How much an employee makes in an IPO depends on their strike price, the share price after listing, and how much of the grant has vested. Outcomes range from a disappointing debut, as with Deliveroo, to multi-million-dollar payouts. Insiders generally wait out a lockup period of 90 to 180 days before selling.
On a day-to-day basis, running your startup involves tasks like writing employment offer letters or deciding how to compensate startup interns. In the long run, however, you’ll need to keep an eye on your company’s exit strategy. Here, the two main options are either to sell a startup in an M&A transaction, or to take the company public in an IPO (initial public offering). During an IPO, a privately owned corporation becomes publicly traded, allowing members of the public to purchase shares. IPOs are also an opportunity for the startup’s employees to exercise stock options that they were offered when joining the company. Stock options are the most common way that startups compensate employees without paychecks. IPO activity rises and falls with the market. The U.S. saw a record year for IPOs in 2020 and another very busy year in 2021. After a slow stretch, Renaissance Capital counted 202 U.S. IPOs raising $44.0 billion in 2025, a four-year high. But what can startup employees expect when their company goes public? If you’re contemplating “How much do employees make from IPOs?” or “What does an IPO mean for employees?”, keep reading for the answers.
Do employees make money in an IPO?
With a high enough share price, a startup’s employees could become a lot richer by selling their stocks. This is especially true for employees who joined in the company’s early stages, and who usually own a larger percentage of the business. But if one IPO could make workers wealthy, another could be a major disappointment. For example, the IPO of the food delivery app Deliveroo was called “the worst IPO in London’s history” when the company’s stock price plunged by 26 percent in one day of trading. The factors that tend to make an IPO successful include a large market of potential customers, a unique value proposition, intriguing products and services, and strong cash flow and revenue. However, even the most promising startup IPO can be impaired by external factors such as market conditions, the performance of competitors, and too much media hype.
What happens to employees in an IPO?
In an IPO, employees have the option to hold or sell the company shares they own. However, employees and other company insiders (e.g. founders and investors) who want to sell shares generally need to wait until the end of the “lockup period,” which typically lasts from 90 to 180 days.
More specifically, employees have the option to purchase company stock at a specified price per share, known as the “strike price.” This amount is set at the time the employee receives the stock option (e.g. when joining the company). If the company’s stock price has risen above the strike price, employees can then sell their stock at a profit. One important question is when employees should exercise their stock options, because the tax treatment of exercising before or after an IPO can differ a great deal. The rules vary by option type, holding period, and country, so confirm the timing with an accountant or tax adviser before you exercise. You also need to weigh any potential tax savings against the possibility that you could earn more by exercising at a different time. Even before an IPO, there are ways for employees to trade their company stock. For example, Nasdaq Private Market is a platform that lets investors purchase pre-IPO shares. This concept is known as a “tender offer,” in which private buyers can invest in the company before it goes public.
How much do people make on an IPO?
In an older HackerNews thread titled “How much did you make from your IPO?”, a few startup employees shared their experiences when their companies went public. The stories here are anecdotal, unverified, and not representative, and the figures are from the time of the thread, so treat them as illustrations rather than benchmarks:
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- Employee #1: One of the first 5 employees at a Y Combinator “unicorn” (i.e. a startup with a valuation over $1 billion). The initial job offer was for 0.5 percent of the company’s shares, although the employee departed the company before all of these shares vested. According to the employee, the shares are worth $1.5 million pre-IPO, with an estimated value of $3 million to $5 million post-IPO. While at the company, the employee lived in San Francisco and earned a six-figure salary.
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- Employee #2: One of the first 30 employees at a startup with a valuation over $1 billion. The employee received $700,000 (post-taxes) after the company’s IPO, and expects to earn another $1.2 million in grants and restricted stock units (RSUs) over the next several years. The employee started as a mid-level developer, and that salary has since more than doubled.
- Employee #3: The 13th employee at a startup with a valuation over $1 billion. The employee accepted a junior non-technical role, with a four-year vesting schedule worth $1.05 million. After leaving the company, the employee accepted a tender offer to purchase some of the employee’s stock.
Of course, these employees were all fortunate enough to work for “unicorns” with very high valuations, making these stories atypical. Most startup employees will see far less money when their company goes public. However, by working hard and choosing the right employer (along with a bit of luck), there’s no reason that workers can’t enjoy a successful IPO.
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Frequently asked questions
Do employees make money in an IPO?
They can, especially early employees who own a larger percentage of the company. But an IPO can also disappoint, and market conditions, competitor performance, and media hype can hurt even a promising listing.
What is a strike price?
It's the price per share an employee pays to buy stock under an option, set when the option is granted. If the stock price rises above it, the employee can sell at a profit.
When should employees exercise stock options for tax purposes?
It depends on the option type, your holding period, and where you live. Tax rules vary, so confirm the timing with an accountant or tax adviser before you exercise.
Can employees sell shares before an IPO?
Sometimes. In a tender offer, private buyers can purchase shares before the company goes public, and Nasdaq Private Market is one platform for pre-IPO shares.
