The VCs are counting on that.
Here's what they know that you don't:
Last year, a friend called excited:
- Head of Product role
- $2M ARR startup
- $120K salary
- "Generous equity package"
I asked one question:
"What's the preference stack?"
Silence.
Here's what that 1% actually means:
- Investors put in $10M
- They get paid back 2x first
- Then they get their pro-rata
- Then you get... what's left
The real math:
$20M exit = $0 for you
$30M exit = $0 for you
$40M exit = maybe lunch money
But it gets worse:
Your 1% isn't even 1%:
- Series A cuts it to 0.5%
- Series B drops it to 0.25%
- Series C? Keep dividing
- Down rounds? Start crying
The cruel truth:
95% of startup employees never see a dollar from equity.
But 100% took pay cuts to get it.
Before you take that "dream offer":
Red flags to watch for:
- "Industry standard vesting"
- "Standard preferences"
- "Standard dilution protection"
- "Standard liquidation rights"
Translation:
Standard = You lose
Questions that save you:
1. "What's the current preference stack?"
2. "Show me dilution scenarios"
3. "What's the exit waterfall?"
4. "How many shares outstanding?"
Because here's what VCs know:
Hope is expensive.
Math is free.
Choose math.
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