Equity

Equity is the difference between being paid to build something and owning the thing you built. A developer earning $200,000 has a good income; a developer owning 5% of a company worth $40m has the same amount in a completely different form - one that can grow while they sleep and be sold in one transaction.

Nearly everyone who becomes wealthy quickly does it through equity rather than salary. The trade-off is that equity is illiquid, often worthless, and pays nothing until an event that may never come.

Two things stand between a percentage and a payout. Dilution: a stake granted at seed is routinely halved by later rounds, so 5% at the start is rarely 5% at the end. Preferences: investors are paid back before anyone else, so a company sold for $40m with $30m of liquidation preferences pays common shareholders out of $10m, not $40m. Both are normal, and neither appears in the headline offer.

Which makes four questions non-negotiable before accepting equity instead of pay: what percentage of fully diluted shares, what the preference stack looks like, what the strike price is, and what tax falls due when you exercise rather than when you sell. An employer who will not answer them in writing is offering a mood, not a stake.