Whether you’re joining an early-stage startup, with seed funding or a startup that’s already raised big chunks of venture capital, it’s important to know the (at the very least) basics of equity. Most startups will offer equity as part of the compensation package, coming in the form of stock options that allow you to buy shares at a prearranged price in the future.
1. Majority of startups never reach the market
You must keep in mind that a startups chances of succeeding are low, even if the idea/product is great there are often external factors at play that cause the failure. If a startup goes bankrupt whatever equity you had becomes worth nothing.
Do your own research into the company, every kid sounds perfect when described by their parent. Look into the company and its product, do you think this is something that can be successful.
2. Understand what equity is and how it works.
Option: You will be given the option to purchase the shares at a certain price that won’t change.
Vested: You will be given the share but will have to work for X amount of time to unlock the rights to it.
3. Ask questions.
Unless you are applying for a very high-up role, chances are you won’t be able to negotiate for anything other than the number of shares. Even so, you should be asking questions such as.
4. With the previous points in mind and it’s time to negotiate, remember that your salary is what you are living off right now. A potentially large pay-out in 5 years will not pay your rent today. Make sure you are not giving up a large amount of salary for a maybe payment later down the road.