From Seed to Series D: How Company Funding Stages Impact Your Stock Options

Stock options are one of the most enticing aspects of joining a startup because they let employees share in the upside they help create. However, their value, structure, and risk change dramatically between a seed company and a Series D “pre‑IPO” scale-up.

Carta’s 2022 Employee Stock Options Report captures both the promise and the pain: 69 % of startup employees say it is important for their company to help them understand equity. However, 55 % still find equity decisions stressful, and 46 % of in-the-money options expired unexercised in 2022.

This guide explains how equity packages evolve at every funding stage, what you can win (or lose), and what questions to ask before you sign.

How Stock Options Evolve Across Funding Stages

Seed Stage

At the seed stage, startups are beginning their journey, often with little more than a prototype, a founding team, and an ambitious vision. The risk here is extremely high—many startups never make it past this phase. However, the potential reward for early employees is also the highest.

Carta’s Q1 2024 State of Private Markets shows that of U.S. startups raising seed rounds in the first half of 2022, only 13 % closed a priced Series A within 24 months—a steep drop from the ~48 % long-run average reported by CB Insights. This illustrates the high failure rate at this stage.

Example: Early employees at Figma received sizable option grants at pennies per share. Many partially cashed out in 2021–23 secondary sales. After regulators blocked Adobe’s $20B acquisition in December 2023, Figma terminated the deal and confidentially filed for an IPO in April 2025. Early holders still stand to gain markedly if the IPO clears even a single-digit billion valuation.

To compensate for the uncertainty and limited cash resources, companies typically offer a larger number of stock options with a very low strike price. Although the ownership percentage might initially seem significant, employees must remember that future funding rounds will dilute their shareholding as more investors and employees come on board. If the company becomes successful, early stockholders could realize life-changing gains.

Series A Stage

By the time a company reaches a Series A funding round, it has typically proven that its product or service has market potential. While the risk remains relatively high, it is somewhat mitigated compared to the seed stage because there is now some evidence of customer demand and revenue potential.

Example: Stripe’s Series A funding in 2011 valued the company at approximately $100 million according to public announcements. According to Carta’s H1 2023 Startup Compensation Report, early engineers at similar companies typically received option packages representing 0.1–0.3% of the company. By 2023, Stripe’s valuation had reached around $50 billion in private markets, making those early options potentially worth millions, even after dilution.

Data Point: The median Series A funding round in 2024 was approximately $11.3 million, with post-money valuations around $44.8 million. According to Pear VC’s equity guide, senior hires at this stage typically receive 0.1–0.5% equity; mid-level roles get 0.01–0.1%

Stock options at this stage are still attractive, although the number of options granted usually starts to shrink, and the strike price tends to increase to reflect the company’s higher valuation. Negotiating a stock option package becomes more strategic here. Understanding vesting schedules, acceleration clauses, and company valuation caps is crucial to maximizing your potential upside while managing your risk exposure.

Series B Stage

Series B companies are focused on scaling operations, growing market share, and fine-tuning their business model. While there is still operational risk—scaling is not easy—the company has likely passed its survival test.

Example: Snowflake raised its Series B round in 2014. Mid-level engineers joining similar-stage companies typically received equity packages representing 0.05-0.1% of the company. When Snowflake went public in 2020 at a $70 billion valuation (SEC S-1 filing), equity from this period would have appreciated significantly despite dilution from subsequent funding rounds.

Data Point: According to Carta’s Q2 2024 Private Markets report, the median time between Series B and Series C funding is around 2.5 years. This means that employees should be prepared for a significant waiting period before realizing the full value of their options.

As a result, stock option grants become more conservative, offering fewer shares at a higher strike price than at earlier stages. Some companies might also begin offering restricted stock units (RSUs) instead of traditional stock options to align employee incentives with more predictable outcomes. Employees at this stage benefit from joining a more stable and established business but must temper their expectations regarding “home run” financial outcomes from stock ownership.

Series C Stage

At Series C, the company is usually focused on solidifying its market dominance, expanding into new territories, or preparing for a major liquidity event such as an acquisition or IPO. The company’s business model is typically proven, and profitability (or a clear path to it) is within reach.

Example: According to public funding announcements, DoorDash raised $250 million at a $4 billion valuation in August 2018—up from $1.4 billion just five months earlier. Senior managers joining at this stage likely received equity packages with strike prices reflecting this valuation. When DoorDash went public in December 2020 at a $72 billion valuation, employees who joined at Series C would have seen significant appreciation in their equity, though not at the scale of early employees who joined pre-Series A.

Data Point: Industry studies suggest roughly one-third of Series C companies eventually go public. The median time from Series C to IPO is approximately two to three years.

Accordingly, the risk for employees is significantly lower, but so is the potential stock option upside. Stock option packages at this stage are often dominated by RSUs or non-incentive stock options (NSOs) with higher strike prices. Some employees may have the opportunity to participate in secondary sales, allowing them to sell a portion of their vested shares before a public offering.

Joining at Series C offers greater certainty, but the potential for exponential wealth generation via equity is much more limited compared to earlier stages.

Series D and Beyond

Once a company reaches Series D and later stages, it often operates like a mature business preparing for an IPO or a major acquisition. The risk for employees is considerably lower. By this point, the company has a robust business model, strong revenues, and significant market traction.

Example: Instacart’s Series D funding in 2016 valued the company at approximately $3.4 billion. By the time Instacart went public in 2023, the valuation was nearly $10 billion. The return multiple for late-stage employees was much smaller compared to what earlier employees received, reflecting the standard pattern of equity appreciation across funding stages.

Data Point: The average employee equity grant at Series D+ companies is typically three to five times smaller than at Series A companies when measured as a percentage of company ownership.

The reward in terms of stock option upside is also the most limited. New hires typically receive RSUs rather than traditional options, providing them with more predictable, but smaller, equity compensation.

Liquidity events such as IPOs or acquisitions are usually on the horizon within one to two years, which can make Series D employment attractive for those seeking more immediate returns rather than long-term, high-risk bets. However, the “startup lottery ticket” aspect is largely gone by this stage.

A Visual Comparison of Equity Across Funding Stages

Key Takeaways

Understanding where a company stands in its funding life cycle is essential to evaluating your stock options. Earlier-stage companies offer more stock at lower valuations but carry much higher risk, while later-stage companies offer stability at the expense of sky-high upside potential.

Consider these practical guidelines:

1. Earlier Stages (Seed, Series A): Expect equity to potentially represent 50-200% of your annual salary in value if the company succeeds. However, recognize that the failure rate is high, and you should be comfortable with the possibility of your options becoming worthless.
2. Mid Stages (Series B, Series C): Equity might represent 30-100% of your annual compensation in projected value. The risk is lower, but dilution from future rounds will impact your potential returns.
3. Later Stages (Series D+): Equity typically represents 20-50% of annual compensation, but with much higher certainty of some return. The major upside potential has already been captured by earlier investors and employees.

Regardless of the stage, it’s critical to assess the full terms of your equity package, including strike prices, vesting periods, and potential dilution, and to think carefully about how they align with your financial goals and risk tolerance.

Conclusion

Joining a startup at any stage is a unique opportunity, but knowing exactly what you’re signing up for is important. Stock options can be a powerful wealth-building tool, but their ultimate value is deeply intertwined with the company’s trajectory and funding journey.

Whether you’re considering a scrappy seed-stage startup or a polished Series D powerhouse, ask tough questions about valuation, fundraising timelines, exit strategies, and liquidity options. Find out the company’s current 409A valuation (which determines your strike price) and understand how it compares to the price investors paid in the most recent funding round.

Remember that your total compensation should be evaluated holistically—considering salary, benefits, work-life balance, professional growth, and equity potential—to determine the right opportunity for your specific circumstances and risk tolerance.

The opinion of the author is subject to change without notice and must be considered in conjunction with relevant regulation, as well as subsequent changes in the marketplace. Any information from outside resources has been deemed to be reliable but has not necessarily been verified. Each individual has unique circumstances to which this information may or may not be relevant. Under no circumstances will this information constitute an offer to buy or sell and it does not indicate strategy suitability for any particular investor.