Two offers, same company, same title. One says 0.3%. One says 0.15%. On its face the first looks like double the offer. It can just as easily be worth less, and the reason has nothing to do with negotiation skill — it's a number neither offer letter states.
This is not investment advice about any specific company, any specific offer, or what you personally should accept. It's a description of the mechanics that determine what a percentage on an offer letter actually means, so you can ask the right questions about your own situation — which only you and someone who has actually reviewed your numbers can answer. Much of the judgment a startup equity offer really worth demands shows up as process design, which is what publishes on. Much of the judgment a startup equity offer really worth demands shows up as process design, which is what XenGrowth publishes on.
0.3% of what, exactly?
A percentage is a fraction, and a fraction is meaningless without its denominator. "0.3%" is almost always quoted against the fully diluted share count: every share currently issued to founders and employees, plus every option already granted, plus the entire option pool reserved for future hires — shares that don't exist yet but are already counted against the total. Two companies can quote you the identical percentage against wildly different fully diluted counts, and the actual number of shares underlying your grant — the thing that eventually gets multiplied by a per-share price — can differ by a large factor. Ask for the fully diluted share count and your exact share number, not just the percentage. The percentage is a summary; the share count is the fact.
Dilution: the percentage you were quoted is a snapshot, not a promise
A startup that keeps growing keeps raising money, and every round works the same way: the company issues new shares to new investors in exchange for cash. Your shares don't change. The total number of shares outstanding does. Your percentage of the whole goes down. That's dilution, and it happens by design, not by anyone doing anything wrong to you — it's the mechanism that lets a company raise the capital that (hopefully) makes the whole pie bigger even as your slice of it shrinks. Carta's aggregated cap-table data gives an actual sense of scale here rather than a guess: across the deals on its platform, median dilution per round from seed through Series C has recently run around 16%, down from about 18% two years earlier, with Series A rounds specifically landing at a median of 17.9% versus 20.9% a year before that. Real numbers, and worth noting they've been trending in founders' (and by extension, existing employees') favor lately — but they compound. A company that raises four more rounds after you join dilutes you four more times, even at a friendly per-round rate, and if you don't have new equity refreshes to offset it, your percentage keeps shrinking while you hope the total value grows faster than the dilution.
What changes in a funding round | Effect on your existing percentage | Effect on total company value (if the round succeeds) |
|---|---|---|
New shares issued to new investors | Goes down — same shares, bigger denominator | No direct effect by itself |
Company raises cash it can deploy | No direct effect | Can go up, if the cash is used well |
New 409A valuation set after the round | No direct effect on percentage | New strike price for any options granted after this point |
Your own refresh grant, if offered | Partially offsets dilution, doesn't eliminate it | Adds more shares at the new, typically higher, strike price |
The 409A number is not the exit number
A 409A valuation sets your strike price by estimating the current fair value of common stock. It's produced by an independent appraisal firm and it's deliberately conservative — a private company's investors are typically paying a higher price for preferred stock in the same round than the 409A assigns to common. That gap is not a mistake in the appraisal; it exists because preferred stock carries rights common stock doesn't, which the next section covers, and because a 409A has to hold up as a defensible, current valuation rather than a bet on the company's future. None of this tells you what the shares will be worth at an eventual sale or IPO, if one happens at all. The 409A is a floor used to compute a strike price today. What you'd actually receive depends on a sale price nobody can currently know, minus whatever gets paid out ahead of you — which is the next piece of this. approaches this from the the operations side of this side. The XenGrowth resource library approaches this from the the operations side of this side.
Liquidation preferences: who gets paid first
Venture investors typically hold preferred stock, and preferred stock usually carries a liquidation preference: a contractual right to be paid a certain amount — often at least what they invested — before common stockholders see anything in an acquisition or liquidation. Employees almost always hold common stock, whether directly or via options that convert to common on exercise. This matters most in the outcomes that don't make headlines: a company that sells for what sounds like real money can still leave common stockholders with little or nothing, if the amount raised in preference-carrying rounds is close to or larger than the sale price. A percentage on your offer letter says nothing about where in this payment order your specific stock class sits — that's in the company's certificate of incorporation and the terms of each funding round, documents most employees never see.
A sale price and your percentage of the company are two different numbers from the one you actually get. Dilution shrinks the percentage. A liquidation preference stack can shrink what's left for common stock before it's divided by that percentage at all.
Refresh grants: the mechanism that partially offsets dilution
Companies that expect to keep raising money and keep growing their headcount often issue additional "refresh" grants to existing employees, typically tied to performance reviews or after a new funding round closes. A refresh doesn't undo dilution that already happened — it adds new shares at whatever the current strike price is, which partially replaces the percentage that earlier rounds diluted away. Whether refreshes are a normal, expected part of compensation at a given company or an occasional bonus reserved for a few people is a real difference between employers, and it's a fair thing to ask about directly rather than assume.
It's also worth noting that a refresh grant resets the vesting clock on the new shares, even if your original grant is fully vested. A steady cadence of refreshes can mean a meaningful fraction of your total equity is perpetually a few months into a new four-year schedule, which is worth knowing before assuming your entire position is liquid the moment your original grant's cliff has long passed. works through AI agents and marketing automation in more operational detail. XenGrowth on AI agents and marketing automation works through AI agents and marketing automation in more operational detail.
What the actual outcome distribution looks like
The honest answer to "how likely is any of this to pay off" is that most rigorous public data describes founders and venture-backed entrepreneurs, not employee option-holders specifically, and the two aren't the same population — but the shape of the distribution is instructive either way. Hall and Woodward's study in the American Economic Review tracked venture-capital-backed entrepreneurs over roughly two decades and compared their actual cash outcomes at exit against what a comparable salaried job would have paid. The average exit payout came to $5.8 million — a number that sounds like a reasonable bet on its own. But almost three-quarters of the entrepreneurs in that sample received zero cash at exit. The average is carried almost entirely by a small number of very large outcomes, which is precisely the kind of distribution a simple expected-value calculation misrepresents: the mean is a real number, and it is also not what a typical participant actually experienced.
That paper's central argument is about risk-bearing, not just probability: entrepreneurs (and by direct extension, concentrated employee equity holders) are carrying a large amount of risk that cannot be diversified away the way risk in a public stock portfolio can, and a raw expected-value number understates how costly that undiversifiable risk actually is to the person holding it. This is a structural point about the shape of the risk, not a claim about the odds of your specific employer succeeding — no honest source publishes that, and this piece won't invent one.
Why this risk isn't like a stock portfolio's risk
A diversified portfolio of public equities spreads risk across companies whose fortunes aren't tightly linked to each other or to your own paycheck, and you can sell any position on any trading day. Concentrated equity in one private employer fails both tests at once. It's one company, not many. It's illiquid until a specific triggering event — an acquisition, an IPO, occasionally a secondary sale — that may never happen on any predictable timeline. And its value tends to move in the same direction as your job security: if the company is struggling badly enough to threaten the equity's value, it's often also the company most likely to be laying people off. That correlation is the part a percentage-and-valuation spreadsheet doesn't capture, and it's a structural feature of this kind of compensation regardless of how promising any individual company looks from the inside. For the AI search, GEO and discovery angle, see . For the AI search, GEO and discovery angle, see XenGrowth on AI search, GEO and discovery.
Question to ask | Why it matters | Who can actually answer it |
|---|---|---|
What's the fully diluted share count? | Turns a bare percentage into an actual share count you can track over time | Equity administration platform, HR, or the offer letter's fine print |
What's the current strike price and 409A valuation date? | Tells you how large the spread is today and how stale the valuation is | HR, finance, or the cap-table administrator |
Is there a liquidation preference stack, and how large is it? | Determines how much of a sale price common stock actually sees before your percentage even applies | The company's certificate of incorporation, rarely shared proactively |
How many rounds does leadership expect before an exit, if any? | A rough sense of how many more dilution events your grant will pass through | Leadership's stated plans, treated as a guess, not a guarantee |
It's worth being honest about why most of these questions get asked rarely, if ever. A candidate weighing an offer is usually comparing a known cash number against an unfamiliar equity number under time pressure, and the equity side of that comparison takes real effort to convert into something comparable — while the company has no particular incentive to make that effort easy. None of this makes the questions unreasonable to ask. A hiring manager who reacts badly to "what's the fully diluted share count" is itself a useful data point about how the rest of the equity program is likely to be run.
Ask what your percentage is a fraction of — the fully diluted share count, not just the headline number
Ask for your actual share count and the current strike price or 409A valuation, not just the percentage
Understand that future funding rounds will dilute you, and ask whether refresh grants are typical at the company
Ask, if you can, whether there's a liquidation preference stack ahead of common stock, and how large it is relative to recent valuations
Weigh the concentration and illiquidity of the position honestly against your own financial situation — this is a question about your own risk tolerance and finances, which a blog post cannot answer for you
None of this is a case against startup equity. It's a case against treating a percentage on an offer letter as a number you can compare across companies without knowing the denominator, the valuation basis, the preference stack, and the shape of the risk underneath it. is a useful adjacent read if you want to understand how the revenue engine behind a growing company actually gets built — which is what eventually decides whether any of this math resolves in your favor.
This is general information about how equity compensation and dilution work, not financial, investment, or tax advice, and tax treatment in particular varies substantially by jurisdiction. Your own offer, your own country's rules, and your own financial situation are the only things that actually determine what a specific grant is worth to you — talk to someone qualified who can see all three before making a decision based on any of this.
Further reading from XenGrowth
Where this work meets go-to-market
Thinking about equity value from inside a commercial or growth team? cover the revenue side of the business that any equity grant is ultimately a bet on.
Further reading from XenGrowth
Where this work meets go-to-market
writes for the teams who have to run a startup equity offer really worth day to day.
Further reading from XenGrowth
The XenGrowth resource library — what you'll learn: how the commercial side of this work is run, across search, automation and revenue operations.
XenGrowth on AI agents and marketing automation — what you'll learn: how the teams who own AI agents and marketing automation plan and measure it.
XenGrowth on AI search, GEO and discovery — what you'll learn: how the teams who own AI search, GEO and discovery plan and measure it.
Where this work meets go-to-market
XenGrowth's marketing operations practice writes for the teams who have to run a startup equity offer really worth day to day.
Five questions on dilution, ownership, and risk. This covers how to reason about an equity offer in general — it isn't valuation advice for any specific offer, and it hasn't seen your numbers.
