Equity Comp vs Cash Comparison Calculator
Startups offer trade-offs: equity-heavy comp could 10x at exit but most equity goes to zero. Cash-heavy comp is guaranteed but lacks upside. Expected-value analysis reveals when each makes sense.
Expected Value Math For Equity
Equity offers should be evaluated on probability-weighted expected return. A $400K equity grant at strike with 25% exit probability and 3x exit multiple has expected value $300K — adjusted for 30% dilution that's $210K. Spread over 5 years, that's $42K/year expected — less than most $40K cash diff would suggest.
Dilution And Strike Price Math
Each funding round dilutes existing equity 15-25%. By Series C, employees have typically been diluted 50-65% from grant. Strike price (option exercise price) on early grants is often $0.10-$1.00; later employees pay $5-$20/share. A 4-year vest with low strike from Series A is far more valuable than the same nominal dollar amount granted at Series C.
Tax Treatment Differences
Cash salary: ordinary income, FICA, state. ISO stock options: qualifying disposition pays long-term capital gains (20% federal max + state) if held 1+ year post-exercise AND 2+ years post-grant. NSO options: ordinary income at exercise, then capital gains on appreciation. RSUs: ordinary income at vest. Equity-heavy comp can save 17-20 percentage points in tax if structured as long-held ISOs.
Source: Carta State of Startup Compensation 2025, Index Ventures Option Plans Survey. Last updated: May 2026.