When I started hiring my first developers, I faced the same question every early founder does:

Should I offer a higher salary or include equity to developers?

At first, it felt like a simple math problem — trade short-term cash for long-term upside. But as I learned from my founders network, how you structure compensation says more about your startup’s culture and future than any fancy pitch deck ever could.

In this article, I will share with you what works, what doesn’t, and how equity-based pay can actually help you attract, retain, and motivate top talent — especially when cash is tight.

Equity vs Base Salary for Developers: What Founders Get Wrong

Too many founders think salary alone is what developers care about. That’s not true anymore.

Developers are smart. They’ve seen enough startups rise and fall to know that a paycheck covers rent, but equity builds wealth — if handled right.

On the flip side, founders sometimes romanticize equity, offering slices of a pie that might never be baked.

So where’s the balance?

The key is intentional structure. If you’re early-stage, your equity offer can’t just be a vague promise. It has to be clear, measurable, and tied to growth. Think of it as building trust — not just compensation.

How Does Equity Work in a Startup?

Before we go deeper, let’s talk basics — because even among founders, “equity” can mean different things.

In most startups, equity is offered in the form of stock options or restricted stock units (RSUs). The classic setup looks like this:

• Vesting period: 4 years

• Cliff: 1 year (nothing earned if they leave before 12 months)

• Strike price: The amount the employee must pay to buy each share

• Ownership: Usually between 0.05% and 1% for key early hires like developers

According to Comparably’s 2025 data, developers at companies that have raised under $1M often get between 0.1% and 1% equity — far more generous than late-stage companies (where shares shrink to fractions of a percent).

In short: the earlier someone joins, the higher the risk — and the bigger their ownership should be.

Pros of Equity-Based Compensation to Developers

To be honest, salary is safe. Equity is not. But that risk is exactly what attracts builders, not just employees.

When you offer equity-based pay, you’re doing more than saving cash. You’re creating psychological ownership. You’re saying, “You’re not just coding features — you’re helping build a company.”

Here’s what I’ve seen happen when equity is done right:

1. It attracts the right kind of talent

You don’t want developers who only chase salary bumps. You want the ones who say, “I believe in what we’re building.” Offering equity filters for that mindset automatically.

One LinkedIn founder, Kaitlyn Knopp, put it perfectly:

“You’ll never get another shot at the same ownership percentage you can negotiate in the early days.”

That’s what you’re offering — a once-in-a-lifetime upside, not just a paycheck.

2. It builds long-term loyalty

Salary raises are temporary motivators. Equity turns short-term effort into long-term commitment.

A dev who owns even 0.25% of your company will think twice before leaving mid-project. They’re now invested — emotionally and financially.

3. It helps you hire competitively

When you can’t outpay FAANG or big startups, equity lets you level the field. A smaller paycheck paired with real ownership can make your offer stand out among developers who’ve seen corporate fatigue and crave purpose.

Cons of Equity for Developers

Equity isn’t a magic bullet. It has its pitfalls — mostly around misunderstanding and over-promising. As a founder, the better you acknowledge it, the better aligned your developers would be.

1. Overvaluing your own equity

Founders often forget: 1% of nothing is still nothing. Unless you’re confident in your product, traction, and funding roadmap, be honest about what that equity might mean in real terms.

2. Poor communication about value

Too many employees leave startups without understanding how dilution works. Each funding round reduces their slice of the pie.

Transparency — showing your cap table, explaining vesting, and clarifying strike prices — prevents resentment later.

3. Equity doesn’t pay the bills

Even if your developer believes in your vision, they still have rent, families, and student loans. Offer a sustainable mix of salary + equity, not a “work for free” dream.

If you can’t pay them fairly today, they probably won’t stick around long enough to see tomorrow.

What’s the Average Equity Compensation in 2025?

Let’s bring some data into play.

According to Comparably, here’s what developers are seeing today:

And here’s the reality check: 60% of developers say they’re not satisfied with their current equity packages. That’s not because they hate ownership — it’s because many don’t understand its value or see it reflected in real outcomes.

So if you want your offer to stand out, make it tangible. Show them how their equity could translate if your valuation hits $50M or $300M. Give them a reason to believe in the math, not just the dream.

How to Structure an Equity Offer That Actually Works

Here’s a framework successful startup founders now use when designing equity or salary compensation packages for developers:

1. Mix equity with a livable base

If you’re early-stage, offer 70–80% of the market salary + meaningful equity. That keeps morale stable while giving upside potential.

2. Communicate vesting like a story, not a spreadsheet

Explain it like this: “After one year, you’ll own 25% of your shares. Every month after that, a little more becomes yours. By year four, you’ll fully own your piece of this company.”

That’s a story they can visualize — not a legal clause.

3. Protect fairness as you scale

Once funding increases, adjust salaries for parity, but let early joiners benefit from higher equity. They took the biggest risk, so they deserve the bigger upside.

4. Offer refresh grants

As your company grows, give top performers additional options or RSUs. It keeps them engaged beyond year four and shows appreciation for loyalty.

Equity for Software Engineers: Why It Still Matters

Let’s talk about developers specifically, because they’re at the heart of this debate.

On Reddit’s r/remotework, one user summed it up perfectly:

“Take the higher salary because you’re unlikely to ever see that equity.”

That’s the common view. But here’s the other side — the one I lean toward:

If you’re hiring mission-driven developers, the ones who want to build something that matters, equity gives them a stake in that mission. It’s not just about being paid — it’s about being included.

A Redditor who worked at a successful startup once said:

“You can’t win the lottery if you don’t play.”

That’s the truth. Equity is a bet — but it’s a bet worth taking when the odds are aligned: a solid founding team, a real product-market fit, and a fair deal.

What Founders Should Keep in Mind

If you want equity to work as a hiring advantage, here’s the mindset shift you need:

• Transparency beats hype: Don’t just say “we’ll all be rich one day.” Show realistic scenarios.

• Reward belief, not desperation: Don’t weaponize equity to underpay people who can’t afford risk.

• Make it part of culture: Talk about ownership in team meetings. Let people feel they’re building something they partially own.

I heard about a startup, one of their early engineers said, “I took less pay because I wanted to feel like I was building my own thing.”

That’s the energy you want in your team.

For Developers Reading This: When Equity Is Actually Worth It

Now, let’s flip the table for a second.

If you’re a developer reading this and wondering whether to take equity or salary, here’s my honest advice:

1. Only take equity when you believe in the founders

If they’re transparent, competent, and have a product with traction, or have a previous record of startup successes, equity can be life-changing.

2. Check your numbers

0.5% of a $10M valuation sounds great — but after three rounds of dilution, it might be closer to 0.15%. Ask about funding plans and total shares outstanding.

3. Balance risk with reality

If you can afford a temporary pay cut, equity makes sense. But don’t bet your rent money on it. The smart play? Take enough salary to live comfortably, and treat equity as a long-term upside, not a guarantee.

4. Make sure you’re aligned with the company’s vision

If you genuinely believe the startup could be a “big fish” — and you’re getting a decent chunk to make the compromise worth it — it’s okay to take the bet. Sometimes, that’s how careers (and fortunes) are made.

Final Thoughts

At the end of the day, this isn’t just about equity vs salary for developers. It’s about alignment.

Salary rewards your present. Equity rewards your future. The best founders — and the best teams — find a balance between both.

If your goal as a founder is to build a company people care about, not just work for, then giving them ownership isn’t generosity. It's a strategy. It’s how you turn employees into believers.

And if you’re a developer deciding whether to take that leap? Remember this: a higher salary can pay for today’s comfort, but the right equity can change your tomorrow only if you find the right deal.