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Equity is a critical part of a Product Manager’s compensation, often worth more than salary alone. The four most common types you'll encounter are:
1️⃣ NSOs: Stock options that require you to buy shares and pay tax when exercised.
2️⃣ ISOs: Similar to NSOs but with potential tax advantages if held long enough.
3️⃣ RSUs: Shares granted over time, often in public companies, with predictable value.
4️⃣ ESPPs: A voluntary way to buy discounted shares through payroll deductions.
Each type comes with different tax rules, risks, and upside. Understanding vesting schedules (like cliffs, graded, or performance-based) is just as important , equity only matters once it's vested and sellable.
For Product Managers, equity isn't just a financial bonus, it's a signal of trust, long-term alignment, and shared ownership in the success of the product and the company.
While base salary and annual bonuses provide short-term financial security, equity compensation gives Product Managers a direct stake in the upside they help create. Whether you're launching a new feature that drives user growth or steering long-term product strategy, equity ensures you benefit from the value your work generates.
The role of a Product Manager is inherently cross-functional and strategic. You’re expected to think long-term, balance business and user needs, and deliver outcomes that move the needle. Equity reinforces this mindset by rewarding long-term value creation, not just sprint velocity.
In startups, it can be the promise of a future payout tied to high growth. In public companies, it may be a predictable reward tied to company stock performance. Either way, equity helps align your priorities with those of the founders, the board, and the executive team, and that overarching alignment can open doors to greater influence and leadership.
If you're only negotiating for salary, you're leaving long-term value on the table. Depending on the equity type, vesting schedule, and company growth trajectory, your equity package can be worth tens or even hundreds of thousands of dollars, or in the right conditions, much more.
Whether you're joining a Series A startup or a global tech giant, equity is a meaningful part of the offer and it's one you should understand just as well as your base pay.
Unlike many other roles, Product Managers are frequently eligible for equity grants, sometimes even more so than engineers or designers at the same level, but not all equity is created equal. Depending on the company stage, location, and compensation philosophy, you may receive one or a combination of the following four types.
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NSOs give you the right to buy company shares at a fixed price (called the strike price) after a set vesting period. You can choose whether or not to exercise them, but they’re not actual shares until you do.
NSOs are the most flexible stock option and can be granted to employees, contractors, or advisors. They're commonly used at startups and private companies where liquidity may be years away.
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What to Watch:
Want to learn how NSOs work and when to exercise them? Read our NSO guide.
ISOs are a tax-advantaged version of stock options that are only available to employees. Like NSOs, they let you buy shares at a set price, but with the potential for capital gains tax treatment instead of ordinary income.
ISOs are common in early-stage startups where equity is a key part of employee compensation. They reward employees who stay long-term and hold their shares after exercising.
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Curious about tax benefits and holding periods for ISOs? Explore our ISO guide.
RSUs are grants of company shares that vest over time, you don’t have to buy them. Once vested, the shares are yours. This is the most common equity type in public tech companies.
RSUs are simple to understand and guarantee some value, unlike options, which only pay out if the company grows. They’re ideal for late-stage startups and public companies where liquidity already exists.
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Need to understand how RSUs vest and when they’re taxed? Check out our RSU guide.
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ESPPs let you buy company shares at a discount, often 5–15%, using money automatically deducted from your paycheck. Many plans offer a “lookback” feature to apply the discount to a previous low point in price.
ESPPs are a voluntary benefit offered by many public companies. They allow employees to invest in the company’s success and potentially earn immediate upside via the discount.
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What to Watch:
Thinking about joining your company’s ESPP? Read our ESPP guide to get started.
Together, these four types of equity represent different approaches to employee ownership. Some are higher risk with higher upside (like NSOs and ISOs), while others offer more predictable value (like RSUs and ESPPs). Understanding the mechanics of each one helps you assess offers, compare opportunities, and plan for the future with more confidence.
It’s one thing to be granted equity as part of your total compensation package, it’s another to actually own it. That’s where vesting schedules come in.
Vesting determines when your equity becomes yours. Until a grant vests, you don’t fully own it, and if you leave the company early, you may walk away with nothing or only a fraction of your original offer.
For Product Managers, especially those working on long-term roadmaps or high-impact initiatives, understanding how vesting works is key to planning career moves, financial decisions, and timing around liquidity events.
Most equity follows a time-based vesting schedule, but not all schedules are created equal. Here are the three most common formats:
📅 Cliff Vesting
You don’t receive any equity until a set period (often one year) has passed, then a large portion vests all at once. It’s often used to ensure commitment from early employees or new hires.
📈 Graded Vesting
Equity vests gradually over time (e.g., monthly or quarterly) after an initial cliff. A typical schedule is “4 years with a 1-year cliff,” meaning you earn 25% after one year, then the rest monthly over the next three.
🏁 Performance-Based Vesting
Instead of time, equity vests when specific milestones are met, like launching a product, hitting revenue targets, or completing a fundraising round. This type is more common in founder or executive grants.
Vesting schedules can significantly influence how much equity you actually receive. For example:
Vesting applies to all major equity types, NSOs, ISOs, RSUs, and even some ESPPs (though ESPPs typically have shorter holding periods instead). The value of your equity only becomes real when it’s both vested and sellable.
🗓️ Learn how vesting really works in The Product Manager’s Guide to Equity Vesting and Ownership Timelines
Equity can be one of the most valuable, and most misunderstood, parts of your compensation as a Product Manager. Whether you’re joining a fast-moving startup or a publicly traded tech giant, understanding what kind of equity you’re receiving, how it vests, and what it could be worth is critical. Here’s how to make the most of it:
1️⃣ Know what you’re getting
Don’t just ask how much equity, ask what kind. Is it NSOs, ISOs, RSUs, or ESPPs? Each comes with different value, timing, and tax treatment.
2️⃣ Understand your vesting
Know when your shares become yours, and what happens if you leave early.
3️⃣ Think long-term
Don’t evaluate offers on salary alone. A thoughtful equity package can be life-changing if the company succeeds.
4️⃣ Keep learning
Use the knowledge from this article as a starting point, and dive deeper into the specific equity type you’ve been offered.
Whether you’re negotiating your first Product Manager role or stepping into a Director position, equity literacy helps you make smarter career decisions and avoid costly surprises.
👉 Ready to go deeper?
Check out our detailed guides on NSOs, ISOs, RSUs, and ESPPs to learn how each one works and how to use them to your advantage.
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