One thing I don't see mentioned frequently when articles talk about equity is the concept of trigger events in regards to vested shares. Equity is a great motivator, and is terrific for rewarding (or even keeping employees) but most strategies don't cover vesting and trigger events. I've seen several excellent employees at another job get completely screwed because they were given equity, but their shares didn't vest until a specific trigger event (such as a buyout or a VC investment). The contract stated the employee had to be working at the company during the trigger event, so the easiest way to save money was to fire those people right before it happened. Not here during the trigger event? No vested shares and therefor no money for you. It's a terrible strategy and quite immoral, but not illegal, so I encourage anyone who is contemplating taking shares in addition to (or in lieu of) pay, make them be very specific about the trigger events, and more importantly - if there's any amount of those shares that are automatically vested on Day 1.

When we formed our company, we specifically stated automatic vesting for specific employees so they knew they were guaranteed money during the trigger event - whether they were still with the company or not. Those numbers are low, but it gives them faith we're not going to screw them over.