How much equity to give employees: benchmarks

Employee equity benchmarks are the typical ownership percentages granted to startup employees based on their role, seniority, and the company’s stage — the framework that prevents you from either overpaying in equity or losing great candidates.

Getting employee equity wrong is expensive either way. If you’re not sure where to start, the equity calculator can help you model grant sizes against your current cap table before you make any offers. It’s also worth understanding the broader market context — the AI equity arms race has pushed compensation expectations higher across the startup ecosystem, even for companies that aren’t building AI products.

Give too little and your top candidates walk. They’ll take the offer from the startup down the street that’s willing to share more of the upside. Give too much and you dilute your founders and early investors to the point where future fundraising becomes painful.

The tricky part: there’s no universal standard. The right grant depends on the role, the person’s seniority, how early they’re joining, and what stage your company is at. But there are ranges. And knowing those ranges is the difference between making competitive offers and guessing.

Quick Reference: Seed-Stage Equity Grants by Role

Role	Typical Range	Notes
VP / C-Level	1-3%	Highest for CTO/VP Eng at pre-product stage
Director	0.5-1.5%	Experienced leaders building teams
Senior Engineer	0.25-1%	Upper range for first 1-3 engineering hires
Mid-Level Engineer	0.1-0.5%	Core IC contributors
Junior Engineer	0.05-0.2%	Learning and growing into the role
Product Manager	0.2-0.75%	Higher if first PM hire
Designer	0.15-0.5%	Higher for lead/head of design (0.4-1%)
Sales	0.05-0.3%	Plus commission; first sales hire building the function: up to 0.5%
Marketing	0.1-0.4%	Higher for VP/Head of Marketing (0.4-1.5%)
Operations	0.05-0.25%	Office managers, ops leads

These are guidelines, not rules. Your specific numbers will vary based on the factors below.

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Why Grant Sizing Matters

Every equity grant comes from your option pool — a reserved block of shares set aside for employees. That pool dilutes everyone: founders, investors, and existing employees.

If you’re too generous with early grants, you’ll burn through your pool fast and need to expand it sooner. Expanding the pool means more dilution, usually at your next fundraising round. Investors watch this closely.

If you’re too stingy, you can’t compete for talent. In a market where strong engineers have multiple offers, equity is often the tiebreaker. A company offering 0.05% to a senior engineer when the market says 0.5% won’t close that hire.

The goal is calibration. Pay what the role is worth in the current market for your stage. No more, no less.

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Benchmarks by Role at Seed Stage

These ranges assume a seed-stage startup with a valuation between $5M and $20M, post some initial fundraising but pre-Series A. Adjust upward for earlier stages, downward for later ones.

Engineering

Engineering equity is the most well-documented because it’s the most common early hire.

VP of Engineering / CTO hire: 1-3%. If you’re hiring a technical leader to build the entire engineering organization, this is essentially a late co-founder role. The upper range (2-3%) applies when the person is employee #1-3, taking significant salary reduction, and bringing critical technical expertise.

Senior Engineers: 0.25-1%. Your first few senior engineers are foundational hires. They’ll set the technical direction, establish patterns, and mentor everyone who comes after. The upper range applies to the first 1-3 hires who are joining before product-market fit.

Mid-Level Engineers: 0.1-0.5%. Solid contributors who can ship independently. They’re not setting architecture but they’re building meaningful features.

Junior Engineers: 0.05-0.2%. Early in their career. You’re investing in their growth. The equity reflects potential, not current impact.

Product

Head of Product / VP Product: 0.5-1.5%. A senior product leader at seed stage is rare and valuable. They’re shaping what you build, not just how you build it.

Product Managers: 0.2-0.75%. First PM hire gets the upper range. Subsequent PMs settle into the lower half.

Design

Lead / Head of Design: 0.4-1%. Design leadership at seed stage means owning the entire user experience. If this person is setting the design system and brand, they’re a VP-equivalent and deserve compensation that reflects it.

Designers: 0.15-0.5%. IC designers who execute on the vision. The range depends on seniority and whether they’re the only designer.

Sales

VP of Sales / Head of Sales: 0.5-1.5%. Building the sales organization from scratch. This person will define your go-to-market motion.

Account Executives / Sales Reps: 0.05-0.3%. Sales equity is typically lower because commission structures provide significant variable compensation. The equity is a retention tool, not the primary incentive. If your first sales hire is functionally building the entire sales function (playbook, process, hiring), they’re closer to a Head of Sales and should be compensated in that range (0.5-1.5%), not the AE range.

Marketing

VP / Head of Marketing: 0.5-1.5%. Setting the marketing strategy, building the brand, establishing channels. This range matches other VP-level roles (VP Sales, VP Product) at the same stage.

Marketing Managers: 0.1-0.4%. Executing campaigns, managing content, running growth experiments.

Operations

Operations Lead / Office Manager: 0.05-0.25%. Critical for keeping things running but typically not a role that shapes the company’s strategic direction.

COO (if not a co-founder): 0.5-2%. A hired COO at seed stage is essentially joining the leadership team. The range depends on how much operational complexity exists.

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How Stage Affects Grants

The same role gets very different equity at different stages. The principle is simple: earlier = more equity, less salary. Later = less equity, more salary.

Pre-Seed / Bootstrapping

At this stage, you’re probably not making formal “grants” — you’re splitting equity among co-founders. Anyone joining now is essentially a co-founder, whether you call them that or not.

Non-founder early contributors might receive 1-5% depending on their role and commitment level. Cash compensation is minimal or zero. The equity reflects the extreme risk. For SaaS founders specifically, the first non-founding hire deserves careful thought — the equity structure for a first SaaS hire covers the ranges, vesting considerations, and common mistakes unique to that situation.

Seed (Post-First Fundraise)

This is where the benchmarks above apply. You have some money. You can pay partial or near-market salaries. Equity grants compensate for the salary gap and the risk of joining a startup that might not work.

Series A

Grants compress significantly. A senior engineer who’d get 0.5% at seed might get 0.1-0.2% at Series A. The company is worth more, so the dollar value of a smaller percentage is comparable or higher.

Role	Seed	Series A	Series B
Senior Engineer	0.25-1%	0.1-0.3%	0.03-0.1%
VP Engineering	1-3%	0.5-1.5%	0.25-0.75%
Product Manager	0.2-0.75%	0.1-0.3%	0.03-0.1%

Series B and Beyond

Equity grants become relatively small percentages but the dollar value increases. A 0.05% grant at a $500M company is worth $250,000. Context matters more than percentages at this stage.

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The Early Employee Premium

Employee #1 is not the same as employee #20. Both contribute, but employee #1 is taking dramatically more risk.

When you’re the first hire at a company with two founders and no revenue, you’re betting your career on something that statistically won’t work. That deserves a premium.

The rough scaling:

• Employee #1-3: Top of the range for their role. These people are essentially co-founders who showed up slightly later.
• Employee #4-10: Mid-to-upper range. The company exists, has some shape, but is still very early.
• Employee #11-25: Mid range. More of the foundational risk has been addressed.
• Employee #25-50: Lower half of the range. The company has traction, a team, and probably some revenue.
• Employee #50+: Bottom of the range or below. You’re no longer a startup in the scrappy sense. Salary should be near-market.

This isn’t just about fairness — it’s about incentives. Early employees need larger stakes because the expected value of their equity is lower. The probability of a meaningful outcome is smaller at employee #1 than at employee #50.

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Option Pool Sizing

Before you grant any equity, you need an option pool — shares reserved for employee grants.

Typical Pool Sizes

• At formation: 10-15% of total shares
• At seed: 10-20%, often expanded as part of the fundraising round
• At Series A: Refreshed to 10-15%, usually at investor insistence

How the Pool Works

The option pool dilutes existing shareholders, but who gets diluted depends on when the pool is created.

In most venture-backed rounds, investors require the option pool to be created before their investment (carved out of the pre-money valuation). This means the dilution falls entirely on founders. If a seed investor takes 20% and requires a 15% option pool pre-money, founders go from 100% to 65%, not the 72% they’d have with proportional dilution. This is standard practice, but it means the “effective valuation” for founder shares is lower than the headline pre-money number.

In the less common case where a pool is created after investment and dilutes everyone proportionally: founders at 80% and investors at 20% creating a 10% pool would go to 72% and 18% respectively.

Important: Stock options must be granted at fair market value, which requires a 409A valuation. Granting options without a 409A exposes employees to a 20% IRS penalty tax plus interest. Get a 409A done before making any grants.

Planning Your Pool

Model your hiring plan for the next 18-24 months. Add up the expected equity grants. Add a 20-30% buffer for unexpected hires or renegotiations. That’s your target pool size.

Running out of pool before your next fundraise means either expanding the pool (diluting everyone mid-round) or making smaller grants (losing candidates). Neither is great.

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Vesting Schedules

Nearly all employee equity follows the same structure.

The standard: 4 years, 1-year cliff, monthly vesting thereafter.

• Year 1 (cliff): Nothing vests. If the employee leaves before 12 months, they get zero equity. This protects against bad hires.
• After cliff: 25% vests immediately (the first year’s worth). Then ~2.08% vests each month for the remaining 36 months.
• At 4 years: 100% vested.

This is so standard that deviating from it raises questions. Some companies offer 3-year vesting or no cliff, but this is uncommon at the seed stage.

For a deep dive on vesting mechanics, cliffs, and acceleration, see our complete guide to vesting.

Refresher Grants

Don’t forget about existing employees. As someone approaches full vesting (year 3-4), a refresher grant keeps them incentivized. At early-stage startups, refreshers are commonly 25-50% of the original grant on a new 4-year schedule. At Series B and beyond, competitive refreshers can reach 50-100% of the original grant, particularly for top performers and retention-critical roles.

Companies that don’t offer refreshers lose their best people right when those people are most valuable.

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Total Compensation Framing

Equity is not compensation in isolation. It’s one piece of the total package.

The framework:

Component	Seed Stage	Series A	Series B+
Base Salary	50-80% of market	70-90% of market	90-100% of market
Equity	Large grant, high risk	Moderate grant, moderate risk	Smaller grant, lower risk
Benefits	Minimal	Basic (health, dental)	Competitive

When presenting an offer, give candidates the data they need to evaluate the equity themselves. Share: the number of shares in the grant, the strike price (from your 409A valuation), the total shares outstanding, and the most recent preferred price per share. Don’t just say “0.5% of the company” and leave it at that.

Avoid making specific dollar-value projections about what the equity “could be worth” at future valuations. Candidates can do that math themselves, and forward-looking value claims about private securities create legal risk. Stick to the current data and let the candidate assess the upside.

The Salary-Equity Tradeoff

Some startups offer candidates a choice: higher salary with less equity, or lower salary with more equity. This is a smart approach because it self-selects for people who believe in the company’s upside.

The typical structure offers 2-3 tiers. The tiers should be designed so the total expected value is roughly comparable across options — the company saves cash but gives more upside, not a windfall:

• Tier 1: 90% of market salary, standard equity grant
• Tier 2: 75% of market salary, 1.5x equity grant
• Tier 3: 60% of market salary, 2x equity grant

Two things to watch: present the tier choice as part of the initial offer before the start date (post-employment elections can trigger Section 409A issues), and make sure the lowest tier doesn’t drop below FLSA exempt salary thresholds ($58,656 in 2026) or your state’s equivalent.

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What if you can’t grant real equity?

If your company is an LLC or a service business, granting actual membership units to employees is legally complicated. The consequences are more severe than most founders realize:

• Tax reclassification. An employee who receives LLC membership interests is reclassified as a “partner” for tax purposes. They lose W-2 status entirely. The company stops withholding income tax and FICA. The employee pays self-employment tax on their distributive share and receives a K-1 instead of a W-2.
• Benefits eligibility. A reclassified partner may lose eligibility for employer-sponsored health insurance, 401(k) participation, workers’ comp coverage, and unemployment insurance.
• Governance rights. Under most state LLC statutes, members have default rights to information, voting, and management participation. These can be restricted in the operating agreement, but the defaults are founder-unfriendly.

The standard solution for LLCs is profits interests. A properly structured profits interest (with a valid Section 83(b) election and compliance with IRS Rev. Proc. 2001-43) can be granted tax-free at issuance and can vest on a schedule like stock options. The catch: it still triggers the K-1/partner reclassification, so it works best for senior hires who understand the tax trade-offs, not for rank-and-file employees.

For broader employee equity, phantom equity avoids the reclassification problem entirely. Employees receive a contractual right to a cash payout tied to company value at a trigger event (usually a sale), without ever becoming actual owners. The economic upside is similar to real equity, but with two key differences: payouts are taxed as ordinary income (not capital gains), and they don’t qualify for QSBS exclusion if your company later converts to a C-corp. Phantom equity plans must be structured to comply with Section 409A to avoid a 20% penalty tax on employees. Have counsel draft the plan.

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Getting It Right

Employee equity is one of your most valuable and finite resources. Every point you grant is a point you can’t give to someone else.

Know the benchmarks. Calibrate to your stage. Front-load grants for early employees who take the most risk. Use standard vesting to protect everyone. And always frame equity as part of total compensation — not a lottery ticket.

If you’re using dynamic equity to manage co-founder splits, the transition to formal employee grants happens when you convert to a fixed cap table. That’s when the option pool gets created and employee equity becomes standardized.

Equity Matrix helps you model these scenarios — from co-founder splits through option pool creation — so you can make informed decisions about how to allocate your most precious resource.

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Frequently asked questions

How much equity should a startup CTO get?

A hired CTO at seed stage typically receives 1-3% equity, with the upper range reserved for someone who is effectively a late co-founder — joining as one of the first few employees, taking a significant salary cut, and building the entire technical organization. At Series A, the range compresses to 0.5-1.5%. If the CTO is a co-founder rather than a hire, the equity is determined through the co-founder split instead of an employee grant.

Do employees get equity on top of salary?

Yes. At startups, equity grants supplement cash compensation. Early-stage employees typically receive below-market salaries (50-80% of market at seed stage) with equity making up the difference. As the company matures through Series A and beyond, salaries approach market rate and equity grants become smaller percentages — though the dollar value of those smaller grants may be comparable or higher because the company is worth more.

What is a typical option pool size for a startup?

Most startups create an option pool of 10-20% of total shares at the seed stage, with 10-15% being the most common range. Investors usually require the pool to be created before their investment, meaning the dilution falls on founders. Plan your pool to cover 18-24 months of expected hires plus a 20-30% buffer, and make sure you have a 409A valuation in place before granting any options.

Should early employees get more equity than later hires?

Yes. Employee #1-3 should receive grants at the top of the range for their role because they are taking significantly more risk — joining a company with little or no revenue, no established product, and a high probability of failure. The equity premium decreases as the company de-risks: employees #4-10 get mid-to-upper range, #11-25 get mid range, and employees beyond #50 receive grants at the bottom of the range with near-market salaries.

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Sources and further reading

The benchmarks in this post are informed by the following sources. We recommend cross-referencing these when calibrating grants for your specific situation:

• Carta Total Comp Data — Carta’s anonymized dataset across thousands of venture-backed companies. The most comprehensive source for equity grant benchmarks by role, stage, and geography.
• The Holloway Guide to Equity Compensation — The definitive open-source reference on startup equity. Covers stock options, vesting, tax treatment, and grant sizing in depth.
• Index Ventures’ Rewarding Talent — Option pool planning tool with benchmarks from Index’s portfolio. Useful for modeling pool sizing and grant budgets.
• Cooley GO Startup Equity Resources — Legal templates and guidance from one of Silicon Valley’s top startup law firms. Covers option plans, 409A, and equity structures.
• NVCA Model Legal Documents — Standard term sheet templates that show how option pools are typically structured in venture rounds.
• IRS Section 409A Guidance — IRS rules on deferred compensation that apply to stock options, phantom equity, and salary-equity tradeoff elections.
• IRS Rev. Proc. 93-27 and 2001-43 — IRS guidance on the tax treatment of profits interests in partnerships and LLCs.