Equity offers can feel exciting — but too often they’re framed in vanity terms like “you’ll own X% of the company,” or if you’re lucky, “the value is $$$ today,” neither of which tells you about the fluid dynamics of that equity grant.

Equity is complex, can lack transparency, and returns are never guaranteed. What really matters is the economic value behind that percentage: the strike price, dilution risk, preferred share structure, and what you’d realistically take home in different exit scenarios. Most employees, let alone candidates in a process, either only get this information one time - or in some cases not at all, which leads to confusion, unrealistic expectations, and missed opportunities to negotiate for true value. This number changes over times, and it’s exceedingly rare for ongoing updates at the organizational level.

The smarter move? Shift the conversation from today’s ownership to financial outcomes.

If your company shares equity, here are some questions you should be asking yourself:

1. Why do I even want equity? Helps you understand your own motivation
2. What is my risk tolerance? Helps you make tradeoffs between cash and equity (you can’t have both!)
3. How much do I want to make upon an exit? (be careful from where you solicit guidance on this to make sure it’s realistic)
4. Can I contribute meaningfully to the company’s growth?
5. What are the economics of the equity being offered? You should know your number of options, vesting schedule, strike price, and preferred price. These will help you understand value today. Learn about the company’s future fundraising / exit plans so that you can estimate the value tomorrow.

As an employee (or prospective hire) you should approach equity offers with both optimism and critical thinking. That way you can make decisions that align with your goals, risk profile, and the real value you hope to achieve. There is tremendous upside potential economically, as well as day-to-day motivation in having a meaningful stake in the company you work for. Finding a shared language, and understanding the dimensions of your investment is worth working toward.

A more detailed discussion on the topic can be found in our archives - Equity: Values versus Vanity

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