What your equity is actually worth — and how to negotiate it.

Investors buy preferred stock. Employees get common stock (usually as options). They are not the same asset, even when the "price per share" sounds similar.

• Liquidation preference: preferred holders get their money back (1x, sometimes 2x+) before common sees a dollar.
• Participation: "participating" preferred gets paid back and shares in the rest — double-dipping.
• Protective rights: anti-dilution, board seats and veto rights. Common has none of these.
• That's why your common stock's 409A price is typically 20–40% of the preferred price.

Ask: "What are the liquidation preferences on each round, and are any participating or above 1x?"

In a sale, proceeds flow top-down. Employees with common stock sit at the bottom. If the sale price doesn't clear everything above you, your shares can be worth zero — even in a "nine-figure acquisition."

Example: a company raised $60M in preferred and sells for $80M. After $5M in debt/fees and a $5M management carve-out, investors take $60M. Common shares $10M — not $80M. Your 0.5% is $50K, not the $400K headline math suggests.

Ask: "What's the total liquidation preference outstanding? At what exit price does common start receiving proceeds?"

• Buyers negotiate with investors and management, not employees. Deal terms are designed to make those parties whole.
• Execs often receive carve-outs, retention packages or new-company grants that never touch the cap table.
• Unvested employee options may be cancelled, converted at a poor ratio, or replaced with a new vesting schedule at the buyer.
• Many "acquisitions" are acqui-hires or asset sales where common receives little or nothing.

Single trigger: vesting accelerates when the company is sold. Double trigger: vesting accelerates only if the company is sold and you are terminated (or your role is materially reduced) within a window, typically 12 months.

Without it, a buyer can fire you after the deal and your unvested equity simply disappears. Double trigger is standard for executives and is a reasonable ask for any senior hire.

Ask: "Can my grant include double-trigger acceleration — 100% (or at least 50%) of unvested shares if I'm terminated without cause within 12 months of a change of control?"

• Most venture-backed startups fail or return less than the capital raised. Only a small fraction reach a meaningful exit.
• Exits take 7–10+ years. Expect 3–5 more funding rounds diluting you 15–25% each.
• Leaving early means paying to exercise options within ~90 days, plus potential tax on the spread — or forfeiting them.
• Salary compounds: it funds savings, investments and retirement today, with zero risk of a liquidation preference wiping it out.

Rule of thumb: value equity as a lottery ticket with good odds, not a paycheck. Trade cash for equity only with money you could afford to lose.

Ask: "If I take less equity, can the base salary or a signing bonus move up by $X?"

Founders often "sell" the future value of the stock — "this will be worth 10x" — using the last preferred price or a dream valuation. Few have thought through the three numbers that matter:

A buyer may value a company at 3–8x revenue, while the last round priced it at 30x. The gap gets absorbed by the bottom of the stack — common stock.

Ask: "What's the current 409A price and when was it set? How did you calculate the value you're quoting me?"

• Extended exercise window: 5–10 years after leaving instead of 90 days.
• Early exercise + 83(b): exercise at today's low 409A to start the capital-gains clock.
• Refresh grants: annual or performance-based top-ups to offset dilution.
• Shares outstanding (fully diluted): ask for the number so you can compute your true ownership %.
• Signing bonus or guaranteed first-year bonus to bridge the cash gap.
• Severance: 1–3 months of pay if terminated without cause.