How to Sell Equity to Executive Candidates
Sell equity to executive candidates with a specific scenario table — showing value at 2x, 5x, and 10x outcomes — not vague statements about 'significant upside.' Give candidates the information they need to evaluate the equity themselves: grant size, total shares outstanding, current 409A valuation, vesting schedule, and your honest view of the company's trajectory. Executives who join based on an equity story they fully understood are more motivated and less likely to feel misled.
Equity is the most mishandled component of executive compensation. Companies either over-sell it with vague promises of 'life-changing upside' or under-explain it with raw grant numbers that candidates cannot interpret. The result: candidates either cannot evaluate the offer or feel misled after joining.
The Information Executives Need
| Information | Why Candidates Need It |
|---|---|
| Grant size (options or RSUs) | Starting point — but meaningless without context |
| Total shares outstanding | Allows calculation of ownership percentage |
| Current 409A valuation (per share) | Establishes today's value of the grant |
| Last preferred price (per share) | Shows current investor-implied value |
| Vesting schedule and cliff | When does the equity become accessible? |
| Scenario table (2x, 5x, 10x) | Shows outcomes at different company valuations |
The Scenario Table Format
| Outcome | Company Valuation | Candidate's Grant Value |
|---|---|---|
| 2x from today | $200M (at current $100M valuation) | $XXX,XXX |
| 5x from today | $500M | $X,XXX,XXX |
| 10x from today | $1B | $X,XXX,XXX |
Present this honestly — including liquidation preferences that affect common stock. Candidates who understand the structure are more committed; candidates who discover the structure later feel misled.
The Most Common Equity Conversation Mistakes
- Presenting raw option counts without context: '50,000 options' is meaningless without total shares outstanding - Refusing to share 409A or total share count 'for confidentiality' — this signals either something to hide or poor communication - Comparing to a public company's stock: private equity is illiquid and binary — this comparison misleads - Promising a path to liquidity without being honest about the timeline uncertaintyFrequently Asked Questions
Should I share the 409A valuation with candidates?
Yes. Candidates need the 409A to calculate the strike price of options and the current per-share value. Refusing to share it while claiming significant equity value is a contradiction that experienced candidates notice.
How do I handle candidates who ask about liquidation preferences?
Answer honestly. Liquidation preferences affect common stock value in acquisitions below certain thresholds. Candidates with prior startup experience will ask this question — and the ones who don't but should are taking a risk they may not understand.
What is the best way to explain vesting to a candidate?
Keep it simple: '4-year vesting schedule with a 1-year cliff. After 12 months, 25% vests. The remaining 75% vests monthly over the following 36 months.' Then ask if they have any questions — not all candidates understand vesting without explanation.
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