Should I take cash or equity?
Cash has a guaranteed value (setting aside changes like inflation), while equity can end up being worth a lot more or less than anyone’s best guess. Cash is a commodity; equity in a company is not. A candidate’s response to equity vs. equity will align with what your company can offer.
Should I ask for equity?
Yes, you should be asking for equity, which is a type of ownership of a company based on the value of its shares. The compensation package at an early stage startup typically includes equity, as well as salary and benefits like health insurance. Rather, it usually comes in the form of stock options called common stock.
Can Stock options make you rich?
The answer, unequivocally, is yes, you can get rich trading options. Since an option contract represents 100 shares of the underlying stock, you can profit from controlling a lot more shares of your favorite growth stock than you would if you were to purchase individual shares with the same amount of cash.
What percentage equity should I ask for?
The longer after you join does the fundraising occur, the higher you should negotiate in terms of equity compensation. Overall, you should expect anywhere from 5\% to 15\% of the company.
Should you take an equity stake with compensation or equity?
If your special skills and knowledge have an impact on the sales of goods or services, an equity stake with compensation (as discussed above) is sometimes preferable. The harder your work the more your equity will be worth.
What should I know before accepting equity-based pay?
Before accepting an equity-based pay arrangement, you should determine if the equity is vested, or granted all up front. Vested equity is paid out in increments over time. If you are to receive a 2\% equity stake vested over the course of four years, you might receive 0.5\% per year along with your regular pay.
Should you choose cash or equity compensation for Your Startup?
Usually, the equity or cash compensation is split more heavily towards cash. However, at a startup, you may elect to have lower cash compensation for more equity compensation. As a veteran worker who has received cash and equity compensation over the past 22 years, let me share you my thoughts on how to choose.
Is it better to choose between salary or equity?
Before diving into the decision between salary and equity, it’s important to understand how they differ in the short-term, as well as how they may pay off down the road. Salary is the easier one, as it’s simply cash in your pocket today, which you can use how you’d like.