Equity is an ownership interest in the business. Your stake in the business only becomes cash if one of two things happens: the business is bought or goes public (an IPO).
An
equity grant is generally for a period of 4 years: you will receive X number of
shares in 4 years and you will earn (or accumulate) progressively during that
period. The acquisition of rights will generally be subject to a
"cliff" of 1 year: you do not earn anything in the first year and on
your first anniversary, you invest ¼ of the shares. This formula ("4 year
vest, 1 year cliff") is almost universal in technology.
Fairness
is complex, Holloway's guide is the best overview if you want to know more.
The
company will never give you shares directly, because you would have to pay
taxes on them immediately. Instead, companies have devised indirect mechanisms
to delay taxes. The two most common are RSUs and stock options.
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