Founders love to offer equity because it's cheap on the cash line. Engineers value it very differently depending on their situation, and getting the mix wrong costs you either runway or the hire. There's no universal answer here, and pretending there is loses people.
Key Takeaways
- Preference is circumstantial: some engineers trade cash for upside, others need the cash (The Pragmatic Engineer).
- Equity grants shrink fast by employee number: a median of roughly 1.5% for employee #1 to ~0.3% by #5 (SaaStr, citing Carta's State of Seed).
- For most non-founding hires, equity is a long-shot bonus, not the deciding factor.
- For remote and nearshore engineers, cash-forward comp usually wins, and flexible mixes win more.
Why There's No Single Right Answer
As The Pragmatic Engineer lays out, equity value depends entirely on circumstances: risk tolerance, financial situation, and belief in the company. Early employees take more risk and typically accept below-market cash for more equity. And grants drop quickly with each hire: SaaStr, citing Carta's State of Seed data, reports a median first-hire grant of 1.5%, falling to about 0.33% by employee number five.
For most hires past the first handful, equity is a lottery ticket attached to the offer, not the reason they say yes.
The Remote and Nearshore Angle
Equity is hardest to value when the engineer is outside the US: unfamiliar tax treatment, currency risk, and a longer, hazier path to any liquidity event. A senior engineer in São Paulo or Lima usually weights cash far more heavily than a Bay Area hire who's seen exits happen. That's not a knock on equity; it's a reason to lead with competitive cash for these roles and treat equity as upside.
| Hire | Likely preference |
|---|---|
| Founding / very early US | Equity-heavy, accepts lower cash |
| Mid-stage US | Balanced, equity as upside |
| Remote / nearshore senior | Cash-forward, equity as bonus |
This is one reason staff augmentation is clean: it's a straightforward cash arrangement with no equity to value, and the open-book rate (engineer take-home plus a flat $1,600–1,800 margin) is unambiguous. See available engineers.
Frequently Asked Questions
Do engineers prefer equity or cash?
It depends on the individual. Early US employees often take equity over cash; most later and remote hires weight cash more heavily. There's no universal answer.
How much equity do early employees get?
Per Carta's State of Seed data (via SaaStr), a median of roughly 1.5% for the first employee, falling to about 0.33% by employee number five. It shrinks fast as the company grows.
Should I offer equity to remote or nearshore engineers?
You can, but lead with competitive cash. Equity is harder to value across borders (tax, currency, liquidity), so most weight it lightly. Treat it as upside.
The Bottom Line
Stop treating equity as a universal sweetener. Match the mix to the hire: equity-heavy for the earliest US believers, cash-forward for most others, and especially for remote and nearshore engineers who can't easily value a far-off, foreign-currency upside.
Roberto Espinoza is CEO of Ruzora, which helps US startups hire pre-vetted senior LATAM engineers in 72 hours. See available engineers.
