Understand equity and vesting
Value RSUs and stock options, and read a vesting schedule.
- Distinguish RSUs from stock options.
- Calculate vested shares under a cliff and monthly vesting.
- Account for the extra risk of private-company equity.
Equity can be the largest part of an engineering offer - and the most misunderstood. Before you can negotiate it, you need to know what kind you are getting, when it becomes yours, and how certain its value is.
RSUs, options, and vesting
- RSUs (restricted stock units): you receive shares as they vest. At a public company they are worth the share price, so they have value even if the price falls. Common at large public companies.
- Stock options: the right to buy shares at a fixed strike price. They are only worth something if the share price rises above the strike: value ≈ (share price − strike) × shares. Common at startups. Exercising costs money, and unexercised options often expire a set time after you leave.
- Vesting: equity is earned over time, commonly four years with a one-year cliff - nothing vests in the first 12 months, then 25% vests at once, then the rest monthly or quarterly.
- Schedules vary: some are even (25% each year); some are back-loaded (for example 5%, 15%, 40%, 40%); some front-loaded.
1total_shares = 4_800
2for month in (6, 12, 30, 48):
3 vested = 0 if month < 12 else min(total_shares, total_shares * month // 48)
4 print(f"Month {month}: {vested:,} shares")Month 6: 0 shares Month 12: 1,200 shares Month 30: 3,000 shares Month 48: 4,800 shares
Private-company equity needs a discount for risk. The shares cannot usually be sold until an acquisition or IPO, which may never happen, and the price in your offer may reflect preferred-stock rounds rather than the common stock you get. Ask for the number of shares, the total shares outstanding (to know your percentage), the strike price, and the most recent valuation - then value it conservatively.
Key takeaways
RSUs are shares; options are the right to buy shares at a strike price.
A one-year cliff means nothing vests until month 12.
Discount private-company equity for liquidity and valuation risk.
Lesson quiz
5 questions · pass with 4 correct · up to 50 XP
Passing this quiz completes the lesson and keeps your streak going. Questions you miss come back in review sessions later.
Practice: run the numbers
Use short Python programs to calculate total compensation, vesting, market percentiles, and counteroffers. These exercises run locally in your browser.
Count vested shares
Read the total shares in a grant and a number of months since starting. The grant vests over 48 months with a 12-month cliff: nothing before month 12, then total * months // 48 shares, capped at the total. Print the vested share count with thousands separators.
- Before the cliff
- At the cliff
- Mid-schedule
- After full vesting
Python runs in a sandboxed browser worker with a 60 second time limit. Its runtime loads from the Pyodide CDN; your code stays in this browser.
Questions about this lesson
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