Educating Start-Up Employees on the Value of Their Equity

For most pre-IPO companies, equity is more than just a hiring incentive—it’s a key part of the company’s culture, compensation strategy, and long-term employee value proposition.

But there’s a disconnect at too many private companies: many employees still don’t fully understand what they’ve been granted, how it works, or what to do with it. And that lack of understanding? It comes at a cost.

Equity Education Is an Underutilized Retention Strategy

The more employees understand their equity, the more they value it—and the more they value remaining at the company. Especially during the mid-to-late stage of a company’s lifecycle, where equity may start to feel more “real” due to rising valuations, late-stage funding rounds, or potential liquidity events on the horizon, education becomes even more critical.

When employees know what they hold, how it could grow, and what milestones could unlock that value, they’re more engaged in the long game. They start to think like owners. They ask smarter questions. And they’re more likely to stay through a tender offer or toward an IPO—not just for the payout, but because they understand how and why their contribution matters.

Real Equity, Real Risk—Without Education, That’s a Liability

At this stage, employees are often exercising options, preparing for tender offers, or reviewing requirements for secondary sales. This is where education really counts—because real money and real tax consequences are at stake.

We’ve seen employees unintentionally walk into serious tax liabilities simply because no one explained the basics. Here are just a few real-world examples that we’ve encountered:

• One employee exercised ISOs with a large spread and triggered the Alternative Minimum Tax (AMT), without even knowing what AMT was. It cost them thousands.
• Another employee wanted to exercise NSOs after leaving a company and, with their post-termination exercise period coming to a close, realized too late that the combined exercise and tax cost was more than they could afford.
• And on multiple occasions, we’ve seen employees reject RSUs—with no strike price or downside—simply because they didn’t understand the value or implications. (They later accepted them when we educated them on the specifics.)

These aren’t rare cases. They’re common. And avoidable.

Education Should Scale with Company Growth

As a company matures, its equity programs typically evolve—more grants, more participants, more complex scenarios. But education often doesn’t keep pace. A quick slide deck at onboarding might have worked in the early days, but it’s not enough when your company has hundreds of equity holders across multiple jurisdictions, and a potential transaction on the horizon.

This is the time to professionalize your equity education strategy. It doesn’t have to be overly complicated—but it does have to be consistent and tailored to your employees.

Here are a few effective strategies we’ve seen work well in late-stage environments:

• Quarterly equity education sessions: Make them mandatory for new grant recipients and available to all employees. Keep them short, include time for Q&A, and update content regularly to reflect what’s happening in the business (e.g., upcoming liquidity events or changes in tax law).
• Scenario-based examples: Help employees understand different outcomes—early exercise vs. holding options, AMT impact, tender offer participation, etc.
• Localized education: For international teams, provide resources tailored to their tax treatment and reporting requirements.
• Office hours or 1:1 access: Whether it’s with your internal equity administration team or a trusted advisor, offering personal guidance can make a huge difference—especially when employees are navigating significant financial decisions.

Build a Culture of Ownership—Intentionally

Equity education isn’t just about compliance or minimizing support tickets (though that’s a nice bonus). It’s about building a culture of ownership. When your team understands what they’re earning, how it works, and what success could mean for them, they show up differently.

They lean in. They stay longer. And they bring others along for the ride.

As your company grows, and exit conversations start getting real and valuations start climbing, this mindset shift is more important than ever.

No Downside, Only Upside

The truth is, there’s no downside to helping employees understand the value of their equity. It’s a win-win. They become more empowered and engaged. You build a stronger culture. And ultimately, the company benefits from employees who are invested—literally and emotionally—in the journey ahead.

It’s time to go beyond just granting equity. Let’s make sure our teams actually understand it.