

Ask HN: Resources on startup questions/advice about equity? - bluetidepro

I'm starting to do more work with a startup and with that, they are starting to offer equity and talk through that side of things.<p>Does anyone know of a good resource where I can ask my concerns about the equity I'm currently being offered, risks I might be taking, and things such as equity dilution.<p>It seems to be a bit over my head currently, and I don't want to get scammed for being naive on the subject. I would feel much better about things if I was able to explain my situation to someone, and then get advice on it.
======
brianchu
A friend of mine was in the same situation, and I compiled some articles for
him. His situation had to do with negotiating equity, so keep that in mind.
Here they are:

<http://mba-mondays.pandamian.com/tableofcontents/>

Read from "Employee Equity" through "Employee Equity: How Much?"

Also: <http://www.payne.org/index.php/Startup_Equity_For_Employees>

An interesting perspective on on mathematical model of calculating how much
equity you "are worth": <http://www.paulgraham.com/equity.html>

The number that you get from Paul Graham's calculation tends to be higher than
what you usually end up getting.

A blog post on the process that someone went through in negotiating
salary/equity: [http://keen.io/blog/29904565692/how-i-negotiated-my-
startup-...](http://keen.io/blog/29904565692/how-i-negotiated-my-startup-
compensation)

This is entirely unrelated to negotiating equity, but is useful to know about
(this _only_ applies if you're living in the US): If/when you do get
stock/options your employers should inform you about an 83(b) election. This
is a tax form that allows you to save on taxes due to stock grants being
treated (at time of vesting) as income. Read about it here:
<http://www.fairmark.com/execcomp/sec83b.htm>. They'll probably tell you about
this and give you the forms for this if/when you get stock.

Concepts you should have a good handle on after reading those articles:
preferred stock (liquidation preference), common stock, dilution (and how it
occurs), stock options vs. giving stock, vesting (cliff). If you don't, do
more reading!

Above all else, remember that if your startup is pre-revenue, valuations are
_extremely_ tricky. Even the valuation of a pre-revenue startup as set by a
funding round can be unreliable, since it's essentially a made-up number
(made-up by VCs/angel investors). Consider that if even VC's and angel
investors barely know what they're doing, imagine how hard it is for employees
to properly place a value on their equity. A lot of it comes down to how
confident you are in the founders/management of the startup (which is often
how investors approach this problem). Hopefully you have worked with the
people long enough to get a good handle on how "determined" and "resourceful"
they are.

If you have any more questions, see my profile and send me an email (replace
the "|" with an @)

~~~
bluetidepro
Thank you so much for taking the time to write this! This really helps.

