Jeff Altman, Big Game Hunter
EP 3067 “Impressive” executive interests plan can be a huge red flag! This episode reveals that seemingly generous stocks or choices are actually worthless, which hides your executive compensation.
Don’t be like a politician in a job interview
(0:00 – 0:14)
Well, let’s talk about things that will excite a lot of people, but can also be full of hidden pitfalls. We are talking about equity compensation. You know, you landed a job that seems to be dreaming about in a truly promising company, and part of it is a part of fairness.
(0:14 – 0:30)
But please stick with it, we do need to dig out why the offer may not be as good as it sounds before you pop up the champagne. Look, this quotes Jeff Allen’s original material, which just hits the nail on the head. This is indeed impressive sound stock packaging can actually be a huge warning sign.
(0:31 – 0:52)
So, how do you say in the world the difference between a gold ticket and a worthless piece of paper? Let’s solve it in all parts. So when you join a startup or a private company with all the amazing growth potential, fairness is a huge commitment, right? Going to the bottom is your chance to have the real part of your company’s future success. Dreams are incredible.
(0:52 – 1:06)
The upside may be absolutely huge. Your pie can become a life-changing expense, but, this is big, but there is another side. It may also end up worth getting nothing, zero.
(1:06 – 1:22)
The whole game is figuring out what path your offer is actually. OK, that makes us have real problems here. You hear the voices of founders and hiring managers, and they will surround these impressive percentages, but that’s the secret they don’t always tell you.
(1:22 – 1:36)
Without context, these numbers are basically meaningless. So imagine a founder sitting across from you, super excited, saying, we just like what you bring to the team. As part of your offer, we will provide you with a 2% stake.
(1:36 – 1:56)
It sounds solid and so valuable, but 2%, absolutely worth it, nothing. There is no complete picture, the percentage is just an empty number. It is designed to get everyone fired without actually providing any real tangible information.
(1:56 – 2:16)
but why? Why is it meaningless? OK, because this number is just a vacuum. It doesn’t tell you about who owns a part of the company, nothing about the beautiful prints affiliated with your shares, and certainly no real financial status of the business you bet on. As our sources said, this is a number with absolutely no context.
(2:16 – 2:25)
This is where you restore control. Look, it has nothing to do with guessing. It’s about knowing exactly what you need to ask for.
(2:25 – 2:41)
So let’s build your due diligence checklist here right now. What is that? What do you need to ask to turn this meaningless percentage into something you can actually judge? What is basic information? here we go. 5 things you must know.
(2:42 – 2:53)
First, the upper limit table so you can see who owns what. Secondly, what is the company’s valuation actually worth today? Third, the vesting schedule. This determines that you really own your stake.
(2:54 – 3:06)
Fourth, oh, it’s a crucial liquidation preference. This determines that the company is paid first when it sells. Finally, ranked fifth, exit strategy, how and when to see a dime from it.
(3:07 – 3:16)
These 5 ts, they unlock the true story of your offer. Let’s zoom in on the first one, the hat table. Treat it as the main list of ownership.
(3:16 – 3:32)
It shows you each share and who it belongs to, founders, investors, other employees. Not seeing this, your 2% is just who knows what. Seeing a hat table is the first step to knowing your real stake.
(3:32 – 3:45)
OK, the next list is the attribution schedule. This is a timeline, saying that your equity actually becomes your time. You know, a fairly standard deal will be a cliff for one year in four years.
(3:46 – 4:00)
The cliff is important. This means that if you leave before your first anniversary, you will get zero shares. You have to know this schedule because if you leave before you fully belong, you will walk out much less than you think.
(4:01 – 4:11)
Look, this really reaches the core of it all. The responsibility at the end of the day is on you. Of course, the company makes an offer, but you are the one that has to investigate.
(4:11 – 4:26)
Doing homework at all five points is the only thing that really protects your potential payday. So you know what to ask now. But what happens if the company doesn’t want to play? Well, that brings us to what the original material says is the ultimate red flag.
(4:26 – 4:38)
Let’s figure it out. You have a list. You are going back to the hiring manager and then politely and professionally requesting to view the cap sheet, the latest 409A evaluation, and terms of the grant.
(4:38 – 4:51)
You’re just doing homework, they say no, or they’re all getting defense. They might tell you it’s confidential, or my favorite, you don’t have to worry about it. They simply refuse to give you the information you need to make a wise decision.
(4:52 – 5:08)
That’s the big one. Our source is clear about this. Ambiguous quotes are your first red flag, but a company refuses to give you details when you ask, that is, I quote here, but the second red flag should give you the signal of a problem.
(5:08 – 5:17)
Think about it. A transparent and proud company should be happy to share this with serious candidates. If not, they might hide something.
(5:17 – 5:26)
So let’s combine this all together. See, assessing equity offers is not about negative or cynical. It’s about being smart.
(5:26 – 5:38)
It’s about knowing your worth, it’s about taking this portion of compensation with the same level of seriousness you’re giving. So, let’s review the task here. First, burn it into your brain.
(5:39 – 5:44)
The percentage itself makes no sense. This is a ghost. You have to ask for the background behind it.
(5:44 – 6:00)
Cover tables, valuations, attribution items and those super important liquidation preferences. And if a company gets weird and refuses to share that information, it’s more than just a red flag, it’s a huge stop sign. Ultimately, your own diligence is the only thing that protects your financial future.
(6:00 – 6:10)
So, I will bring you a last thought. The next time you see an equity offer, you will be armed and ready. You will know the right questions, asking for the real story behind the numbers.
(6:10 – 6:18)
So, is your offer you a life-changing opportunity or is it just a truly elaborate fantasy? Now, you have your own tools.
Transition to another industry or field
About Jeff Altman, Big Game Hunter
Large Hunter Jeff Altman is a coach who has served as a recruiter for a hundred years. His job involves career coaching, as well as executive job search coaching, job coaching and interview coaching. He is the producer and former host of “Base-free Broadcasting Station”, the first podcast in iTunes for more than 3,000 episodes of work search.
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