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Updated September 12, 2022Our aim is to be as helpful to the beginner as to those with more experience. Having talked with employees, CEOs, investors, and lawyers, we can assure you that no matter how much you know about equity compensation, you will likely run into confusion at some point.
If youβre an employee or a candidate for a job, some of these may apply to you:
Youβve heard phrases like stock, stock options, strike price, ISOs, RSUs, 83(b) election, 409A valuation, AMT, or early exercise and know they are probably important but are mystified by what some of them really mean or whether they apply to your situation.
Youβre considering a job offer but donβt know how to navigate or negotiate the equity component of the offer.
Youβre joining a startup for the first time and are overwhelmed by all the paperwork.
Youβre quitting, taking a leave of absence, or are being laid off or fired from a company where you have stock or options and are thinking through the decisions and consequences.
A company you work for is going through an acquisition, IPO, or shutdown.
You have stock in a private company and need cash.
Founders or hiring managers who need to talk about equity compensation with employees or potential hires will also find this Guide useful. As many entrepreneurs and hiring managers will tell you, this topic isnβt easy on that side of the table, either! Negotiating with candidates and fielding questions from candidates and employees requires understanding the same complex technicalities of equity compensation well.
That said, this topic is not simple and we ask that readers be willing to invest time to get through a lot of confusing detail. If youβre in a hurry, or you donβt care to learn the details, this Guide may not be for you. Seek advice.
Much of what you read about equity compensation was written by a single person, from a single vantage point. The authors and editors of this Guide have navigated the territory of equity compensation from the perspective of employees, hiring managers, founders, and lawyers. We do believe that the knowledge here, combined with professional advice, can make a significant difference for both employees and hiring managers.
One of the difficulties for candidates negotiating equity compensation is that they may have less information about what they are worth than the person hiring them. Companies talk to many candidates and often have access to or pay for expensive market-rate compensation data. While some data on typical equity levels have been published online, much of it fails to represent the value of a candidate with their own specific experience in a specific role. However, even without exact data, candidates and hiring managers can develop better mental frameworks to think about offers and negotiations.
On the other hand, challenges are not limited to those of employees. Founders and hiring managers also often struggle with talking through the web of technicalities with potential hires, and can make equally poor decisions when making offers. Either over-compensating or under-compensating employees can have unfortunate consequences.