The Equity Grant Term Reference, One Row per Term That Moves Your Payout

You have an offer with equity in it. This reference exists so you can take the equity section of that offer, jump to the row for any single term - strike price, cliff, exercise window, 409A, double-trigger, refresh - and leave with two things: what that term proves about your actual payout, and the specific way it is quietly misleading you. It is a lookup table, not an essay. Read one row and leave, or read the whole thing once and keep it open for every offer you ever get.

Equity vocabulary is designed to sound generous while hiding the clauses that decide whether you walk away with anything. The share count looks big. The option life says ten years. The grant letter says "double-trigger acceleration." Each of those phrases proves something narrower than it implies, and each has a standard failure mode. I have organized this guide so you can resolve any term without reading the terms around it.

Which document actually controls your grant

The offer letter summarizes the equity; the company's equity plan and your separate grant agreement control it. The real mechanics live in those documents, not in the letter you signed first. Before you decode anything else, confirm you are reading the controlling text.

Employers often promise options in offer letters and fail to follow through. Option grants must be approved by the board and fully documented, and you must sign an option agreement and often a separate option grant notice. Until that board approval and signature exist, you do not have the grant - you have a promise. Treat "promised" and "granted" as different states, because the gap between them is where money disappears.

The delay risk is structural, not administrative. The strike price is legally pinned to the fair market value of the common stock on the grant date. If the board approves your grant months after your offer, and the company's 409A valuation rose in that interval, your strike rises with it. You pay more per share for the same equity, and that can create a breach of contract claim if the letter promised a specific price. Get the grant dated and documented early.

The terms that mislead, decoded

The three terms below cause more misreadings than any others. Each proves one narrow fact and gets read as a broader one. This is the core table of this reference; the rest of the guide expands each row.

Each row carries the same lesson: the printed number answers a different question than the one you are asking. The strike answers "what is common stock worth today," not "what is this company worth." The option life answers "how long until the option expires if I stay," not "how long I have after I leave." The share count answers "how many units did they grant," not "what fraction of the company do I own."

Strike price

The strike price proves the common-stock FMV on the grant date, set by a 409A valuation, and legally it cannot be lower than that FMV. It does not prove the company's worth. Preferred stock, which investors hold, carries liquidation preferences and anti-dilution rights that common stock lacks, so common is discounted against it. At seed stage, common stock is commonly valued at 20 to 40 percent of the latest preferred price. A "cheap" strike is not a gift; it is a measure of how little common stock is currently worth relative to what investors paid.

Post-termination exercise window

The post-termination exercise window, or PTEW, proves how long you have to buy your vested options after leaving. The default is 90 days, driven by ISO tax law, which requires exercise within three months of departure to keep incentive stock option treatment. The option life printed in the plan - often ten years - is the life if you stay. The moment you leave, the 90-day clock usually governs, and a vested, valuable grant can silently expire if you miss it. Extended windows of 5, 7, or 10 years exist as a recruiting differentiator, but you must read the specific clause to know which you have.

Share count and fully diluted ownership

A raw share number proves the size of your grant and nothing about your ownership. Ownership only exists as a percentage of the fully diluted total, which counts all shares plus options, warrants, and the unissued pool. Companies sometimes express your stake against issued and outstanding shares because that denominator is smaller and the percentage looks bigger. The same 100,000 options can read as 1.25 percent of outstanding but only 1 percent fully diluted. Always divide by the fully diluted count.

Grant types and the tax regime each triggers

The grant type - ISO, NSO, RSU, or RSA - determines your entire tax treatment, so identify it before anything else. The type is the single fact that decides whether you owe tax at vest, at exercise, or at sale.

Incentive stock options (ISOs) can only go to employees, must be priced at FMV set by a 409A, and carry the most favorable tax treatment if you meet the holding rules: sale at least two years from the grant date and one year from exercise. But ISOs are also where the traps cluster. The IRC Section 422(d) $100,000 limit caps the FMV of ISOs that first become exercisable in any calendar year; anything above that automatically becomes a non-qualified stock option (NSO), regardless of what your grant agreement calls it. The limit is tested using FMV at the time of grant, not at vest.

NSOs have no $100,000 cap and are taxed as ordinary income on the spread at exercise, with immediate withholding. RSUs grant actual shares that vest and are taxed as ordinary income at vest or settlement, with no strike to pay. RSAs are restricted stock you hold from day one, often with an 83(b) election option. If your offer mixes types, read each tranche separately; the ISO/NSO split created by the $100,000 limit is common and often undocumented in the grant letter itself.

The vesting standard and what deviation from it signals

The venture-backed standard is a four-year grant with a one-year cliff: 25 percent of your shares vest at month 12, then the remaining 75 percent vest monthly over the following 36 months. Any deviation from this is a signal worth reading, because the standard is near-universal.

Under this schedule, 1/4 vests after the one-year cliff, then 1/48 of the original grant vests each month until the four-year period ends. The cliff is the sharpest clause: leave before month 12 and you forfeit 100 percent of your equity. About 22 percent of startup employees leave before the one-year cliff, forfeiting everything, which is why the cliff date belongs on your calendar the day you sign.

Treat the 90 percent US adoption figure as a single source's claim rather than an established fact; the European 62 percent figure comes from a named benchmark provider. Both point the same direction: the four-year, one-year-cliff structure is the default, so a shorter vest, a longer cliff, or back-loaded vesting is a deviation you should ask the company to explain and justify in writing.

Acceleration: single trigger, double trigger, and Good Reason

Acceleration determines what happens to your unvested equity when the company is sold. Single trigger accelerates on one event, usually the change of control alone. Double trigger requires two events, and it is far more common - and far more conditional than candidates assume.

Double-trigger acceleration requires both a defined change of control AND a qualifying employment event, such as an involuntary termination other than for misconduct, or a resignation for defined "good reason," both typically within a defined window. The protection window is often 6 to 12 months after a sale, during which the second trigger remains active. The critical misread: if you keep your job with the acquirer, the second trigger never fires, and your vesting simply continues on the original schedule. Double trigger protects you against being fired after a sale; it does not hand you a payout for staying.

Good Reason is the clause that makes the employee-initiated path real. It commonly addresses a reduction in responsibility, a material change in reporting lines, a reduction in pay, or a relocation. A double-trigger clause that does not enumerate what counts as Good Reason is weaker than it looks, because you cannot reliably resign and trigger acceleration without a defined standard to point to. Confirm the definition is written out, not implied.

How to decode a grant, step by step

This is the procedure practitioners follow to take an offer from letter to a payout you can state in a number. Work it in order the first time; after that, jump to whichever step a new offer leaves unresolved. Some practitioners put fully diluted ownership first because it reframes everything, but the grant-type and strike steps are stable in the sequence below.

To request the numbers you need, the two questions below do most of the work. Send them to your recruiter or the hiring manager before you sign.

Email 1 - controlling documents:
"Before I sign, could you share the equity plan document and my grant notice or award agreement? I want to confirm the grant type, the vesting commencement date, and that board approval is in place. If the grant is pending approval, when is it expected, and what strike price will apply?"

Email 2 - ownership and mechanics:
"Two quick figures so I can evaluate the grant: (1) the current fully diluted share count, so I can compute my ownership percentage, and (2) the post-termination exercise window for these options. I also want to confirm whether the grant is early-exercisable and whether any portion falls outside the $100,000 ISO limit."

How this goes wrong: failure modes and false positives

Most equity mistakes are not errors of math; they are a term proving one thing while the candidate reads it as another. Each failure mode below has a false positive - the moment it looks fine but is not - and a specific check that catches it.

• Strike-price-as-value error. A candidate treats a low strike as a bargain without checking the 409A date. False positive: a cheap strike on a stale 409A just before a markup. Check: confirm the 409A valuation date is within 12 months.
• Percentage-of-outstanding inflation. An offer quotes ownership against issued and outstanding to make it look bigger. False positive: a "1 percent" that is really about 0.8 percent fully diluted. Check: demand the fully diluted share count.
• "Promised" treated as "granted." The offer letter mentions equity but no board approval exists. False positive: counting unissued options as yours. Check: ask for the signed grant notice and the board consent.
• Ignoring the 90-day clock. A candidate assumes the stated 10-year option term is the real deadline. False positive: a vested, valuable grant that silently expires 90 days after departure. Check: read the PTEW clause specifically.
• The $100K limit surprise. The annual ISO limit catches many employees off guard; any ISOs exercisable above it convert to NSOs regardless of what the grant agreement says. Check: have payroll or finance confirm the ISO/NSO split.
• Single-trigger assumption. A candidate assumes an acquisition vests everything. False positive: expecting a payout when the plan is double-trigger and they stay employed, so the second trigger never fires. Check: read for "change of control AND qualifying termination."
• Vague Good Reason. A double-trigger clause with no Good Reason definition is weaker than it looks. False positive: believing you can resign and accelerate. Check: confirm Good Reason enumerates pay cut, demotion, and relocation.
• Early-exercise plus $100K trap. If the grant is early-exercisable, meaning all options are immediately exercisable, the IRS treats the entire grant as subject to the $100,000 rule. Check: read whether the whole grant is early-exercisable.

Two tax thresholds move with the calendar, so re-check them against the current year rather than memorizing a figure. The AMT exemption, which governs whether exercising ISOs triggers alternative minimum tax, was $90,100 for single filers and $140,200 for joint filers in the most recent published figure. A 409A valuation must be updated every 12 months or after a material event; violations trigger a 20 percent federal penalty plus interest on affected employees. When you evaluate an offer, pull the current AMT exemption and confirm the 409A date yourself.

Why expert help is scarce, and where to find it

Equity-compensation specialists are thin on the ground, which is why most candidates decode grants alone. In Refolk's index, there are 3,333 US compensation analysts versus 47 in the UK - a 70.9x gap - and only 204 US stock plan administrators, the people who actually run ISO and RSU programs.

That scarcity has a practical consequence: the expertise concentrates at large employers, so a candidate at an early-stage company rarely has an internal person to ask. When you want to sanity-check a grant before signing, the practical move is to find a person who runs these programs for a living and ask a specific question. Refolk turns a plain-English request into a list of exactly those people, so you can reach someone who has administered the same grant type rather than guessing from a blog post.

Before you sign: the final verification

Run this checklist against the offer in front of you. If any item is unchecked, you do not yet know what you will walk away with, and you should not sign until it resolves.

Keep this reference open across every offer, not just this one. The vocabulary is stable: the terms do not change between companies, only the values do. What changes with the calendar are the tax thresholds - the AMT exemption and the 409A update requirement - so re-verify those current figures each time, and let the rows above do the rest.

The one area this reference cannot standardize is refresh and follow-on grants. There is no public benchmark for how companies handle them, so the only reliable move is to get the expectation in writing before you sign. Everything else in your grant has a default you can check against; refresh does not, which is exactly why it is the term most often left vague and most worth pinning down.