Beyond your specific question, which appears to have been answered, highly recommend the book “Venture Deals” to learn more about equity based funding:

https://www.amazon.com/Venture-Deals-Smarter-Lawyer-Capitali...

https://www.amazon.com/Venture-Deals-Smarter-Lawyer-Capitali...

Book is here

For those interested in this topic, I suggest reading 'Venture Deals' by Brad Feld. While it's broader than this topic, it does cover some of the legal/technical elements of vc funding and exits, which help when trying to understand outcomes such as this (i.e., preferred vs common shares, etc). http://www.amazon.com/Venture-Deals-Smarter-Lawyer-Capitalis...

Despite all the jokes here about your equity being worth very little, most of them are probably right.

Of course it depends on the specific company, but if we are talking about a late stage startup in SV then they are most likely overcapitalized, and might end up IPOing at a price lower than their current valuation. This would make your common stock worth proportionally much less.

The valuation = 2x strike price thing is standard. Common stock valuation is always worth much less than preferred stock, because of the liquidation preferences (usually it's closer to 1/3 of the value). Often recruiters will use this to make it sound like you are getting an awesome deal.

To answer your question (should you give up more salary in return for more options/stock), the main question you have to ask yourself is "Do I think this company will IPO or be bought for _higher_ than the current headline valuation". If the company raises more money before their exit, then do you think they will go on to exit for an even higher valuation than their next round? If the company ends up exiting for a valuation that is lower than their current valuation, then you would have been much better off taking cash in the first place. Even if they exit at a higher valuation than they are today, but in the meantime they had raised some more money (and the final exit is lower than their last valuation), then it will affect the value of your common stock for the worse. If you are being offered ISOs rather than RSUs, you also have to understand the fact that you may end up in a position where you can't leave the company without purchasing your overvalued common stock (see: golden handcuffs).

If you don't understand the differences between common stock, preferred stock, liquidation preferences etc, I would highly recommend the book Venture Deals by Brad Feld[1]. It's written for startup founders, but equally useful for understanding employee stock options.

[1] http://www.amazon.com/gp/product/B00AO2PWOI/

Usually recommended:

http://www.amazon.com/Venture-Deals-Smarter-Lawyer-Capitalis...

Venture Deals by Brad Feld and Jason Mendelson: http://www.amazon.com/Venture-Deals-Smarter-Lawyer-Capitalis...

Why do you want investors should be your first question. Raising money means dilution and being put on a vesting schedule along with having to deal with liquidation preferences or headaches of convertible debt (see this book[1] to understand some of these terms). Second, finding investors usually takes connections. For young CS grads, easiest way would be through the university's tech commercialization office. Another would be an accelerator or incubator. Then you could reach out to mutual connections in your network to find angel investors or seed funds. Hope that helps. If you need more help feel free to contact me (my email is in my profile). Good luck!

1) http://www.amazon.com/Venture-Deals-Smarter-Lawyer-Capitalis...

Perhaps not exactly what you are looking for, but a very good read on the subject is "Venture Deals" (http://www.amazon.com/Venture-Deals-Smarter-Lawyer-Capitalis...).

If you want to know exactly what rights your shares have (and don't have), this is the book.

Yes, http://www.amazon.com/Venture-Deals-Smarter-Lawyer-Capitalis...

By no means is that complete, but that should give you a primer, and I learned about it from other startups that successfully have raised funds. (I was in the dark too at a point. https://news.ycombinator.com/item?id=4064276)

The other big thing is just to get out and talk with other founders near you. I found (at least in our community) they were very willing to share information over a beer or soda.

The a16z website shows the current portfolio (most recent, un-exited investment) and does not display their entire investment history. If you check out their Crunchbase profile[1], they have already had some big exits with Groupon, Zynga, Skype and Instagram, which is quite impressive since they only started investing 3 years ago. I'm sure there have been some other medium/large M&A liquidity events as well but it usually takes 3-5 years to figure out if your VC portfolio is any good and 7+ years to realize any returns. LPs know this and funds usually have a 10 year life cycle, sometimes with options to extend it a year or two [2].

[1]http://www.crunchbase.com/organization/andreessen-horowitz/i... [2]http://www.amazon.com/Venture-Deals-Smarter-Lawyer-Capitalis...

>to ask for? Is there an "idiots guide" to equity?

Not exactly, but I'd recommend reading http://www.amazon.com/Venture-Deals-Smarter-Lawyer-Capitalis... because I think it will help despite being focusing more on founder vs investor rather than employee asking for equity.

Not sure if you meant a book on the web but I liked Venture Deals - http://www.amazon.com/Venture-Deals-Smarter-Lawyer-Capitalis...

Rookie mistake. Read Venture Deals: http://www.amazon.com/Venture-Deals-Smarter-Lawyer-Capitalis...

http://www.amazon.com/Venture-Deals-Smarter-Lawyer-Capitalis...

http://www.amazon.com/Mastering-VC-Game-Venture-Start-up/dp/...

http://www.amazon.com/The-Startup-Game-Partnership-Entrepren...

http://www.amazon.com/Term-Sheets-Valuations-Intricacies-Big...

http://www.amazon.com/Venture-Capitalists-Work-Billion-Dolla...

http://www.amazon.com/Raising-Venture-Capital-Serious-Entrep...

http://www.amazon.com/The-Art-Start-Time-Tested-Battle-Harde...

I believe any one or more of those will get you going in the right direction. All of those I've either read, or have seen recommended highly enough by people I trust, that I feel comfortable recommending them. The Guy Kawasaki book is a good, basic introduction to starting a startup, although it's a little old now. I think most of it is still relevant though.

A lot of this stuff is probably on the 'net as well, but you may have to dig around for it a bit. Quora has a lot of good questions (and good answers) on VC / startup topics, so that might be worth a look. Also, a number of high profile VCs maintain blogs where they share a lot of useful information. Mark Suster comes to mind (http://www.bothsidesofthetable.com/) and does Brad Feld (http://www.feld.com/wp/). Note that Brad Feld is the author of one of the above books.

I liked Venture Deals: Be Smarter than your Lawyer and VC.

Amazon affiliate link: http://www.amazon.com/gp/product/1118443616/ref=as_li_ss_tl?...

Amazon non-affiliate link: http://www.amazon.com/Venture-Deals-Smarter-Lawyer-Capitalis...

(Choose whichever you prefer.)

The really short version is that the company sells (probably newly created) shared in exchange for money. The owners of the company are generally not selling their own shares. That would lead to serious complexity.

If you want to know more, read Venture Deals[1]. It's very thorough and well written.

[1] http://www.amazon.com/Venture-Deals-Smarter-Lawyer-Capitalis...

Although not a book about becoming a VC or angel investor, Venture Deals by Brad Feld and Jason Mendelson of TechStars and Foundry Group does cover a lot about investments and common things you should understand (which is something useful to know if you're looking to get into the business).

Link: http://www.amazon.com/Venture-Deals-Smarter-Lawyer-Capitalis...

Although again this isn't a book on the subject, here is a blog post talking about it: http://www.askthevc.com/wp/archives/2007/01/how-to-become-a-...

Also: http://www.quora.com/How-do-you-become-a-venture-capitalist?...

Brad Feld and Jason Mendelson released an excellent book this year.

Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist

http://www.amazon.com/Venture-Deals-Smarter-Lawyer-Capitalis...

Have you read the book "Venture Deals" [1] by Foundry Group VCs? If not, grab a copy now and read through the first few chapters.

[1] http://www.amazon.com/Venture-Deals-Smarter-Lawyer-Capitalis...