You'll most likely receive equity as part your compensation package if you have been offered a job at a startup.
Equity refers to the number of shares that you receive in a company. This means that you only "own" a small percentage of it. While investors and founders will own the majority of the company, employees still get their fair share.
The more experienced you are in technical areas, the more equity you will likely receive.
A company at Series C or seed stage will offer more equity to new employees, for example. The stages are simply a reflection of the size and capital of the company (i.e. Assets available. Hires at a seed stage startup will be eligible for more equity as the company's contribution level is higher than when the company is in a later stage.
Your job and position will be classified as technical or non-technical, individual contributor (IC), director (D), or manager (M). ICs are employees who have less than five years experience but are not responsible for managing a team. Directors and managers have at least five years experience and are responsible for the direction and management of teams.
My experience is that equity ranges from 0.1% to 0.9% for those who work in sales or business roles. Expect 0.2 to 1.25 percent for engineering and product roles, and 0.02 to 1% for designers. These bands may not be followed by all startups. Some are open to changing the weight of your equity and base salary based on your preferences.
As an example, I am a business representative at a seed-stage startup. Although I hold a masters degree in business administration, I did not have any full-time work experience. My experience and background made me an IC, which led to me being offered a $90,000. base salary with no equity.
Eight months later, I had shifted my responsibilities and was awarded 0.2% equity along with a base of $90,000.00. I asked for a 15% increase in base, and my adjusted offer resulted in me receiving $100,000.00 in base with 0.1% equity.
It all depends on your risk tolerance. Are you willing to take on more equity if the company is successful? Do you prefer to cash in today or more equity?
Equity works on a vesting system that controls when your shares accumulate. Most startups have a four year vesting schedule, with a one-year cliff. This means that your equity cycle must begin within one year and continue for four years to fully vest.
For example, 0.1% equity was granted to me (15,000 shares). If I stay for one-year, 1/48th would become my 15,000 shares (12 months x 4 years = 48). If I stay for two years, I would receive 12/48ths my total shares. Three years would equal 36/48ths. Four years would equal 48/48ths.
You can cash out your shares when and if you leave the startup. Your equity will not vest if you leave the startup before the cliff (i.e. you'll get zero shares).
It's better to wait and see what the company offers before you negotiate equity. If the budget is not within your reach, it could deter the hiring manager and prevent them from continuing the conversation.
If your base range is not negotiable, be open about it. Also, don't forget to mention that you can take equity if you aren't 100% committed to the company.
However, joining an early-stage startup will give you more control over the company's direction. You'll likely be working closely with people from multiple teams. It's also important to believe in the mission and work well with your coworkers. This will make a difference in the growth of your company and your equity.
You should ensure you get what you are worth and assess the growth potential of the company (aka your learning growth) as you would any other investment.
Belicia Tan works as a community manager and operations manager at Ladder. This pre-series B startup focuses on helping early career talent build community. Her previous experience includes working as a consultant in healthcare for the federal and pharmaceutical sectors. Connect with her via Medium and LinkedIn.