You Offer Equity, But What Does That Mean?

By Kevin Roth

If equity is part of the package that you offer new employees, you should be willing and able to discuss the current cap table, dilution of shares and target price with any potential hire that gets an offer, regardless of level.

An informed candidate recognizes that getting 5,000 shares means absolutely nothing without having an idea of total shares outstanding and most recent valuation. I’ve had offers where 1,000 shares are currently worth far more than 5,000 shares at another same stage company.

If you’re currently operating under the policy that you only share that information with certain level hires, you need to revisit that policy. Draft up an NDA that people have to sign before sharing the information and only get to that step if the candidate specifically requests the information AFTER reviewing all other components of the offer. If you’re not willing to disclose that information at the very final stages with that protection in place, many candidates make the assumption that there’s something to hide.

A lot of people take pay cuts to join startups solely because of the equity. It’s fair to think that they’d want to know exactly what that equity is potentially worth.

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