Red Flags in Equity Offers
The structural, communication, and situational red flags to check before you sign anything.
What you’ll learn
- ✓Participating preferred stock and how it eats your exit proceeds
- ✓Stacked liquidation preferences (2x, 3x) that leave common dry
- ✓No extended exercise window after departure
- ✓Companies that won't share total shares outstanding
- ✓Late-stage startups with massive preferred overhang
- ✓Situational red flags: down rounds, bridge financing, excessive dilution history
Some equity offers are structured fairly. Others are structured in ways that systematically reduce what you'll ever see — not through fraud, but through terms that are technically legal and completely buried in the fine print. Learning to spot these before you sign is one of the highest-leverage skills in your career.
Red flags fall into three categories: structural (the terms themselves), communication (what they won't tell you), and situational (what the company's trajectory suggests about your equity's odds).
In this chapter, you’ll work through the exact framework for red flags in equity offers. We cover each of the key topics with worked examples, real numbers, and actionable steps you can take immediately.
- ✓Participating preferred stock and how it eats your exit proceeds
- ✓Stacked liquidation preferences (2x, 3x) that leave common dry
- ✓No extended exercise window after departure
- ✓Companies that won't share total shares outstanding
- ✓Late-stage startups with massive preferred overhang
- ✓Situational red flags: down rounds, bridge financing, excessive dilution history
Equity Decoder
Stop guessing. Start knowing.
12 chapters. 38 pages. An equity calculator. Everything you need to decode any offer.
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