# The Private-Company Equity Grant, Priced to a Risk-Adjusted Number

*You can take a real option or RSU grant letter and produce a defensible net, risk-adjusted dollar range for it instead of trusting the headline.*

- Canonical URL: https://www.refolk.ai/candidates/guides/private-company-equity-grant-risk-adjusted
- Pillar: Offers and negotiation
- Format: Teardown
- Published: 2026-10-09
- Last reviewed: 2026-10-09
- Reading time: 17 min

You are holding or expecting an offer with private-company stock options or RSUs, and the recruiter has quoted a number. This guide takes one real grant from the letter all the way to a net, risk-adjusted dollar range you can set next to another offer, including the wrong turns candidates take when they trust the headline. The audience is a candidate comparing offers, not an equity planner; by the end you should be able to run your own grant letter through the same seven forks.

The recruiter's number is almost always paper value: shares times a price that assumes a good exit, with no strike cost, no dilution, and no tax removed. Paper value is a fine starting point and a terrible comparison number. The job here is to carry one worked example - a 50,000-share ISO grant at a Series B company - through each step, show the intermediate figures, and land on a defensible range.

## What a private equity grant is actually worth

A private equity grant's value is paper value minus strike cost, minus future dilution, minus exit risk, minus tax, and the headline you were quoted strips none of those out. The published rule of thumb is blunt: expected private option value is 5% to 25% of the headline number once you account for dilution, exit probability, and tax friction.

Start with the formula. Paper, or intrinsic, value equals shares times current common fair market value, minus shares times strike price. Your strike is set at the 409A common FMV at grant - the 409A is the independent appraisal of common stock the company commissions to set that strike. Options are typically struck at the 409A common price, which usually sits well below the preferred price that investors paid in the last round.

That gap is where most of the error lives. In practice, common stock FMV at a venture-backed startup typically represents 10% to 30% of the most recent preferred share price. So a $4 strike on stock with an $8 preferred has $4 of in-the-money value per share - but only if the company exits and you are not wiped out lower in the preference stack.

**5-25% - Expected private option value as a share of the recruiter's headline**

What remains after dilution, exit probability, and tax friction, per resumefast.io.

> **Rule:** Price common on the 409A, never on the preferred
>
> Your strike and your per-share value both reference the 409A common FMV. Reusing the preferred price for common overstates the spread by three to ten times before a single other adjustment lands.

Our worked example: you have been offered 50,000 ISOs at a $12 strike. The recruiter's email calls it "a $600K grant," which is 50,000 times a $12-ish number they pulled from somewhere. Hold that headline. We will rebuild it from the actual inputs and watch it shrink.

## The inputs you have to request before you can price anything

You cannot price a grant from the grant letter alone. The letter gives you grant type, share count, strike, vesting, and the exercise window; the company has to give you the four numbers that turn those into dollars.

Request these, in writing:

- **Exact share count and strike price** - usually on the letter.
- **Current 409A common FMV** - the per-share common value today, not at grant.
- **Latest preferred price per share** - from the most recent priced round.
- **Fully-diluted shares outstanding** - the denominator for your ownership percent.
- **Vesting schedule, cliff, and grant type** - ISO, NSO, or RSU.
- **Post-termination exercise window** - how long you have to exercise after leaving.

The strike price itself is not negotiable by the employee, so do not spend leverage there. What you are negotiating, if anything, is share count. What you are doing here is measuring.

A note on freshness: the 409A has a shelf life. The independent-appraisal safe harbor requires the 409A date be no more than 12 months before the grant, and 409As must be updated annually or within 30 days after a material event. If the number you are quoted is stale, flag it and ask for the current one.

For our example, the company returns: current 409A common FMV of $18, latest preferred price of $60 per share, and 40,000,000 fully-diluted shares. That tells you two things immediately. Your $12 strike is below today's $18 common, so you are in the money on paper. And $18 common against a $60 preferred is a 30% ratio - the top of the normal 10% to 30% band, consistent with a Series B company.

> **Watch out:** A "$200K grant" is not a fact yet
>
> A grant labeled "$200K in options" may be worth $0 or $2M, and until you have the four numbers neither you nor the company knows which. Treat any headline as a claim to verify, not a figure to compare.

If you want help sanity-checking a grant against people who have actually built these plans, you can find them by role and stage. [Refolk](/candidates) writes your resume from your own history and scores how well you fit a posting, and the same index that powers that is searchable for the specialists who price grants like yours.

## From paper value to a net range: the procedure

Run the grant through seven steps, from pulling the letter facts to stress-testing the liquidity gates. The order matters: value, then dilution, then risk, then tax, then the gates that decide whether any of it is reachable.

#### One grant, letter to risk-adjusted number

1. **Pull the grant letter facts** - Record grant type, share count, strike, vesting, cliff, and PTE window. Done when every field is filled or flagged "ask."
2. **Request the four company numbers** - Ask in writing for current 409A common FMV, latest preferred price, fully-diluted share count, and PTE window. Done when you have all four in writing.
3. **Compute ownership percent and paper value** - Shares divided by fully-diluted total is ownership percent. Paper value is shares times (preferred minus strike) for options, or shares times FMV for RSUs. Done when you have a headline to beat.
4. **Apply dilution** - Multiply ownership by a future-dilution factor, flat 0.5 or compounding ~20% per expected round. Done when ownership is projected to a plausible exit.
5. **Apply stage discount or build scenarios** - Use the stage discount table, or build weighted low, middle, and high exit cases. Done when you have a range, not a point.
6. **Subtract exercise cost and taxes** - For options subtract strike times shares plus tax on the spread and gain; for RSUs subtract ordinary tax at settlement. Done when the range is net.
7. **Stress-test the liquidity gates** - Check the PTE window and, for RSUs, whether a secondary counts as the second trigger. Done when you know what is realizable before an IPO.

Here is where our example stands after step 3. Ownership is 50,000 divided by 40,000,000, which is 0.125%. Paper value using the preferred price is 50,000 times ($60 minus $12), which is $2.4M. That is the number a naive candidate carries into the comparison, and it is wrong in two directions at once: it uses preferred, and it ignores everything downstream. Using the current 409A common instead, paper value is 50,000 times ($18 minus $12), or $300K. Already the headline looks different depending on which price you anchor on.

#### The value funnel for one option grant

1. **Paper value** - Shares times preferred minus strike, the inflated starting point
2. **On the 409A** - Re-price on current common FMV, not preferred
3. **Dilution** - Cut projected ownership for future rounds
4. **Exit risk** - Weight across low, middle, high exit cases
5. **Net of tax** - Remove exercise cash and tax at exercise and sale

*Each stage strips something the recruiter's headline left in, from strike cost through to the liquidity gate.*

## Dilution and the stage discount: two ways to cut the number

After you have paper value, you cut it twice, for dilution and for exit risk, and sources genuinely disagree on whether to do these as two steps or fold them into one flat discount. Both camps agree the uncut number is useless.

### Dilution first

Every future priced round issues new shares and shrinks your slice. Most seed and Series A rounds dilute existing shareholders by 15% to 25%, and Carta's 2024 data puts the median around 20% per round. A common modeling shortcut is a cumulative dilution factor of 0.5 across all future rounds, which saves you from guessing how many rounds are left.

| Round | Carta 2023 median | Carta 2024 median |
|---|---|---|
| Seed | 20.5% | 18% |
| Series A | 19.5% | 18% |
| Series B | 17.2% | 12% |
| Series C | 12.6% | single digits |

Compounding the 2023 column from seed through Series B gives 0.795 times 0.805 times 0.828, about 0.53 retention. That is where the flat 0.5 shortcut comes from: four rounds roughly halve ownership. For our Series B example, the company has fewer rounds left, so a 0.6 retention factor is defensible. Applied to the $300K common-based paper value, that is $180K of dilution-adjusted paper value.

### Then the stage discount

Now the harder cut: exit risk. One camp applies a flat discount by stage. The jobsbyculture table below is the cleanest published version.

| Stage | Discount | Cents per stated dollar |
|---|---|---|
| Series A-B | 50-70% | 30-50 |
| Series C-D | 30-50% | 50-70 |
| Late/Pre-IPO | 20-35% | 65-80 |
| Public RSUs | 0% | ~100 pre-tax |

Our company is Series B, so a 50% to 70% discount applies, or 30 to 50 cents per dollar. Take the $180K dilution-adjusted figure, apply 30 to 50 cents, and you get a $54K to $90K range before tax and exercise cost. Set that against the recruiter's "$600K."

The scenario camp rejects the single flat discount. Their argument: most startup equity is a low-probability, high-variance asset, so you should build a low, middle, and high case and compare offers by expected value. A low case might be zero - the company folds or exits below the preference stack and common gets nothing. A middle case prices a modest acquisition. A high case prices a strong IPO. Weight each by a rough probability and sum. If you have any read on the company, scenarios are more honest than a flat discount, because the flat discount hides a zero that is often the most likely single outcome.

#### Which cutting method to trust

Horizontal axis runs from Little company knowledge to Strong company knowledge. Vertical axis runs from Comparing fast to Modeling carefully.

| Quadrant | What it means |
| --- | --- |
| Fast and blind | Use the flat stage discount as a placeholder range |
| Fast and informed | Anchor the flat discount, then nudge for what you know |
| Careful and blind | Build scenarios but keep the low case at or near zero |
| Careful and informed | Weight explicit low, middle, high exit cases by probability |

*Pick the flat discount when you know nothing specific; build scenarios when you have a real read on the exit.*

> Most startup equity is a low-probability, high-variance asset, so compare offers by expected value, not share count.

## The tax and exercise bill that lands last

Even a realized exit is not take-home money. For options you pay cash to exercise and tax on the spread; for RSUs you owe ordinary income tax the day shares settle. These come off the end of your range, and under-withholding here is a classic trap.

For NSOs, you owe tax the moment you exercise on the spread between FMV and strike, at ordinary rates, even if you do not sell. For ISOs, exercise can trigger alternative minimum tax on the spread, and you also have to fund the strike itself. In our example, exercising all 50,000 ISOs costs 50,000 times $12, or $600K in cash out of pocket, before any sale. That is the number candidates forget: you need liquidity to capture the grant at all, and the PTE window may force the decision early.

For double-trigger RSUs the pattern is different. There is no tax at grant and no tax when units time-vest at a private company. At settlement, when the liquidity event finally delivers shares, the full market value of every delivered share becomes ordinary W-2 income at once. It is typically withheld at the flat 22% supplemental rate even when your real marginal rate is 32% to 37%, which means years of accumulated value lands as income in a single day, under-withheld. Budget the gap or you will owe it at filing.

> **Watch out:** You may not be able to sell at IPO to pay the tax
>
> A 180-day lock-up can prevent selling at IPO even as settlement tax comes due. Assuming you can sell shares to fund the tax is how people end up owing on paper gains they cannot yet touch.

One penalty deserves its own line. If a grant is struck below the 409A FMV and fails Section 409A, the options are subject to taxation upon vesting, premium-rate interest, and a 20% additional federal tax. California imposes its own 20% penalty on top of the federal 20%, and options struck below 25% of FMV may be treated as restricted stock by the IRS entirely. This is the company's drafting risk, not yours to fix, but a strike that looks suspiciously low against the 409A is worth a question before you sign.

Carry the example to net. Take the $54K to $90K pre-tax, risk-adjusted range from the prior section. Subtract the ordinary-rate tax on the realized spread at exit - call it a third to a bit more at the margin - and the net, risk-adjusted range lands roughly in the $35K to $60K band. That is the number you compare, against a "$600K" headline and a $600K exercise bill. The grant is not worthless, but it is an order of magnitude below the quote.

## How this goes wrong: the eight failure modes

Most mispriced grants fail in one of eight predictable ways, and each has a tell and a check. These are the false positives that make a grant look like money it is not.

| Failure mode | What it looks like | The check |
|---|---|---|
| Trusting the headline | Recruiter quotes shares times preferred | Rebuild from the four numbers; a "$200K grant" may be $0 or $2M |
| Preferred as strike base | Big in-the-money spread | Re-price on current 409A common FMV |
| "Vested" double-trigger RSUs | Portal shows vested shares | Confirm the liquidity trigger has fired, or they forfeit on exit |
| Selling at IPO to pay tax | Assumes shares are liquid day one | Check for a 180-day lock-up |
| Ignoring the PTE window | Assumes options survive departure | Confirm the window; standard is 90 days |
| Secondary as the trigger | Tender offer looks like liquidity | Most secondaries do not satisfy the double trigger |
| Under-withholding at settlement | 22% withheld, 37% owed | Reserve for the marginal-rate gap |
| Skipping dilution | Face value ignores future rounds | Apply ~0.5 or compound ~20% per round |

Three of these deserve weight because they are the ones that silently zero out real value.

**The PTE window can cancel years of vesting.** The standard grant gives 90 days to exercise after you leave, and missing it cancels the options no matter how long you worked. ISOs that are not exercised by day 91 auto-convert to NSOs under IRC 422(a)(2), even where an extended window preserves the right to exercise - it preserves the right, not the ISO tax status. A few companies extended their windows: Pinterest moved to seven years, and Quora and Coinbase adopted similar terms, but Carta data shows most startups still default to 90 days. The bite is cash: to keep the options you must fund strike times shares within 90 days of leaving, and for our example that is $600K you may not have.

**Double-trigger structure turns "vested" into "contingent."** A double-trigger RSU requires both time-based vesting and a liquidity event, typically an IPO or acquisition, before any shares deliver. Both triggers must be satisfied; time-vesting alone does nothing. Facebook's condition was a change of control or six months after IPO, coinciding with lock-up expiry. If your employment ends before the second trigger, unvested shares are forfeited, and a portal showing "vested" is showing only the first trigger.

**A secondary usually is not the trigger.** Because a secondary or tender offer usually does not count as the liquidity trigger, double-trigger RSU holders often cannot participate in private-market liquidity even when a tender is running. If your plan is to sell early in a secondary, read the plan document and confirm it qualifies, because the default answer is no.

> **Rule:** Vested is not the same as realizable
>
> For any private grant, separate two questions: has it vested, and can it be turned into cash. The PTE window, the second trigger, lock-ups, and secondaries all sit between "vested" and "money," and any one of them can hold the whole grant illiquid.

## Before you call the number defensible

Run this check before you put your risk-adjusted range next to another offer. If any item is unchecked, the number is a guess, not a comparison.

#### Grant pricing sign-off

- [ ] I have the current 409A common FMV, latest preferred price, fully-diluted count, and PTE window in writing.
- [ ] My per-share value is anchored on the 409A common FMV, not the preferred price.
- [ ] I applied a dilution factor of ~0.5 or compounded ~20% per expected remaining round.
- [ ] I cut for exit risk with either the stage discount or weighted low/middle/high scenarios, and my low case includes zero.
- [ ] I subtracted the cash cost to exercise and the tax at exercise and at sale.
- [ ] I confirmed the PTE window and whether I could fund the strike inside it if I left.
- [ ] For RSUs, I confirmed what satisfies the second trigger and whether a secondary qualifies.
- [ ] I reserved for the gap between 22% withholding and my real marginal rate.

## Keeping the number current and finding help

The number you built has a shelf life, because the inputs move. Re-run the math whenever the company issues a new 409A, closes a round, or extends the PTE window, and re-check your tax reserve if your marginal rate changes. The method stays fixed; the four numbers do not.

The scarce resource is someone who can model the waterfall rather than just talk about equity. In Refolk's index, only 22 US profiles list "409A Valuation" as a skill against 2,701 listing "Equity Compensation," under 1% of the pool, and the specialists cluster at firms like Carta and in FP&A and founder roles. Geography gates access too: the US equity-comp advisory pool is roughly 27.6 times the UK's, 2,701 against 98, so UK candidates face materially thinner specialist coverage.

**22 - US profiles naming "409A Valuation" as a skill in Refolk's index**

Against 2,701 naming "Equity Compensation," so under 1% of the pool can model the waterfall.

**The request email for the four company numbers**

```
Hi [name],

Thanks for the offer. To evaluate the equity properly, could you share a few figures in writing:

1. The current 409A common fair market value per share
2. The most recent preferred price per share from the last priced round
3. Total fully-diluted shares outstanding
4. The post-termination exercise window for the options

I have the share count, strike, and vesting from the grant letter. These four let me value the grant on a consistent basis. Appreciate it.

Best,
[you]
```

*Send after a verbal offer, before you counter. Adapt the greeting and sign-off.*

When you want to pressure-test your range against someone who has priced grants like yours, search for the specialist directly rather than the generalist.

Ask me this: `Equity compensation financial planners in San Francisco who specialize in pre-IPO startup employees.` - [run the search](https://www.refolk.ai/start?q=Equity%20compensation%20financial%20planners%20in%20San%20Francisco%20who%20specialize%20in%20pre-IPO%20startup%20employees.).

*Returns planners who model strike cost, dilution, and double-trigger tax, not just HR-side equity administrators.*

The discipline is the point. A headline is a claim; a net, risk-adjusted range built from the four numbers is a comparison you can defend across the table. Carry your own grant through the same seven forks and you will know, within a plausible band, what you are actually being offered.

## Frequently asked questions

### How do I value startup stock options in an offer when the recruiter only gave me a share count?

Get three numbers from the company first: the current 409A common fair market value, the latest preferred price per share, and the fully-diluted share count. Paper value is your shares times the preferred price minus your shares times the strike. Then cut it with a dilution factor and a stage discount. Expected value typically lands at 5% to 25% of the headline, so never compare offers on share count alone.

### Should I use the preferred price or the 409A price as my strike base?

Your strike is set at the 409A common fair market value at grant, which is the correct floor for exercise cost. Use the current 409A common FMV, not the preferred price, as the per-share value you multiply against. Common FMV typically runs 10% to 30% of the preferred price, so reusing the preferred price for common dramatically overstates your in-the-money spread before dilution and tax even enter.

### What discount should I apply to private company equity when comparing two offers?

Published advisor discounts go by stage: Series A to B carry a 50% to 70% discount, so 30 to 50 cents per stated dollar; Series C to D carry 30% to 50%; late-stage or pre-IPO carry 20% to 35%; public RSUs carry zero pre-tax. The scenario camp rejects a single flat discount and instead weights explicit low, middle, and high exit cases. Both beat trusting paper value.

### My RSUs show as vested in the equity portal. Is that money I can count?

Not if they are double-trigger. Double-trigger RSUs require both time vesting and a liquidity event, usually an IPO or acquisition, before any shares deliver. Time-vesting alone does nothing, and if your employment ends before the second trigger fires, the units are forfeited. A portal that says "vested" is showing the first trigger only, so treat those shares as contingent, not realized.

### What happens to my options if I leave before an exit?

The standard grant gives you 90 days after termination to exercise, which means funding strike times shares in cash within that window, and missing it cancels the options outright. ISOs that are not exercised by day 91 auto-convert to NSOs even under an extended window, which preserves the right to exercise but not the ISO tax treatment. Some firms extend the window to several years, but most still default to 90 days.

---

*From the Refolk guide library. I revise these guides rather than replacing them, so the current version is always at https://www.refolk.ai/candidates/guides/private-company-equity-grant-risk-adjusted*