It's definitely a problem I see with startup equity, particularly the way options are often given. X% of nothing is still nothing and for most startups I can easily work out the very low likelihood of ever seeing cash out of the options they offer.
Many option plans also seem to have clauses where you can't keep them if you leave the company, making them all but worthless except for companies that exit quickly. As a result I'd almost only ever accept real equity that vests in some amount after 1 year or I don't see how I'm really getting anything at all.
The way I'd like to see it positioned is, you give me a sensible stake in the value we're building in trade for a reasonable expectation (1-2 years) of how much of my time you need to build some value. Otherwise just pay me the cash value you think the equity is worth and I can invest it in something real. I'm not going to be remotely motivated by you just handing me a lottery ticket.
Many option plans also seem to have clauses where you can't keep them if you leave the company, making them all but worthless except for companies that exit quickly. As a result I'd almost only ever accept real equity that vests in some amount after 1 year or I don't see how I'm really getting anything at all.
The way I'd like to see it positioned is, you give me a sensible stake in the value we're building in trade for a reasonable expectation (1-2 years) of how much of my time you need to build some value. Otherwise just pay me the cash value you think the equity is worth and I can invest it in something real. I'm not going to be remotely motivated by you just handing me a lottery ticket.