As an employee of a startup, you will likely have equity as part of your compensation package. Equity will typically be comprised of ISOs (incentivized) or NSOs (non-incentivized) stock options.
The idea of owning a piece of a company can be daunting especially when it is your first time, but in a yolo manner it can also be exciting.
Here are 5 reasons why your startup equity is exciting:
1) You’re an Owner and Builder of the Company
As an owner-builder at a startup, you have a say and more control in the direction of the company. Have an opinion on the direction of the product or on growth? Dig in, do the research, and present your findings. By doing this it can be very fulfilling especially if you believe in the company's mission.
2) Your Equity Is Like a Retirement Plan
Startup equity can be a valuable addition to your retirement savings. If the company does well, your equity could be worth a lot of money down the road. You could potentially take a loan off of your startup equity like Elon Musk did with his Tesla shares. We talk more about what to look for in a startup to increase your chances of equity growth here.
3) You Don’t Have To Interview Often
Interviewing and job hunting is a pain in the neck. Employees with equity are more likely to stay with a company for the long haul. Helping build or take things to the next level without having to worry about the stability of your job is lovely.
4) You Have More Flexibility With Your Finances
Startup equity gives flexibility to people on when they want to exercise their shares. This will have a direct impact on how and when you have to pay taxes. In this piece, we explain the thinking on exercising your shares.
5) You Don’t Have To Wait for an IPO To Get Liquidity
2023 may bring a new model for how people extract liquidity from their startup equity. In years past, popular options were for the company to buy back shares or allow you to sell your shares to other investors. Allowing you to sell shares to other investors as part of your startup's financing round, usually, is called conducting secondaries.
Not every startup is going to have a positive outcome so please check out this piece to see what signs to look for when learning about your startup equity. Check out this piece to learn what questions you should be asking to increase your chances of financial success with your startup equity.
You will find an amazing startup to join, but don't be a stranger as we are only one email away. Great Orange Duck can help you find the startup of your dreams.
*** Disclaimers - this is not financial advice and this is written assuming the startup is doing very well ***