What the equity in your offer is worth

Lots of job offers come with two numbers: your salary, and "equity", which means a slice of the company's stock. People haggle over the salary and quietly accept the stock, because it arrives with a confident dollar figure and asking about it feels rude.

But that stock can be anything from real money on a schedule to a lottery ticket, and the paperwork looks about the same either way. A few polite questions tell you which one you've got. You're allowed to ask every one of them.

The three kinds you'll see

• RSUs at a public company (stock anyone can buy on the market). Shares handed to you bit by bit, which you can sell at the market price. The catch: the price moves, and the dollar figure in your offer was one particular day's price.
• RSUs at a private company (not on the stock market). Shares handed to you bit by bit, which you can sell only when the company allows it. The catch: the company decides when you can sell, and that might be years away.
• Options. The right to buy shares later at a fixed price. The catch: they're only worth something if the share price rises above that fixed price, and buying them costs you real cash.

"Vesting" is the word for handing shares over bit by bit. You only own them once they've vested, which is the company's polite way of encouraging you to stick around.

Five questions to ask before you say thank you

• How many shares exist in total, counting everything? Your grant is a fraction, and this is the bottom half of it. It's a normal question with a real answer.
• When did investors last put a price on the company, and what was it? A price from a hot year three years ago is history, not value.
• What's the vesting schedule, and is there a cliff? Four years, with nothing until you hit one year (the cliff), is standard. Anything slower is a pay cut, so call it one.
• What happens to my options when I leave? Some companies give you only 90 days to buy them or lose them. Some now give you years. Ask which this is.
• What if the company gets bought, or my job gets cut? Whether your unvested shares get handed over early is written down somewhere. Read it before it matters.

The bottom half of the fraction

An option grant is a number of shares, and it only means something next to the total share count. Nobody volunteers that number, which is why it's the first question on the list. Here's how much it changes the picture:

Grant A   $120,000 of RSUs over 4 years,
          public marketplace company
          = $30,000/year at today's price,
            and you can sell as it vests

Grant B   40,000 options, young startup
          Your price $2.10, investors' $8.40
          10.5M shares in total
          = 0.38% of the company today,
            shrinking as it raises more money,
            worth nothing below $2.10,
            sellable on a date nobody can name

Top-ups, and the drop in year four

When your first grant finishes vesting, your total pay drops, unless the company has given you new stock along the way (a "refresh"). Ask how refreshes work before you join. Are they yearly? What earns one? Does staying get rewarded, or quietly ignored?

As with salary, the refresh rules almost never bend for one person. Knowing them still tells you what year three will feel like, which beats finding out in year three.

None of this is investment advice, and this guide has no opinion on any company's future. It's just the vocabulary for asking good questions. People who ask get answers. People who don't get a big number in a PDF.