The idea of working for a startup is probably one that’s garnered much buzz and interest in recent times. Freedom, jeans, WFH, games, “no stress”, free food, are probably some of the “cool perks” that come to mind when we hear “startup”. However, “three out of every four startups fail”. I didn’t make that up, I promise! 

Fortunately, Flutterwave’s (Nigerian Payment Solutions Start-Up) funeral isn’t on the horizon at all; valuing at over $1 Billion. That is such an incredible feat considering the odds. So if you have the balls to take on such a high risk, working for a startup, it’s imperative that you also have the brains to negotiate a killer Equity Compensation. Guaranteed, you work for this amazing startup that you’re uber passionate about, but what’s your equity stake in the company?

First of all, introduction! 

Equity compensation is a form of payment, that is not cash, offered to employees; giving them the opportunity to share in the profits a company makes as its value appreciates. This type of remuneration is often employed by startup companies who typically can’t afford to pay staff at competitive rates. The first thing you need to understand about the equity in your job offer is whether it is Restricted Stock or if it’s a Stock Option. 

Receiving stock options allows you to buy stocks at a predetermined price, also known as strike price, which should generally be set at a reasonable market value of the company stock at the time of purchase. If the stock price of a company goes up, with stock options, you reap the benefit of the difference between your strike price and the increased stock valuation when there is an exit. 

In contrast, the restricted stock is granted to you without you paying, albeit with restrictions. The stock is accrued according to a vesting schedule – the period where your stock “matures” and can be taken advantage of.

Things to consider:

1. How much will I be paid out in the event of an exit? 

So yes you’ve acquired ownership, but how much percentage is yours? What’s the value of the percentage? That’s something you should know. 

2. How Long is My Vesting Schedule?

You now know your ownership percentage, but when will you be able to access the benefits and how often? Does this become void after you stop working with the company? What’s the expiration date? 

3. What are the tax and compliance implications of the particular equity compensation package offered to you? 

You really do not want to get into any trouble because you didn’t do your due diligence to help you make an informed decision. 

4. How do I cash out? 

You need to find out how you will actually reap the benefits of your equity. What is the exit strategy? Will there ever be an exit? 

If you are yet to see how complicated all of this is, let me tell you right now: THIS IS SO COMPLICATED!!! Probably the greatest advice I can give you is that you seek good legal and professional counsel before you make any decisions because I won’t be here if everything goes south.

Startup life isn’t a smooth ride across the country, so you definitely want to be offered the opportunity to share in the ownership of equity to make the bumps worth it. I mean, you’re helping to build the company so you might as well own part of it. I’m pretty sure the smart staff at flutterwave are “in the money” right now! 

If you work in a traditional company and you are wondering where to find jobs at startups, you should visit Tamborin.io.