By Jeff Altman, The Big Game Hunter
EP 3067 That “impressive” executive equity package might be a HUGE red flag! This episode reveals how seemingly generous stock or options can actually be worthless, hiding a major flaw in your executive compensation.
Don’t Act Like a Politician on Job Interviews
(0:00 – 0:14)
All right, let’s talk about something that gets a lot of people excited, but can also be full of hidden traps. We’re talking about equity compensation. You know, you land what seems like a dream job at a really promising company, and part of the offer is a chunk of equity.
(0:14 – 0:30)
But hang on, before you pop the champagne, we really need to dig into why that offer might not be nearly as good as it sounds. And look, this quote from our source material by Jeff Allen, it just hits the nail on the head. That really impressive sounding equity package, it could actually be a huge warning sign.
(0:31 – 0:52)
So how in the world do you tell the difference between a golden ticket and, well, a piece of worthless paper? Let’s break it all down. So when you join a startup or a private firm that’s got all this amazing growth potential, the equity is the big promise, right? It’s your shot to get in on the ground floor, to own a real piece of the company’s future success. And the dream is just incredible.
(0:52 – 1:06)
The upside can be absolutely massive. Your slice of the pie could turn into a life-changing payout, but, and this is a big but, there’s the flip side. It could also end up being worth literally nothing, zero.
(1:06 – 1:22)
The whole game is figuring out which path your offer is actually on. Okay, so this gets us to the real problem here. You’ll hear founders and hiring managers, they’ll toss around these percentages that sound so impressive, but here’s the secret they don’t always tell you.
(1:22 – 1:36)
Without context, those numbers are basically meaningless. So picture this, a founder sits across the table from you, super excited and says, we just love what you bring to the team. As part of your offer, we’re going to give you 2% equity.
(1:36 – 1:56)
It sounds so solid, so valuable, but that 2%, it can be worth absolutely, positively nothing. Without the full picture, a percentage is just an empty number. It’s designed to get you all fired up without actually giving you any real tangible information.
(1:56 – 2:16)
But why? Why is it meaningless? Well, because that number just exists in a vacuum. It tells you nothing about who else owns a piece of the company, nothing about the fine print attached to your shares, and certainly nothing about the real financial health of the business you’re betting on. It’s a number offered, like our source says, with absolutely no context.
(2:16 – 2:25)
This is where you take back control. See, this isn’t about guesswork. It’s about knowing exactly what information you need to ask for.
(2:25 – 2:41)
So let’s build your due diligence checklist right here, right now. So what is it? What do you need to ask for to turn that kind of meaningless percentage into something you can actually judge? What’s the essential info? Here we go. There are 5 critical things you have to understand.
(2:42 – 2:53)
First, the cap table, so you can see who owns what. Second, the company’s valuation, what’s it actually worth today? Third, the vesting schedule. This dictates when you really own your shares.
(2:54 – 3:06)
Fourth, and oh man, this one is crucial, liquidation preferences. This decides who gets paid first when the company sells. And finally, number five, the exit strategy, how and when you might ever see a dime from this.
(3:07 – 3:16)
These 5 Ts, they unlock the real story of your offer. Let’s just zoom in on that first one, the cap table. Think of it as the master list of ownership.
(3:16 – 3:32)
It shows you every single share and who it belongs to, founders, investors, other employees. Without seeing this, your 2% is just 2% of who knows what. Seeing the cap table is step one to understanding your real stake.
(3:32 – 3:45)
Okay, next up from our checklist is the vesting schedule. This is the timeline that says when your equity actually becomes yours. You know, a pretty standard deal is vesting over four years with a one-year cliff.
(3:46 – 4:00)
And that cliff is a big deal. It means if you leave before your first anniversary, you get exactly zero shares. You’ve got to understand this schedule because if you leave before you’re fully vested, you’re walking away with a lot less than you thought you were getting.
(4:01 – 4:11)
And look, this really gets to the heart of it all. The responsibility at the end of the day is on you. The company makes the offer, sure, but you are the one who has to investigate it.
(4:11 – 4:26)
Doing your homework on all five of those points is the only thing that truly protects your potential payday. So you know what to ask for now. But what happens if the company doesn’t want to play ball? Well, this brings us to what our source material calls the ultimate red flag.
(4:26 – 4:38)
Let’s just play this out. You’ve got your checklist. You go back to the hiring manager and you politely, professionally ask for a look at the cap table, the latest 409A evaluation, and the terms of your grant.
(4:38 – 4:51)
You’re just doing your homework and they say no, or they get all defensive. They might tell you it’s confidential or my favorite, you don’t need to worry about that. They just flat out refuse to give you the information you need to make a smart decision.
(4:52 – 5:08)
That right there, that’s the big one. Our source is crystal clear about this. A vague offer is your first red flag, but a company refusing to give you the details when you ask, that is, and I’m quoting here, yet a second red flag that should give you a signal of a problem.
(5:08 – 5:17)
Think about it. A company that’s transparent and proud of what they’re building should be happy to share this with a serious candidate. If they’re not, they’re probably hiding something.
(5:17 – 5:26)
So let’s wrap this all up. Look, evaluating an equity offer isn’t about being negative or cynical. It’s about being smart.
(5:26 – 5:38)
It’s about knowing your own worth and it’s about treating this part of your compensation with the same level of seriousness you’d give your salary. So let’s recap the mission here. First, burn this into your brain.
(5:39 – 5:44)
A percentage by itself means nothing. It’s a ghost. You have to demand the context behind it.
(5:44 – 6:00)
The cap table, the valuation, the vesting terms, and those super important liquidation preferences. And if a company gets all weird and refuses to share that info, that’s not just a red flag, that’s a giant stop sign. At the end of the day, your own diligence is the only thing protecting your financial future.
(6:00 – 6:10)
So I’ll leave you with this final thought. The next time you see an equity offer, you’re going to be armed and ready. You’ll know the right questions to ask to get the real story behind the numbers.
(6:10 – 6:18)
So is that offer you’re holding a life-changing opportunity or is it just a really well-crafted illusion? Now you’ve got the tools to find out for yourself.
Transitioning to Another Industry or Field
ABOUT JEFF ALTMAN, THE BIG GAME HUNTER
Jeff Altman, The Big Game Hunter, is a coach who worked as a recruiter for what seems like one hundred years. His work involves career coaching, all as well as executive job search coaching, job coaching, and interview coaching. He is the producer and former host of “No BS Job Search Advice Radio,” the #1 podcast in iTunes for job search with more than 3000 episodes.
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