This is the part about equity that is most likely to bite you in the ass if you receive equity but ultimately do not control the allocation of it. (Common for early employee or founders on the technical side of things).
Day 1: Awesome, I own 10% of this company. If it sells for millions I will make a significant amount of money!
Day 630: Due to the "almost infinite" nature of equity and dilution, I now own 0.05% of the company. If it sells for millions I will be able to buy a cup of coffee!
If you go for this sort of deal you should always have some anti-dilution protection. Otherwise as is pointed out the equity is essentially worthless. You can use some sort of full ratchet clause or ensure the majority shareholder can not issue more shares (though some special resolution requirement). You'll need a lawyer...
This is the part about equity that is most likely to bite you in the ass if you receive equity but ultimately do not control the allocation of it. (Common for early employee or founders on the technical side of things).
Day 1: Awesome, I own 10% of this company. If it sells for millions I will make a significant amount of money!
Day 630: Due to the "almost infinite" nature of equity and dilution, I now own 0.05% of the company. If it sells for millions I will be able to buy a cup of coffee!