Got laid off from a startup - what should I negotiate?

Counteroffer · Answers · severance Source: https://trycounteroffer.com/answers/got-laid-off-startup

Short answer: At a startup, focus negotiation on three things: equity treatment (acceleration of unvested grants and extended option exercise windows can be worth more than cash), healthcare bridge (COBRA at startup family plan rates is expensive), and broad release carve-outs. Don't expect cash severance above 4-12 weeks for ICs or 3-6 months for senior leaders, but do push hard on equity and exercise windows. Startup severance is highly negotiable because there's no institutional HR policy to enforce.

Startup severance reality

Startups generally offer less severance than mature tech companies. The reasons are practical and structural:

Cash is constrained; founders are sensitive to runway
No formal HR policy enforces consistency
Fewer internal precedents means each negotiation is individual
Investor pressure and board oversight affect what leadership feels they can offer

The flip side: startup severance is more negotiable than corporate severance because no policy machine constrains the conversation. You're often dealing directly with the founder or executive who can authorize exceptions.

For most startup employees, the initial offer will be at or near the company's minimum. The path to better is direct conversation about specific items, not procedural negotiation.

Equity is the main event

For startup employees, equity treatment at separation often exceeds the cash component in value. The key items:

Accelerated vesting of unvested grants. Default: cancel at termination. Negotiable: 6-12 months of acceleration for senior leaders, less for ICs.

Extended option exercise windows. Default: 90 days post-termination. Critical for ISOs because the 90-day cutoff converts to NSOs with significant tax implications. Negotiable: 3-10 years.

RSU treatment for double-trigger grants. Time-vested but unpaid RSUs (waiting for liquidity event) can be preserved with negotiation. Default treatment varies wildly by plan.

Right of First Refusal modifications. Many startup equity grants include ROFR (the company can repurchase at fair market value or cost). At layoff, modifications to ROFR can enable selling shares to fund tax obligations.

Founder/early employee considerations. If you have founder shares or early restricted stock, treatment differs from later-stage employees. Acceleration provisions, vesting cliffs, and right-of-first-refusal may all need attention.

Worked example: VP Engineering at a Series C startup with 100,000 options at $5 strike, current 409A of $25/share. Vested 75,000, unvested 25,000.

Default 90-day exercise window: must exercise 75,000 × $5 = $375,000 in 90 days. Most employees can't.
Extended 7-year exercise window: keep options alive; exercise closer to liquidity event when value is clearer.
Acceleration of 12,500 unvested (50% of unvested): additional $250,000 of option value preserved.

The exercise window extension alone can be worth more than the cash severance. Always negotiate it.

Cash benchmarks by stage

Realistic cash severance ranges at startups:

Stage	IC cash severance	Senior leader cash
Pre-seed/seed (< $5M raised)	0-4 weeks	4-12 weeks
Series A ($5-25M raised)	2-6 weeks	8-16 weeks
Series B ($25-75M raised)	4-8 weeks	12-24 weeks
Series C-D ($75-300M raised)	6-12 weeks	16-26 weeks
Late-stage private ($300M+ raised)	8-16 weeks	26-39 weeks
Pre-IPO	12-16 weeks (approaches Big Tech)	39-52 weeks

These ranges represent typical practice. Aggressive companies sometimes pay less; founder-led companies with strong people values sometimes pay significantly more.

When negotiating, anchor at the high end of the range for your stage. Cite peer companies at similar stage where you can.

Healthcare considerations

Startup employees should pay particular attention to healthcare continuation:

Startup health plans often have smaller risk pools, which means full COBRA premiums are higher (sometimes $2,500+/month for family coverage)
3-month COBRA bridges are common but often insufficient
Senior leaders should push for 6+ months
A cash equivalent option (grossed up for tax) can be more flexible than direct COBRA payment

Some startups offer pre-tax COBRA via continued employer arrangement; others switch you to direct payment. The structure affects after-tax cost significantly.

Pre-IPO specific issues

If your startup is approaching IPO at the time of layoff, several special considerations apply:

Lock-up applicability. If the company IPOs while you're under a lockup as a former employee, you may face restrictions on sales. Negotiate exemption or expedited lockup release.

Tender offer participation. Many late-stage private companies do periodic tender offers (employees sell shares to designated buyers). Former employees often lose eligibility. Negotiate continued participation for one cycle.

409A valuation timing. Strike prices are set based on 409A. Recent funding rounds can spike 409A, making option exercise more expensive. Time exercise decisions thoughtfully.

Public company SEC restrictions. Once the company goes public, you're subject to insider trading restrictions for some period. Plan around them.

Selling shares to fund tax obligations. Equity acceleration creates tax events. If the shares are private and not liquid, you may face a tax bill with no cash to pay it. Negotiate plan modifications to allow sales when liquidity arrives.

What to do next

If you want a delivered review of your specific startup severance, with focus on equity acceleration, exercise window extensions, and stage-appropriate cash benchmarks, we deliver one in 24 hours for $199. See Severance Review.

Sources

Carta startup compensation and severance data
Pave market benchmarks
IRC § 422 (ISO requirements)
409A regulations (Treas. Reg. § 1.409A-1)

Get your contract reviewed

If you want a delivered review of your specific document with cited authority and counter language, see https://trycounteroffer.com/severance.

Last updated: Sun May 31 2026 00:00:00 GMT+0000 (Coordinated Universal Time)

Counteroffer is a contract analysis service, not a law firm. This page is informational, not legal advice.