Thanks for your reply!
As for 5/6, even if I join as the first employee I will still give up a big fraction of my salary for equity. Assuming I want to do this for sure, is there any other risks/differences you can think of?
As for 5/6, even if I join as the first employee I will still give up a big fraction of my salary for equity. Assuming I want to do this for sure, is there any other risks/differences you can think of?
Consider this, most likely the startup will fail and your equity will be worth zero. You need to evaluate risk & sacrifice vs opportunity.
Let's assume that this startup will get acquired for $50 million after 5 years and 3 rounds of funding. You take a 50% salary cut and 1% stock options; which will be diluted to about 0.25% after 3 rounds of funding (depending upon investment terms). You will get $125,000 (0.25% x $5 million) after 5 years. Is it worth the salary cut and sacrifice you will make?
There is a very little chance that this startup may turn out to be a $1 billion exit. Let's assume this happens after 10 years and 8 rounds of funding. At this point, your 1% equity is diluted to about 0.04%; so you will get about $400,000.
If the startup is acquired for anything less than $50 million, you will probably not get anything.
If I were to join a pre-funding startup and take significant salary cut, I would expect at least 10% equity.