Understanding equity compensation is crucial for job seekers, especially in the tech industry. This guide will help you navigate the complex world of equity and make informed decisions about your job offers.
Types of Equity Compensation
There are several types of equity compensation you might encounter:
- Stock Options: The right to purchase company stock at a predetermined price.
- Restricted Stock Units (RSUs): A promise to grant stock at a future date.
- Employee Stock Purchase Plans (ESPPs): Programs allowing employees to purchase company stock at a discount.
Understanding Vesting Schedules
Vesting is the process by which you earn the right to your equity over time. Common vesting schedules include:
- Time-based vesting: Equity vests over a period of time, often 4 years with a 1-year cliff.
- Performance-based vesting: Equity vests when certain company or individual goals are met.
Evaluating Equity Offers
When evaluating an equity offer, consider the following:
- The current valuation of the company
- The potential for future growth
- The vesting schedule and any associated restrictions
- The tax implications of the equity type
Remember, equity can be a valuable part of your compensation package, but it's important to understand the details and potential risks. Don't hesitate to ask questions and seek professional advice when evaluating equity offers.