Does this include prospective employee stock options? It would be great to know that startups seeking to hire me have a legal obligation to tell me about financial troubles.
On the other hand, I agree that it is a red flag to refuse to disclose the percentage an allocation represents.
Not for you, maybe. For the rest of us... http://www.eligiblemagazine.com/wp-content/uploads/2013/01/r...
I'm assuming by "ratchets" he meant anti-dilution provisions, which often mean that if the company raises a new round on anything less than amazing terms, existing investors get topped up with new shares to maintain their ownership percentage, at the expense of common shareholders.
A preference, strictly speaking can be with or without a ratchet. A preference means that, at a liquidity event, you get paid before another class of shares. A ratchet means that you get paid a specified minimum price before other shareholders get paid.
An anti-dilution provision usually is invoked in a "down round" and it does what it says: It compensates earlier investors for dilution in cases where the value of their shares don't go up. The details are often complex, and the circumstances where this happens are often where a company is in trouble, and holders of common and options on common are going to get massacred anyway. At which point, if the company wants to keep you, you'll get a new set of options. Which is a long way of saying "you got bigger problems."
In virtually any case where a company has a down round, or fails to meet preferences in a sale, you want to leave anyway. Your stock being worthless is the least of your problems. The exception is if you're specifically part of a turnaround, in which case you'll have a newly negotiated package (unless you were a VERY early hire sitting on a bunch of still in the money options or something).
But you should see the grant as a percentage of fully-diluted outstanding stock, and you should know the preference on top of the cap table, and you should know the last granted strike price and if there is anything that would prevent your grant from being granted at that price.