What a stake is actually worth.
WHAT YOU MAY BE OFFERED
- Share options: the right to buy at a fixed price
- Restricted shares: shares granted, vesting over time
- Phantom arrangements: cash tied to value
WHAT VESTING MEANS
Earning the entitlement over time.
WHAT A TYPICAL SCHEDULE LOOKS LIKE
An initial period before anything vests, then gradual vesting.
WHAT HAPPENS IF YOU LEAVE BEFORE THAT
You get nothing.
WHAT TO ESTABLISH
The number of shares The total outstanding The strike price, for options The current valuation The vesting schedule What happens on leaving How long you have to exercise after leaving
WHY THAT LAST POINT MATTERS ENORMOUSLY
A short exercise window can force an expensive decision or forfeiture.
WHAT EXERCISING COSTS
The strike price, multiplied by shares, plus possible tax.
WHY THAT MATTERS
You may be unable to afford your own options.
WHAT LIQUIDATION PREFERENCES DO
Pay investors before common shareholders.
WHAT THAT MEANS
Common shares can be worth nothing in a modest sale.
WHAT TO ASK
Whether preferences exist, and their multiple.
WHAT TO VALUE EQUITY AT
Something well below the headline figure.
WHAT TO NEVER DO
Accept substantially reduced salary for equity you have not evaluated.
WHAT TO TAKE ADVICE ON
Tax treatment, which varies.
