Understanding Startup Equity

Why is it important to understand startup equity when considering a job offer?

• It guarantees a higher position in the company.

• It ensures you know the company's mission.

• It helps in negotiating a better salary.

• It allows you to assess the fairness of the equity offer.

What is a key difference between stock options and restricted stock?

• Restricted stock is granted without payment, while stock options require purchase.

• Stock options have tax implications upon exercise, while restricted stock does not.

• Stock options are free, while restricted stock requires payment.

• Restricted stock is always more valuable than stock options.

How can you determine the value of the equity being offered?

• By calculating the number of shares outstanding.

• By comparing it to the equity offered by other companies.

• By checking the company's stock price on the stock exchange.

• By asking for the company's latest 409A valuation.

Why might a company be reluctant to disclose its 409A valuation?

• It is not relevant to employees.

• It is confidential information.

• The valuation is always changing.

• The valuation might be lower than expected.

What is a 'cliff' in the context of vesting schedules?

• A bonus period where extra shares are granted.

• A sudden drop in the value of shares.

• A time frame before any shares or options vest.

• A period after which all shares are vested.

How does a vesting schedule typically distribute shares over time?

• All shares are vested at once after the cliff.

• Shares are vested gradually over the vesting period.

• Shares are vested only at the end of the vesting period.

• Shares are vested randomly throughout the period.

What are the two main exit strategies for cashing out equity in a private company?

• Stock splits and dividends

• Secondary markets and buybacks

• IPOs and acquisitions

• Mergers and acquisitions

What is a potential risk of accepting a job offer with a high equity component?

• The company will not pay any salary.

• You will have to work longer hours.

• The equity will always decrease in value.

• The company might not have an exit event.

What happens during the 'lockdown period' after an IPO?

• The company's stock price is fixed.

• Employees are restricted from selling their shares.

• The company buys back shares from employees.

• Employees can sell their shares immediately.

What should you consider when evaluating if a startup's equity offer is worthwhile?

• The company's current stock price.

• The company's office location.

• The likelihood of the company reaching an exit event.

• The number of employees in the company.