or employment entity, ask whether the grant is affected and obtain the answer in writing. Administrative work rarely feels like upside, but a missing exercise notice can be more consequential than another percentage-point argument. The trail also protects the company from misunderstanding. A candidate who can point to the exact question asked and answer received is less likely to rely on a memory shaped by a later valuation. In uncertain compensation, recordkeeping is not distrust. It is the ordinary infrastructure that lets both sides distinguish a grant from a story about a grant.
The grant should survive a skeptical reading
Read an equity grant as though you had to explain it to a future version of yourself who has forgotten the recruiting conversation. Start with the instrument, quantity, exercise price, vesting dates and expiry or post-termination window. Then identify the documents that can change the answer: plan rules, board approval, grant notice, shareholder arrangements and later amendments. A cap-table image can orient you, but it is not a substitute for the agreement that defines the employee’s rights. Run a dilution thought experiment without pretending to forecast the company. Ask what happens to the percentage if the option pool expands or a new financing issues shares. Then run an outcome thought experiment: no liquidity, a modest sale, and a sale where preferences or other terms affect what ordinary holders receive. You do not need to assign a value to each scenario if the company cannot provide the inputs. The purpose is to notice which missing fact controls the result. There is a fair counterargument to all this caution. Early employees can receive unusual scope, access and upside, and insisting that equity be valued like cash would make startup hiring impossible. That is true. The answer is not to dismiss the grant; it is to put the grant in the right lane. Join because the work, fixed compensation and learning are acceptable without a payout. Treat equity as compensation for accepting additional uncertainty, with upside that may never become liquid. Before signing, ask who can answer questions after the founder or recruiter moves on. A named equity administrator, a current plan version and a predictable statement process are small but meaningful signs of operational maturity. If the company cannot share confidential investor information, it can still explain the employee-facing mechanics. The grant becomes more credible when its administration is as clear as its story.