Questions candidates can ask about equity compensation

Typically includes things like total outstanding shares, conversion price of the various preferred rounds, liquidation preference for the preferred shares, etc. The delta between the most recent preferred round and the 409a is the best approximation of the actual value of the equity at the time of the grant.

Assuming your interviewers are potential future teammates, ask them questions about work. Ask your recruiter or future manager benefits and comp questions. At most companies >10 people, your recruiter will have a packet with all the answers to equity questions.

The present value of cash flows is so much higher than the future value of some illiquid, highly speculative startup equity with way more restrictions than regular public stock equity.

On the other hand, I always insist on talking to the CEO or the highest ranking exec you can during the interview process. It is absolutely in your best interest to hear the company's vision and path to success directly from the source. Again, this person will clam up when discussing financial specifics, but you should still expect them to make you feel secure about the company's potential.

If you're not a founding member, what reasons does that leave?

Personally I’d take my chances either early, with a meaningful share of the company, or post-IPO when the amount of shares is much smaller but its value reasonably predictable.

Equity is a lotto ticket, not an IOU.

If you join an established public company that offers RSUs, etc. thats different. Those can be traded for cash money, once vested. Getting your equity out of a startup before the IPO or public stage isn't as straightforward, or real.

Join startups because it's a thing you are so passionate about making, a thing that you think the world needs so badly that you are willing to make personal and professional sacrifices to bring it to reality. Join a startup because you love thr team, really want to work with them and really think that what your building is good for you, your community, the world.

The equity piece is just there so folks like us don't feel "Walter Whited" when our passion project makes a big impact, and the world rewards that impact with financial gains.

1) Startups may not give you the full picture, but it's very unlikely they are going to straight up 'lie' to you - that would be bad, and likely illegal.

2) Yes, almost anything can happen with equity, and when it gets shifty, bad things will happen so you have to have a reasonable take on it - which, admittedly is really hard for most people.

I think it's better to understand that there's going to be a lot of risk in equity, and it's not something you should bank on too hard.

Don't expect to get $1M if you own 0.1% of equity and the company is sold for $1B.

Highly likely you'll get nothing + laid off.

Negotiate for immediate benefits: cash bonus, salary, RSUs (if company is public), etc...

Could be. But these questions can also be useful as (1) bullshit filters and (2) signalling (that you know your stuff and are not to be toyed with).

In particular as to (1): you should be able to readily get answers to these questions; any hint at evasiveness, or a refusal to answer, should be taken as a red flag.

The greatest frustration is usually around: 1. feeling like your equity cut is not enough once you know what other people are paid; 2. not knowing how much you pay in exercise cost / taxes / exercise window until it's too late

On 1, there's a growing DB of startup comp here: https://topstartups.io/startup-salary-equity-database/

First off, if you're comparing multiple offers with similar salaries, equity considerations may be a good way to make a decision.

Beyond that, understanding how companies handle equity compensation can tell you a lot about their culture and treatment of employees. There are companies out there that are eager to answer these questions because they give generous stock compensation and want you to know it. There are also companies that will obfuscate and hide behind misleading numbers. I once had an offer and asked for more equity, only to be told by the recruiter that the stock was about to split, so I'd actually get twice as much (this is absolute nonsense, to be clear, and a huge red flag).

Lastly, with regard to your initial question about compensation, asking these questions absolutely can be useful to that end. When you're negotiating with early to mid-stage startups, one of the things that you can negotiate is your equity/salary split. I once took a pay cut from the initial offer in exchange a much greater amount of equity than I was initially offered. That was because I found a lot of positives about the company and preferred higher risk and more reward (thankfully it looks like that is going to work out very well in my favor, but obviously that was in no way assured). If a company's giving you bad answers as it relates to equity, you may well want to try to negotiate for a higher salary in exchange for less equity, so your financial circumstances aren't tied as much to the company's performance. Understanding equity gives you one more dimension on which to negotiate, and the more things you can negotiate, the better off you are.

There is this prevailing idea in Silicon Valley that you should just ignore equity and treat it like a lottery ticket, and while I think that is very good for financial planning, it is otherwise awful advice. Just because you don't have full control over the way things go with equity doesn't mean that you shouldn't educate yourself on what can be a meaningful portion of your compensation.

Trying to value equity as employee or will it ever be worth anything might as well be buying books from the supermarket with winning lottery numbers.

Just get your contingent offer in writing, because that freezes a time period of trustworthiness that remains applicable even if they change their mind or their opinion about you.