Understanding Tech Startup Equity as a Seller

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From one of my all-time favorite Simpson's episodes, when Bart joins a Dot-com era startup

How Startup Sellers Get Screwed on Equity

If you're a seller at an early, mid or even late-stage company, there's a pretty good chance you're getting completely shafted when it comes to your equity/ownership. I would know, I spent most of my career in early tech startups and it's played out more times than I care to count. So what is a Sales Player to do? Let's get into it.

Tech Equity 101:

Most early stage, tech startups set up shop as ~~Delaware~~ C-Corps (as of early 2025, there seems to be a migration away from Delaware corps and more startups opting to incorporate in Nevada or Wyoming). They typically start with 10 million shares. Here’s how those get divided up:

7–8 million shares go to the founders at basically zero cost ($0.0001 per share).
With each new round of funding, equity gets diluted by about 20–25%.
Your stock vests over 4 years with a 1-year cliff—meaning you get nothing if you leave before a year...

Now, let’s see how this all plays out in real life...

Let's say you’re the second sales rep at a startup doing $1M in Annual Recurring Revenue (ARR).

The company raised $1.5M in a seed round with a $6M valuation.
They have 10M shares, with 2M more authorized for future use.
Your sales quota is $500K, and you’re granted 50,000 shares (0.5% of shares), which vest over 4 years.

Sounds pretty good, right? Let’s fast forward a year...

After a Year, Where Are You Actually At?

You crushed it. You hit quota and helped grow revenue by 50%. The company raises a Series A at a $15M valuation, bringing in another $5M in funding.

Congrats! Your hard work helped the company nearly triple its valuation.

Now, let’s talk about your cut:

After your 1-year cliff, you’ve vested 12,500 shares (out of 50,000).
But because of dilution from the new funding, the company now has 13.3M shares outstanding.
Your ownership drops to just 0.09% of the company.

That’s less than one-tenth of one percent, for helping double revenue!!!

What’s Your Stock Actually Worth?

Best-case scenario? Your stock is worth $18,750.

Meanwhile, the founders’ stock is now worth $12 million—and they bought it for almost nothing.

So basically, while your work helped massively increase the company’s value, your piece of the pie actually shrunk.

*By the way all of the above assumes a potential liquidity event i.e. a sale or IPO, most tech startups will take 10+ years to have a liquidity event, if they're lucky enough to have one at all.

But You Got Paid in Salary & Commission!

Some Founders argue that sales reps don’t deserve more equity because they get a salary AND commissions.

Consider this:

Your CEO/Founder probably makes $150K per year (industry standard)
Your OTE (On-Target Earnings) is likely $150K–$200K, with half of it not guaranteed.
You worked just as hard, if not harder, to build the company, yet you got a small fraction of the ownership.

How to Fight for a Better Deal

If you’re interviewing or already at a startup, don’t be afraid to push back. Here are some common excuses and how to counter them:

🚫 “This is market rate.”
✅ Founders make side deals all the time. If they value you, they can make an exception.

🚫 “Our option pool is limited.”
✅ The board can expand the pool anytime. If they won’t, founders can give up some of their own stock.

🚫 “We’ll re-evaluate next year.”
✅ Bullshit! If they really believed in you, they’d give you equity now not make you wait.

To Sum it All Up

If you’re bringing real value to a tech startup, you deserve real compensation. Don’t let anyone tell you otherwise.

In my case, it took messing this up a few times to learn how to properly negotiate this and even then, I've come to the realization that cash is king in tech sales, which is not to say you should leave equity on the table, but you have to take an honest look at how it all works.

I realize there's a lot of nuance around this topic and it's frankly something that doesn't get talked about nearly enough. I hope this is eye opening and let me know what I got wrong.

If you want help negotiating your equity component, let's get time to explore 1:1 coaching.

See ya next week. -JMW

Latest Episode: Winning an Electric Car as a Sales Spiff and Other Crazy Career Stories with Chris Dankowski

Chris Dankowski is a Sales Strategy Consultant and Coach to Sellers and Founders in tech. Based in Austin, Texas, Chris has previously sold at top companies like: Evernote, Outreach and HubSpot. In this episode, Chris shares stories and insights on managing your tech sales career.

Stream the full episode here

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