It's placement season, and every week another batch of offer letters goes out.
A question I'm getting often right now is some version of this:
“I’ve got two offers: one pays more in cash, usually from a large, established company while the other pays less, but throws in equity at an early startup, and a founder who's said it could be worth a few crores in four or five years.
Which one to go for?”
Almost everyone leans towards the in hand cash salary.
And that makes sense, but sometimes we look back and realise it was the wrong move.
So here's how I think about it now:
The first thing worth knowing is that the word "equity" covers two very different things.
A large listed company, a Google or a Meta or an Infosys, pays part of your package in shares that trade on a stock exchange.
You can sell them once they vest, they rise and fall with the market, and plenty of employees have built real wealth just by holding on.
If it's a startup, it helps to know what an option is before you fall for the number.
An option is the right to buy a share later, at a price fixed today.
It vests, which means you earn it slowly instead of all at once.
And in India, the day you exercise, you owe tax, at your slab rate, on the gap between what you paid and what the share is notionally worth that year for a share you still can't sell to anyone.
So it's a bit more involved than "I might make a few crores."
There's a multi-year commitment in there, with a couple of cash and tax decisions buried inside it that most people never read down to.
I'm telling you all this so you go in with your eyes open, because the upside is real, and there's a lot more of it in India now than there used to be.
When Walmart bought Flipkart in 2018, around 100 employees became dollar-millionaires, some of whom had joined early in fairly ordinary roles.
When Flipkart spun off PhonePe in 2023, it paid out 700 million dollars to roughly 19,000 employees.
When Swiggy went public in late 2024, 500 of its people became crorepatis.
And it isn't just the giants.
Razorpay has bought back employee stock four times, putting real money in the hands of close to 2,000 of its people.
Zerodha runs a buyback almost every year.
These are companies that were tiny or where people were skeptical about joining when they started out.
There's also something you need to consider in your calculations.
Taking a stake in an early company is a way of saying you believe in where it's going. It ties your own outcome to the company's, and that changes how you work.
You stop thinking like someone who's paid to finish tasks and start thinking like someone who owns a piece of the result.
The best early employees I've known took the equity because they were convinced about the company and wanted skin in the game, long before the math looked obvious.
That conviction is worth something, to you and to the founder who notices it.
What you do have to do is respect the odds.
Most startup equity ends up worth little, simply because most startups never reach the kind of exit that pays employees.
That's the nature of a bet made with conviction.
You're buying into an outcome you believe in, knowing how often it doesn't come off.
So the question I'd sit with has two parts.
First, can you afford the bet?
If the lower cash number covers your rent, your expenses, whatever you send home, and still lets you live the way you want for two years without ever counting on the equity, then the equity is a real bet sitting on top of a salary you can live on.
Take it, and enjoy the upside if and when it comes.
If you need the higher number to live the way you want, the equity is being funded out of your rent money, and that is a trade off you should be willing to make.
Second, would you invest in this company with your own money?
Because that is what you are essentially doing with lower cash and taking equity.
If you truly believe that the market, the company and its founders can make it a unicorn startup in the long run and your equity will be worth a lot more than what you are sacrificing in cash today, then the bet truly makes sense.
Else it doesn’t.
Hit reply if you have made that choice before. And which one did you choose?
I read every reply.
Swati