Should You Join a Startup?

Who funded the company decides what your job is like

A recruiter says, "We just closed our B," and the new grad nods. The recruiter moves on to the free lunch. Nobody says what the B cost the company, who now sits on its board, or what that means for the offer on the table. The letter is not trivia. It says how much money the company has already promised to return to investors before an employee sees anything from a sale.

Two questions decide most of what an employee will experience: who owns the company, and what stage it is at. Ownership tells you what the people in charge want and how fast they want it. Stage tells you how likely the company is to survive, how much of it a new hire can expect, and how much cash it can afford to pay. A seed startup and a Series C startup are different jobs with different odds.

Twelve ways a company gets funded

Read the owner column first and the cash column second; the last row, a public company, is the reference point the other eleven depart from.

The stage ladder

Round size, valuation and headcount are Carta medians, drawn from companies on Carta that were still alive when measured and pulled up in 2025 by AI companies, so read them as an optimistic anchor rather than the average for a company you might join.

Failure odds fall as you climb. Grant size falls faster: hire number one at a seed company gets a median 1.5% in Carta's data, and a new grad at seed roughly 0.1% to 0.3%. Cash rises: startup new-grad base salaries run roughly $100K to $180K by Simplify's 2026 data, against big-tech packages of roughly $180K to $285K. Early, you take a large slice of something likely worthless. Late, a tiny slice of something likely to survive, paid mostly in cash.

Three clocks, and you work on one of them

A founder who never took outside money wins by staying profitable for decades. A venture fund wins by returning many times its money inside a ten-year fund life, so it needs the company to grow fast or fail fast. A private equity firm wins by buying at one price, tightening operations, and selling higher roughly six years later. None of these is wrong. They are different clocks, and the cash and equity columns above follow from them.

Venture investors expect most of their bets to fail, and the company you join is one of them, so cash is thin and options fill the gap. A family owner has no portfolio; the business is the retirement plan, and layoffs are personal. A private equity firm bought with borrowed money and needs the cash flow to service the debt, so headcount is a lever. Whatever the money asks of the company, the company will ask of you.

Why your options may be worth nothing

Most people never exercise: options vest slowly, cost cash to exercise, and expire 90 days after you leave.

A stock option is the right to buy a share at a fixed strike price. It pays only if the share is later worth more. A restricted stock unit (RSU) is a promise to hand you a share once it vests. Carta's reports show options dominating through Series B and RSUs common from Series C or D. The strike is set by a 409A valuation, roughly 20% of the preferred price at Series A and roughly 30% at Series B.

Grants vest over four years with a one-year cliff, then monthly. Nothing vests until your first anniversary, when a quarter arrives at once; the rest comes in 36 monthly slices. Leave in month eleven and you get nothing. Vesting only gives you the right to buy. Exercising means paying the strike for every share, in cash, plus any tax due on the spread. At a growth-stage company that bill can run to tens of thousands of dollars.

When you leave, a clock starts. Carta found that 91% of terminated grants carry a post-termination exercise window of 90 days or less. Inside that window you pay to exercise or forfeit. Most people forfeit: Carta's Q4 2024 data shows only 32.2% of vested, in-the-money grants were exercised, down from 54.2% three years earlier. If the company is acquired, acceleration decides whether unvested shares vest early; double-trigger, the more common form, requires both the sale and your termination without cause.

How money actually reaches you

Private shares turn into cash only at an IPO, an acquisition, or a rare tender, and investors are paid first.

Private shares cannot be sold on a whim. An IPO turns them into public shares, but employees are usually barred from selling for a lockup measured in months. An acquisition converts shares into cash or acquirer stock at the deal price. Between those events, a company may run a tender offer, buying shares from employees at a set price, or approve a secondary sale to a private buyer.

Tenders are rarer than the headlines suggest. Carta ran 396 tender offers in 2025, up 62% from the year before and paying roughly 16,000 employees, but that is about 1% of the companies on its platform, and about a fifth were at Series E or later. The cap on what any holder may sell is typically 10% to 25% of their holdings; only 23% of tenders let sellers part with more than half. Median participation in H1 2025 was 56%.

The headline valuation is not your valuation. Investors buy preferred stock, which carries a liquidation preference: the right to get their money back before common holders, meaning founders and employees, receive anything. Carta's deal-terms data shows about 96% to 97% of rounds use a 1x non-participating preference, so investors take either their money back or their pro-rata share, whichever is larger. The sum of those preferences is the preference stack, and it sits between the sale price and your shares.

What goes wrong, and to whom

Down rounds, dilution and shutdowns all hit common stock first, and a new grad holds only common.

A down round is a financing at a lower price per share than the last one. Earlier investors usually hold anti-dilution protection, which hands them extra shares to make up for the drop, and those shares come out of everyone else's ownership. Options granted at the old 409A price may now carry a strike above the share value, which is called being underwater. Some companies reprice them or issue fresh grants; many do not.

Even in good rounds, ownership shrinks. Carta's data on 2,005 US software startups puts median dilution per round at 19.5% at seed, 18% at Series A, 14% at Series B, and 10% at Series C. An employee who held 0.2% after seed holds roughly 0.12% after an A, B and C. Most often, though, the company simply dies: Correlation Ventures found about 65% of venture investments return less than the capital invested, and a dead company's options are worth nothing.

Private equity changes the job even when the company survives. Davis, Haltiwanger and co-authors studied 3,200 buyouts and found net employment down about 1% two years after a deal: down 13% in public-to-private deals, up 13% in private-to-private ones. Earnings per worker fell about 1.7%. Equity sits in a management incentive plan for a few senior executives; a new grad gets none. Carta reports average Series D headcount fell 29% from its 2023 peak, and layoffs there arrive in cohorts.

Lifestyle business or venture scale

A lifestyle business pays in cash and stability rather than equity, and it is more likely to exist in ten years.

Not every company is trying to become enormous. A lifestyle business is built to generate a good living for its owner, without outside investors and without an exit. A venture-scale business must aim for hundreds of millions in value or fail trying. The word startup gets applied to both, and the two owners want opposite things from the same employee. One wants you to stay for a decade. The other wants the company worth ten times more in five years.

A bootstrapped or family owner wants stability, competence, and low turnover, and shares profit in cash more often than equity. The family-firm literature notes that owners "wish to maintain substantial equity ownership"; a rough estimate is that only 5% to 10% of non-family employees at such firms receive any equity or phantom equity, while 20% to 30% get cash profit share. Pay tends to sit roughly 10% to 25% below large-company cash for the same title.

Survival is the quiet advantage. The Bureau of Labor Statistics tracks every employer business in the country and finds 77.9% still open after one year, 51.4% after five, and 34.7% after ten. Those closures include sales and retirements, so they overstate failure, and they still compare well with a seed-stage venture company. The upside is a steady paycheck, a share of profits, and a boss who plans to be there next year. Nobody should expect to get rich from equity.

Ten questions to ask before you sign

Every one of these can be pasted into an email, and a refusal to answer is itself an answer.

A company that has its house in order will answer most of them within a day. The point is not to negotiate harder. It is to convert a grant expressed as a share count into ownership, price, and the odds of ever being paid, so the equity line can be compared with the salary you give up to get it.

1. How many fully diluted shares are outstanding, so I can convert my grant into a percentage of the company?
2. What was the most recent 409A valuation per share, and what price per share did investors pay in the last preferred round?
3. What is the total liquidation preference stack today, and are any rounds participating or above 1x?
4. How long is the post-termination exercise window for my options if I leave?
5. Does my grant carry any acceleration, and is it single-trigger or double-trigger?
6. How many months of runway does the company have at its current burn rate?
7. When did the last round close, and what were its price and headline terms?
8. How has headcount changed over the past twelve months, and what is the hiring plan for the next twelve?
9. What is the company's policy on employee secondary sales, and has it run a tender offer?
10. Does the company plan to refresh the option pool in the next round, and by roughly how much?

Glossary

Pre-money / post-money

Pre-money is what investors agree the company is worth before their cash goes in. Post-money is pre-money plus the new cash, and it is the number people quote as the valuation.

Dilution

The shrinking of your ownership percentage when the company issues new shares to investors or employees. You keep the same number of shares; there are simply more shares in total.

Fully diluted

The share count that includes every share that could exist: issued stock, all options (granted or not), warrants, and convertible notes. Your percentage should always be quoted against this number.

Option pool

Shares set aside for employee grants. Investors usually require it to be created or refilled before their round, so the pool comes out of founders' and existing employees' ownership.

Strike price

The fixed price you pay per share when you exercise an option. Set at the fair market value of common stock on the grant date, which is what the 409A valuation determines.

409A valuation

An independent appraisal of what the company's common stock is worth, used to set strike prices. It is usually well below the price investors paid for preferred stock in the last round.

ISO

Incentive stock option. Can qualify for long-term capital gains treatment if you hold the shares long enough after exercise, but the spread at exercise can trigger the alternative minimum tax.

NSO

Non-qualified stock option. The spread between strike and fair value is taxed as ordinary income when you exercise, with withholding, and later gains are capital gains.

RSU

Restricted stock unit. A promise to give you a share once it vests, with no strike price to pay. At private companies RSUs usually also require a liquidity event before they settle.

Vesting

The schedule on which your grant becomes yours. The standard at venture-backed companies is four years, with nothing until the first anniversary and monthly portions after that.

Cliff

The period, usually one year, during which nothing vests. If you leave before the cliff, you walk away with no equity at all.

Acceleration (single and double trigger)

A clause that vests unvested shares early. Single trigger fires on a sale of the company alone. Double trigger requires a sale and then your termination without cause, and is the more common form.

Post-termination exercise window

How long after leaving you have to pay for your vested options before they are cancelled. Ninety days is standard; some companies extend it to several years.

Early exercise and 83(b)

Some plans let you exercise options before they vest. Filing an 83(b) election with the IRS within 30 days starts the capital gains clock early and can reduce taxes later, but you pay cash for shares you might forfeit.

Liquidation preference

The right of preferred stockholders to receive their money back before common holders get anything when the company is sold or wound down. A 1x preference means one times what they invested.

Participating vs non-participating

Non-participating preferred takes either its preference or its pro-rata share, whichever is larger. Participating preferred takes the preference and then also shares in what remains. Non-participating is the norm.

Preference stack

The total of all liquidation preferences across every round, in order of seniority. In a sale, this amount is paid to investors first, and common stock is paid only from what is left.

Down round

A financing at a lower price per share than the previous round. It usually triggers anti-dilution protection for earlier investors and can leave employee options underwater.

Anti-dilution

A term that gives earlier investors extra shares if a later round is priced lower, protecting their percentage. The extra shares come out of everyone else's ownership, including employees.

Secondary sale

Selling your private shares to another investor rather than back to the company. Most companies must approve the buyer and many restrict or forbid these sales outright.

Tender offer

An organized event where the company or an outside investor offers to buy shares from employees at a set price. Usually capped at a fraction of each person's holdings.

Lockup

A period after an IPO during which insiders, including employees, may not sell their shares. The stock can move a great deal before the lockup expires.

Runway

How many months the company can keep operating at its current spending before the cash runs out. It sets the deadline for the next round, a profit, or a shutdown.

QSBS

Qualified small business stock. A federal tax exclusion that can wipe out capital gains tax on shares of qualifying small companies held long enough. The rules changed in 2025, so check current thresholds and holding periods rather than relying on an older summary.