Restricted Stock Units at a Pre-IPO Company: What Vesting Actually Means for Your Net Worth

"Do you include your unvested RSUs in your net worth?"

That question shows up constantly among people working at private, pre-IPO companies, phrased almost exactly that way on forums like Blind. It's a harder question than it sounds, because at a private company, "vested" doesn't mean what it means everywhere else.

At a public company, once your RSUs vest, you own real shares you can sell on the open market within minutes. At a pre-IPO company, your RSUs can be fully time-vested and still be worth exactly zero dollars you can access, because there's no market to sell into. Understanding the difference is the whole ballgame for deciding what belongs on your personal balance sheet.

Single-trigger vs. double-trigger vesting

Public company RSUs are usually single-trigger: they vest based on time alone, typically over four years with a one-year cliff, and once vested, the shares are yours to sell.

Most pre-IPO companies use double-trigger vesting instead. There are two separate conditions, both of which must be satisfied before you actually receive shares:

1. Time-based vesting (trigger one), the standard four-year, one-year-cliff schedule most people are used to.
2. A liquidity event (trigger two), meaning the company goes public, gets acquired, or has some other qualifying event that creates an actual market for the shares.

Until both triggers fire, nothing settles. You can have four full years of time-based vesting complete and still hold nothing you can sell, spend, or borrow against, because the second trigger, the IPO or acquisition, hasn't happened.

This structure exists for a practical tax reason. Employees at private companies can't sell shares to cover the tax bill that comes due when RSUs vest, because there's no buyer. Single-trigger vesting at a private company would leave employees owing real income tax on shares they can't turn into cash to pay it. Double-trigger vesting defers both the share delivery and the tax bill until an actual liquidity event makes the shares sellable.

When the second trigger fires, everything lands at once

Here's the part that catches people off guard. When a pre-IPO company finally goes public or gets acquired, every tranche of RSUs that already cleared trigger one (time-based vesting) settles simultaneously. If you've been at the company three years when the IPO happens, three years of accumulated, time-vested RSUs deliver in a single event.

At that moment, the full market value of every delivered share becomes ordinary W-2 income, all at once, typically withheld at the flat federal supplemental wage rate (22% up to $1 million in supplemental wages in a calendar year, 37% above that, per IRS Publication 15 guidance on supplemental wage withholding). That withholding rate is a payroll default, not your actual tax rate, and for many people it undershoots what they'll actually owe once the shares are added to the rest of their income. It's common for employees to end up owing more at tax time than what was withheld at settlement.

So what should count in your net worth today?

There's no single right answer here; it depends on how conservative you want your number to be, and the vetting for this topic turned up genuinely split opinions among people living through it. But a few principles hold up well.

Time-vested but not yet delivered shares at a private company are not an asset you can spend, borrow against, or sell. They're a real economic interest, but an illiquid and conditional one. Including their full paper value in your net worth the same way you'd include a brokerage balance overstates how much of your financial position you actually control right now.

A reasonable approach: track them separately, and only at a meaningful discount, or not at all until the second trigger is scheduled. Some people exclude unvested and undelivered pre-IPO equity from net worth entirely, the same conservative instinct that leads people to exclude the death benefit of a life insurance policy or money they expect to inherit. Others include it at a steep discount (30-70% off the last private valuation, reflecting both illiquidity and the real chance the company's value drops or the IPO never happens) to acknowledge it's real without pretending it's cash.

Once shares actually deliver, they belong in your net worth at market value, just like any other stock. The moment the second trigger fires and shares hit your brokerage account, the uncertainty that justified excluding or discounting them is gone. At that point they're no different from RSUs at a public company: an asset, valued at what they'd sell for today, not what you hope they'll be worth someday.

The unpaid tax bill on those shares is a liability the moment they settle, even before you file. If your company withheld 22% and your actual marginal rate is 32% or higher, you owe the IRS the difference. That gap is a real liability sitting against your new asset, and ignoring it overstates your net worth right when the number matters most.

A worked example

Sam joined a private company as employee number 40. Over three years, RSUs worth $600,000 at grant vest under the time-based schedule (trigger one). The company still hasn't gone public.

Before the IPO: Sam's net worth statement shows $0 for these RSUs, or, if Sam wants to acknowledge them without overstating certainty, a heavily discounted placeholder like $150,000 (a 75% discount reflecting that the company could be acquired for less than expected, could fail to go public at all, or could take years longer than hoped).

The IPO happens. All three years of time-vested RSUs settle at once. At the IPO price, the shares are worth $900,000 (the company grew in value since grant). That $900,000 is immediately taxed as ordinary income. The company withholds 22%, or $198,000. Sam's actual marginal tax rate, once this income stacks on top of salary, works out closer to 35%, meaning the real tax bill is roughly $315,000, a $117,000 shortfall beyond what was withheld.

Sam's net worth statement, the day after the IPO: $900,000 in newly delivered, sellable shares (an asset, same as any brokerage holding), minus a roughly $117,000 estimated tax liability for the withholding shortfall that hasn't been paid yet. Net effect on net worth: about $783,000, not the full $900,000, and certainly not the $600,000 grant-date figure from three years earlier.

That gap between the headline number and the honest number is exactly why "do you count your RSUs" doesn't have a one-line answer. The honest number changes shape at every stage: illiquid and uncertain before the second trigger, a real asset paired with a real tax liability the moment it fires.

The concentration risk doesn't go away at settlement

Once shares deliver, a new problem starts: a large share of your net worth is now sitting in a single company's stock, often the same company that pays your salary. That's a different question from whether to count the shares at all, and it deserves its own decision framework, covered in the RSU and ESPP playbook on selling and diversifying once shares are actually liquid.

Steady Wealth's screenshot import can pull in a brokerage balance the moment shares actually settle and become sellable, which is also a natural point to log the estimated tax liability as a manual account so the two show up together instead of the asset side telling only half the story.

Frequently asked questions

Should I include unvested RSUs in my net worth at all?

Most conservative approaches exclude unvested RSUs entirely, the same way you'd exclude a job offer you haven't started or money you expect but haven't received. Time-vested-but-undelivered RSUs at a pre-IPO company sit in a gray zone: real economically, but illiquid and conditional on an event that may never happen or may happen at a lower valuation than expected. If you include them, do it at a meaningful discount and label them clearly as speculative, not liquid.

What happens to my RSUs if the company never goes public?

It depends entirely on the plan terms, and this varies by company. Some plans include an expiration window (commonly five to seven years) after which time-vested-but-undelivered RSUs are forfeited if no liquidity event has occurred. Others extend indefinitely or convert on an acquisition instead of an IPO. Read your specific grant agreement rather than assuming; this is one of the most consequential details in the whole arrangement and it's easy to overlook when you're excited about a new job offer.

Why can't I get an 83(b) election to lock in a low valuation on my RSUs?

The 83(b) election only applies to restricted stock awards (RSAs), where you're issued actual shares at grant that are held in escrow until vesting. RSUs are structurally different: no shares actually exist until they vest and deliver, so there's no property to file an 83(b) election on at grant time. If your offer includes RSAs instead of RSUs, the calculus is different and an 83(b) election may be worth discussing with a tax professional within the required 30-day window.

How do I estimate the discount to apply to unvested pre-IPO equity?

There's no formula everyone agrees on, but a reasonable range people use is discounting the last private valuation by somewhere between 30% and 70%, with the size of the discount reflecting company stage (later-stage, profitable companies closer to IPO warrant a smaller discount than early-stage ones), how liquid secondary markets for the stock are, if any exist at all, and your own risk tolerance for counting speculative wealth. The honest answer is that any number here is a guess dressed up as precision, so treat it as directional, not exact.

Does the tax withholding shortfall on RSU settlement really matter that much?

Yes, and it surprises a lot of people. The 22% federal supplemental withholding rate applies regardless of your actual income level, so anyone whose marginal tax rate is above 22% (which includes most people earning six figures once the RSU income stacks on top of salary) will owe more than what was withheld. Setting aside cash or planning a partial share sale specifically to cover the gap, rather than assuming withholding covered it, avoids an unpleasant surprise the following April.