A startup job offer is the hardest kind to evaluate, because the headline is designed to look bigger than it is. A modest base plus a large equity number reads as a great package, but the real question is what that equity is actually worth and what you are risking to get it. Engineers who get this wrong either turn down good bets out of caution or take bad ones dazzled by a big notional figure. Here is how to evaluate a startup offer properly, so the decision is yours and not the pitch's.
Start with the base you would accept anyway
Before you touch the equity, decide the base salary you would accept for this role if there were no equity at all. That is your floor. Equity is upside on top of a base you are happy with, never a reason to accept a base you are not. Check where the offer sits against the market band for your role, seniority and city in our salary checker first. A startup base a little below a big-company number can be a fine trade for the scope and upside; a base well below market, propped up only by options, usually is not.
How to actually value the equity
Australian startup equity is almost always options: the right to buy shares later at a fixed strike price, earned over a vesting schedule, worth nothing until a liquidity event that may never come at the quoted value. To value it at all, you need the numbers, so ask for them:
- How many options, as a percentage of fully diluted shares? A dollar figure is meaningless without the share count and the total. A percentage of the whole company is the honest unit.
- What is the strike price, and the most recent valuation? Your upside is the gap between a future price and your strike, so both matter.
- What is the vesting schedule and cliff? Standard is four years with a one-year cliff. You earn nothing if you leave before the cliff.
- How big is the option pool, and how much future dilution is likely? Later raises dilute you; a rough sense of the trajectory matters.
Then treat the result as a bet with a real chance of being worth zero, sized against the base you already accepted. If a founder cannot or will not answer these, that is information in itself.
Read the company's health
The equity is only worth discussing if the company survives long enough to matter. You will not get audited accounts, but you can ask, and how leadership answers tells you a lot:
- Runway. How many months of cash at current burn? Under twelve without a clear plan is a flag.
- Revenue and growth. Is there real revenue, and is it growing? Pre-revenue is not disqualifying, but it changes the risk.
- The last raise and the investors. When did they last raise, how much, and from whom? Recent, credible backing is a meaningful signal.
- Candour. A founder who talks clearly about runway, revenue and the path to the next raise is a far safer bet than one who deflects.
Weigh the role and the risk
Beyond the money, a startup is a bet on the work and the people. Ask what you would actually own, who you would report to, and whether you would grow. Ask, honestly, what happens if it does not work out, for the company or for you in the role. The upside of a startup is scope, ownership and learning you cannot get at a big company; the downside is instability and a real chance the equity is worth nothing. Both are true at once, and the right call depends on your stage of life and appetite for risk. Our guide on how startups hire versus listed companies lays out the trade from both sides.
A startup offer is a bet, not a salary. Value the base as if the equity is worth zero, then decide whether the upside and the work are worth the risk you can actually see.
FAQ
How do you value equity in a startup job offer?
Value it as upside on top of a base you would accept on its own, not as part of your salary. Australian startup equity is usually options with a strike price and a vesting schedule, worth nothing until a liquidity event. Ask for the number of options as a percentage of fully diluted shares, the strike price, the vesting and cliff, the most recent valuation, and the size of the option pool, then treat the result as a bet, not a guarantee.
What questions should you ask before accepting a startup offer?
Ask about runway and last raise, revenue and growth, who the investors are, the equity details above, who you would report to and the scope you would own, and what happens if the role or the company does not work out. A good startup will answer these openly; evasiveness is itself an answer.
Should you take a pay cut to join a startup?
Sometimes, but go in clear-eyed. A modest base below a big-company offer can be worth it for the scope, ownership, learning and genuine equity upside. A large cut justified only by a notional equity figure that may never vest at value is a worse trade than it looks. Decide what base you need to live well first, then weigh the rest.
How do you tell if a startup is financially healthy?
Look at runway, recent revenue and growth, the quality and recency of the last funding round, and how candidly leadership discusses all of it. You will not get audited accounts, but a founder who can talk clearly about runway, revenue and the path to the next raise is a much safer bet than one who deflects.