Offer letter is the initial written employment offer summarizing compensation, role, equity, and conditions — the first legal touchpoint between a startup and a new hire.

How it works

Typical contents: job title and manager, base salary, target bonus (if any), equity grant size and type (ISO/NSO/RSU), vesting schedule (often four years with one-year cliff), benefits eligibility, at-will employment statement, and contingency on background checks. The letter references separate PIIA and equity plan documents the employee must sign at onboarding.

Founders should grant equity only from an board-approved equity incentive plan with available pool. Offer letters should not promise acceleration, extended exercise, or refresh grants unless approved — those belong in option agreements or employment contracts.

International hires need jurisdiction-specific templates; contractors use consulting agreements, not employee offer letters.

Why it matters

• Founders: Standardize templates with counsel to move fast without creating one-off promises. Mismatch between offer letter and cap table admin causes retention crises at exit.
• Investors: Cap table diligence verifies that promised grants were documented and 409A-compliant. Missing IP assignment from early offer cycles is a red flag in acquisition legal review.

Common mistake

Quoting equity as “0.5% ownership” without specifying pre- or post-money fully diluted basis — percentages shift every round; share counts or option units are clearer.

Related ideas

See also equity incentive plan, PIIA, vesting cliff, and 409A valuation.