
Ask HN: What exactly does the equity % on a job offer mean? - jeremy_k
I'm not asking for obvious answer of a % stake of ownership but looking for slightly more details.<p>If the offer says 0.5% - 1.0% is that upfront? Is that over time? Is it different for any company? What happens if you go through funding?<p>I'm trying to gather some knowledge solely for the purpose of not being nieve to how equity works in start-ups. Any additional read would be gladly appreciated.
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JohnHaugeland
So, the percent isn't really enough to get answers; there's going to be a lot
more information here.

But generally speaking, in American tech companies, the current norm is
something like "a four year monthly vesting with a one year cliff."

If you have that, what that would mean was that you got no stock for your
first year. If you got fired in month 11, you'd be out in the cold on equity
completely. This is a safety measure for the company: you can't always be sure
you're hiring the right person.

But if you get past the cliff, then you receive all the stock you would have
gotten during that time.

A four year monthly vesting means that you break your stock up into 48 monthly
groups, and receive it in those pieces one at a time. So, assuming the one
year cliff, you'd get one quarter of your promise the day that cliff ticked
over, then 1/48 of your promise every month thereafter until, after four
years, it was fulfilled.

Meaning if you got a 1% offer (which is large,) and you got fired at exactly
year 2 of a four year vesting, you would walk away with one half of one
percent of the company.

There is a book that I read which I found very, very helpful in understanding
the arcana. It's called "Venture Hacks," and despite that the title pretty
obviously panders to software nerds, it is chock full of very valuable
information, and is presented in a way that I found very, very readable.

It is quite uncommon for a company to give you a percentage up front. Hiring
is difficult; sometimes a complete clown looks really sophisticated, and two
months in, when you realize they basically just lied their way through the
interview, you don't want to send them away owning a piece of your thing after
having done nothing.

But, the amount of information you gave us is incomplete, so we cannot
actually give you a solid answer.

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jeremy_k
It was a general question and your answer along with everyone else's summed up
exactly what I was wondering. I'm definitely going to check out the book.

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jaytaylor
>> If the offer says 0.5% - 1.0% is that upfront? Is that over time? Is it
different for any company? What happens if you go through funding?

It all depends on the legal details of your contract. If the it stipulates
that equity will be a certain amount even after other's go through dilution,
then that's what it is (this is a rare promise to receive in my experience).
If nothing is promised, then your percentage is at the mercy of the of the
board.

In situations like this I always have a lawyer review my legal agreements so I
can get solid answers to my questions BEFORE I sign anything.

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spo81rty
Probably equity vested over 3-5 years. Could be SARs, stock options, profit
interest only stocks or other methods of equity bonuses.

Equity is great but since 90% of startups fail, choose wisely if you are
taking a pay cut.

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tferris
It's always over time and then called vested or vesting. Usually it's 4 years,
if you negotiated well 3 years. Often you get a 1 year cliff too which means
you get nothing if you leave in the first 12 months. And finally you get in
general virtual shares restricted to sell them in case of an exit. 5 years
vesting is very very unusual. Depending on the stage on the importance of the
role you can ask for more or less. The some good articles in the net
explaining how much one should get. The higher the risk the more equity.

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psadri
Most likely for a startup:

The equity vests monthly over 4 years with a 1 year cliff. This means that you
don't vest anything for the first year (if you leave, you don't get anything).
At 1 year, you get 1/4 of the equity vested. Every month thereafter, you get
1/48 vested.

The above is the most normal. You will have to check the terms for your offer.

Funding: If the company raises funding, everyone typically gets diluted by a
certain %. On the positive side, the company's total value will hopefully more
than increase by more than your dilution :)

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ig1
Fred Wilson wrote a nine part blog series on employee equity which you should
read:

<http://mba-mondays.pandamian.com/employee-equity/>

From the startup view point rather than employee viewpoint, but it should give
you most of the stuff you want to know. One additional point you should
consider is what the tax implications of the equity will be.

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malandrew
Check out David Weekly's short guide on this:
[http://www.scribd.com/doc/55945011/An-Introduction-to-
Stock-...](http://www.scribd.com/doc/55945011/An-Introduction-to-Stock-
Options-for-the-Tech-Entrepreneur-or-Startup-Employee)

