When you first start working at a startup, your salary is typically lower than the market rate. Startups are often light on cash, which they make up for by offering equity – or options or shares in the company. Often this equity will be discounted significantly, because the company is growing, it is not as valuable.
Equity is a tremendous opportunity to build wealth, if the company does well and eventually goes public. A person who was granted 10,000 shares of Facebook in the early days is a multimillionaire today, if they kept it.
These stories are commonplace among the startup world. I have been awarded equity in 2 separate companies. Both are among the best investments I ever made.
But you usually have to last a year, and sometimes as long as 4 years, before any of it pays off. You may never actually make any money from equity if there isn’t a liquidity event, like an IPO.
My biggest regret for each is that I didn’t ask for more. Most companies can afford it; they have tens or hundreds of millions of shares. A few hundred or thousand more likely won’t make a difference for them, but will for you.
Whenever you get an offer at a company that has any stock incentives, ask for 20-30% more than you are offered.
This alone would have made me hundreds of thousands of dollars had I known. At the time, I dismissed my own value and didn’t know better.