How to Structure Founding Engineer Equity

Equity is often the most misunderstood part of hiring founding engineers. Get it wrong, and you either overpay, underpay, or create misaligned incentives.

Typical Equity Ranges by Stage

These ranges are based on market data and our experience working with early-stage startups. Actual grants vary based on many factors (see below).

Stage	Typical Range	Notes
Pre-seed (first hire)	1.0% – 3.0%	Often closer to co-founder equity
Seed (engineer #1-3)	0.5% – 1.5%	Standard for strong senior engineers
Post-seed (engineer #4-10)	0.25% – 0.75%	Depends on seniority and role
Series A	0.1% – 0.5%	Pool diluted, cash becomes more important

Factors That Influence Equity

Timing: Earlier = more equity. Engineer #1 gets significantly more than #5.
Risk tolerance: Taking below-market cash? Equity should compensate.
Experience level: Senior engineers with startup experience command more.
Role scope: Is this person architecting the entire system or joining a defined team?
Location: Remote from low-cost-of-living areas may accept different structures.
Competitive offers: What's the candidate's alternative? FAANG offer changes the math.
Founder equity: If founders have 30% each, early hires get more than if founders have 10% each.

Vesting Schedules and Cliffs

The standard vesting schedule for founding engineers is:

4-year vesting: Total equity vests over 4 years
1-year cliff: No equity vests until 12 months of employment
Monthly vesting after cliff: Equal monthly increments after the cliff

Some startups offer accelerated vesting on acquisition (single or double trigger), which can be a meaningful benefit for early employees.

Cash vs Equity Tradeoffs

Founding engineers typically accept below-market cash in exchange for equity upside. Here's how to think about it:

Scenario	Cash	Equity
Market rate, small equity	$180K–$220K	0.25%–0.5%
Below market, significant equity	$120K–$150K	1.0%–2.0%
Minimal cash, co-founder-like	$60K–$100K	2.0%–5.0%

The right structure depends on your runway, the candidate's financial situation, and your valuation.

Negotiation Tips for Founders

Be transparent: Share your cap table (or at least the option pool size).
Explain the math: Help candidates understand potential outcomes at different valuations.
Don't oversell: Be honest about risks. Good candidates appreciate honesty.
Consider refresh grants: Promise to revisit equity after 2 years or at next round.
Document everything: Get a good startup lawyer for your option agreements.