For startups or any companies who offer illiquid equity, the following is a good tactic I’ve been using that never fails.

Simply tell them (at the offer stage):

“Make me two offers, one with a higher cash compensation and the other with higher equity.”

Then, always take the position with higher cash to base your next negotiations. If it’s good enough, you might even take it outright.

This is a trick that exploits the fact that most startup founders and recruiters have an over-inflated “best case” view of how much their equity is actually worth, so it works in your favor when they use it as a benchmark against real money today. I’ve found they also fail to account how much it would be worth for you vs. them. Considering the risk is high you won’t make anything from those options even if you exercise them (& stay long enough), the cash position is nearly always better. If the company becomes some run-away success there will be opportunity to get more equity but getting a cash raise in 6 months is infinitely harder I’ve found. Promotions at startups often times have an additional equity award and by that time you’ll have more information as to the chance of success or not.

Generally, based on my experience, it’s a good way to immediately get an extra $10-20k, with little emotional effort and without the other side feeling as if they were strong-armed, or that they had to give up something, since they offered you the choice. (This is important because you don’t want to start your position there viewed as an “expensive new toy”). They still feel powerful and in control. They may even be happy you took the cash option and let them “keep more” of their precious company. When I started doing this I originally feared they would think I don’t have faith in them, but I’ve never had someone feel insulted I took the cash option.

As an engineer I actually enjoy the negotiation process, it’s the best type of problem: pure tactics.

I agree with nearly everything you said except this:

> If the company becomes some run-away success there will be opportunity to get more equity but getting a cash raise in 6 months is infinitely harder I’ve found.

The size of grants you get after a company is deemed a "run away" success (or even just "not going to die in the next year") are literally 3-4 orders of magnitude smaller than the grants you get before then (ie pre 10 employee number).

Based on this I tend to optimize more for equity (I'm young and not super risk averse), and another thing I've done is agree to take a pay cut until after another round is raised, with a pre-negotiated salary adjustment in order to min-max more towards equity.

But I think you've touched on something super important which is that using the ambiguity of the value of the options is a great way to put the ball back in their court.

True, but honestly if you aren’t already a co-founder, friends with the investors, or very close to the founders, or have A LOT of experience on the business side of tech startups, I’m afraid to say the chances of you getting screwed are extremely high.

As an engineer, you won’t be privy to much if any of the business side, investor meetings, etc. I’m talking about personal relationships. Most engineers I know don’t even have access to or know what the cap table is. The only companies where I’ve made any money from the equity have been ones where the founders are already rich and happen to be nice, altruistic people. It’s unfortunatley how the sausage is made in SV. Most engineers (>90%) make $0 from any equity, no matter how well they have played their game. The era of massage therapists startup millionaires is over. The cat has been out of the bag for awhile now, people know there is money to be made in these companies so they are structuring them to do that.

I’m pretty sure engineers often get screwed as this has something to do with the fact they just don’t have face time with investors or access to the business side and spend their lives “heads down” building the product.

A sad anachronism but very true. Or maybe I'm just old and bitter? lol

To add to that: most engineers are completely clueless about how equity works.

And the typical startup execs do everything they can to keep them that way.

Most engineers I met in SV only knew their equity "will be worth X millions" because that's what the founder told them when they joined. They don't understand funding rounds, dilution, the power of the board and majority owners... Often they don't know what the cap table is.

As someone that doesn't really understand any of that, where should I begin to inform myself?

I get the basics of equity, but don't really know how funding rounds affects it, dilution or even what a cap table is.

https://github.com/jlevy/og-equity-compensation

The bottom lines:

1. The valuation you will get from the founders before being hired ("your equity will be worth $X millions when we IPO") is unrealistically optimistic. Even on the remote chance your startup becomes a huge success, you'll see a small fraction of that at best.

2. Unless you have a lot of influence on the board and majority shareholders (you won't), you can't really protect yourself from losing all the value of your stock.