How Equity & RSUs Work at Startups and Big Tech (2026 Guide)

You get an offer letter. The salary number looks fine, but there is also a line about equity or RSUs worth a certain amount. What does that actually mean for your bank account? Equity & RSUs are one of the most misunderstood parts of a job offer, especially for people early in their careers. This guide breaks down how equity & RSUs actually work, how startups and Big Tech companies structure them differently, and what questions you should ask before you sign anything. 

TL;DR Summary

• Equity & RSUs are two different ways companies pay you in company shares instead of (or in addition to) cash.
• Startups usually offer stock options (ESOPs) that need to be exercised and may expire worthless.
• Big Tech usually offers RSUs, which convert to real shares on a vesting schedule, no purchase needed.
• A standard vesting schedule is 4 years with a 1 year cliff.
• Always ask for the strike price, vesting schedule, and current valuation before accepting an offer with equity.

What Are Equity & RSUs, Really?

Equity simply means ownership. When a company gives you equity, it is giving you a small piece of the company itself. RSUs, or Restricted Stock Units, are one specific way companies hand out that ownership.

The key difference: with RSUs, the company simply hands you shares over time. With ESOPs, the company gives you the right to buy shares at a set price, and you only profit if the company’s value rises above that price.

Understanding equity & RSUs is part of building real career literacy, alongside the technical skills that get you hired in the first place. If you are working on the skills side of your career, explore HCL GUVI’s career development resources to find the right learning path for 2026.

Equity & RSUs at Startups

Startups almost always offer equity in the form of stock options, not RSUs.

• You get the option to buy shares at a fixed strike price, usually the company’s valuation when you join.
• Options vest over time, typically 4 years, so you earn the right to exercise gradually.
• If the company’s value rises above your strike price, that difference is your potential profit.
• If the company never grows or shuts down, your options can become worthless. This is the real risk behind startup equity & RSUs.
• Exercising options often costs money upfront, and in India this can trigger tax even before you sell anything.

Equity & RSUs at Big Tech

Big Tech companies like Google, Amazon, Microsoft, and Meta almost always use RSUs instead of stock options.

• RSUs are a promise of actual shares, given for free once they vest. There is no strike price and nothing to buy.
• A typical grant vests over 4 years, often 25% per year or monthly after the first year.
• Since these companies are publicly traded, RSUs have a real, known value the moment they vest, and you can sell immediately.
• RSUs are taxed as regular income at vesting, based on the share price that day.
• Big Tech often adds “refresher” RSU grants every year, which is how total pay grows even without a promotion.

Startup Equity vs Big Tech RSUs: Side by Side

How Vesting Schedules Work

Vesting is the timeline that decides when equity & RSUs actually become yours. Almost every company, startup or Big Tech, uses some version of this structure.

• Standard schedule: 4 years total, with 25% vesting after the first year (the “cliff”), and the rest vesting monthly or quarterly afterward.
• Cliff: If you leave before the 1 year cliff, you typically get nothing, even if your offer letter mentioned a large equity number.
• Refresh grants: At Big Tech, new RSU grants are often added every year, so your total unvested equity keeps growing while you stay.
• Acceleration: Some companies offer faster vesting if the company is acquired, but this is rare and worth asking about specifically.

Taxes on Equity & RSUs in India

Tax treatment differs significantly between the two types.

• RSUs: Taxed as salary income at vesting, based on market value that day. If sold later at a higher price, the extra gain is taxed separately as capital gains.
• ESOPs: Taxed at exercise, based on the difference between market price and strike price. A second tax applies later when the shares are sold.
• Foreign shares from companies like Google or Amazon also need to be reported under India’s foreign asset disclosure rules, even before you sell.

Tax rules change often, so consult a tax professional before your first vesting event.

Questions to Ask Before Accepting an Offer

• What is the current valuation, and how was it calculated?
• What is the vesting schedule, and is there a cliff?
• For startups, what is the strike price and the cost to exercise?
• What happens to my equity if I leave before it fully vests?
• For RSUs, will I get refresher grants, and how are they decided?

Common Mistakes to Avoid

• Only looking at the headline equity number. An offer that says “₹50 lakhs in equity” usually means the value spread across 4 years, based on assumptions that may not hold true. Always ask how that number was calculated.
• Not understanding the cliff. Leaving a startup after 10 months instead of waiting for the 1 year cliff can mean walking away with zero equity, even after a year of hard work.
• Ignoring the tax bill on ESOPs. Exercising stock options can trigger a tax payment before you have actually sold anything or made any real money, which can catch people off guard financially.

Conclusion

Equity & RSUs are not free money, but they are also not something to ignore. Startups use stock options that carry real upside and real risk. Big Tech uses RSUs that behave more like deferred salary in stock form. Understanding the vesting schedule, the tax timing, and the real value behind the numbers in your offer letter helps you make an informed decision, whether you are comparing two offers or just trying to understand what you already have.

FAQs

1. What is the difference between equity and RSUs? 

Equity is the broad term for any kind of ownership in a company. RSUs are one specific form of equity, where you are given actual shares for free once they vest. Stock options, another form of equity, give you the right to buy shares at a fixed price later.

2. Do startup employees usually get RSUs or stock options?

Startups almost always offer stock options (ESOPs) rather than RSUs. This is because most startups are not publicly traded, so giving employees free shares with a clear market value is not straightforward.

3. When do RSUs become real money?

RSUs become real shares on their vesting date, based on a vesting schedule set in your offer. At that point they have real value if the company is publicly traded, and you can typically sell them.

4. What happens to my equity & RSUs if I leave the company?

Anything unvested is usually lost when you leave. Vested RSUs remain yours. Vested stock options at a startup usually need to be exercised within a limited window after you leave, or they expire.

5. Are equity & RSUs taxed in India?

Yes. RSUs are taxed as income when they vest. Stock options are typically taxed when exercised, based on the gain over the strike price, with additional tax due later when the shares are sold.

6. How do I know if an equity offer is good?

Look at the vesting schedule, whether there is a cliff, the company’s valuation and how realistic it is, and for startups, the strike price. A large headline number with a long vesting period and high risk is very different from a smaller number in liquid Big Tech RSUs.