Rich on Paper, Poor in Cash
Imagine you own a painting appraised at $1 million. You are technically wealthy — but you cannot pay rent with a painting. You need a buyer, a transaction, and cash in hand before that wealth is real. Startup equity works exactly the same way. As a Staff Engineer, your grant might show a seven-figure number in your equity portal, but that number is a projection, not a balance.
The Liquidity Spectrum:
Equity exists on a spectrum from "sell it today" to "wait a decade and hope":
- Public Company RSUs (Restricted Stock Units): 100% liquid. Once vested, shares trade on a public exchange. You can sell within seconds during market hours.
- Late-Stage Private (Tender Offers): Partially liquid. The company occasionally opens a structured window — typically tied to a new funding round — where employees can sell roughly 10–20% of their vested shares to incoming investors.
- Early-Stage Private (Series A/B): Effectively 0% liquid. There is no market for your shares. Your equity is a high-risk, long-duration bet that pays out only at a liquidity event — an IPO, acquisition, or secondary sale — which may be 7–10 years away, or may never happen.
Why This Matters for Career Decisions:
Engineers routinely accept lower salaries in exchange for equity, treating the equity as equivalent compensation. This is a category error. A $50k salary reduction in exchange for $500k in paper equity is only a fair trade if the equity actually converts to cash — and the historical base rate for startup equity reaching a meaningful payout is low. Most startups fail. Of those that succeed, many do so at valuations that make early employee equity worth far less than the headline number suggested.
The Golden Rule:
Never count unvested or illiquid equity as net worth. Until cash clears your bank account, equity is a high-risk derivative with an uncertain expiration date. Model your personal finances on your salary. Treat equity as a lottery ticket with better-than-average odds — not as a savings account.