Would You Rather Take 10% Equity or a Cash Bonus of $100,000 in a Startup’s First Year?

If a company can afford to give you a cash bonus of $100,000 during the first year, they must be doing absolutely everything right.  It would be in your best interest to take the equity, even if there is risk involved.  Why would I come up with this resolution?

Let’s look at five years into the future.

The company takes off even further.  Your company decides to take an exit.  You don’t have the next Google, Facebook, Braintree, or anything insane like that.  However, you have a decent mid sized startup.  10% equity turns into $3 million.  After taxes, you have $1.5 million in your pocket.  Your potential gain is $2.9 million.

The company fails.  Your equity is worthless.  You lost $100,000.

What is worse, to lose $100,000 or $2.9 million?

Originally posted on Quora.

Leonard Kim consults startups and writes books like The Etiquette of Social Media: How to Connect and Respond to Others in the World of Social Media

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