Is the motivation that asking these questions is going to be used in some way to get better compensation?
1. Ask questions
2. ???
3. Profit!
The true is that equity in a startup us extremely risky. So you're either going to get a large chunk and be a decision maker or you're ganna be a passive participant and hope for the best. No questions is going to change that. Even if the answers to these questions may be desirable NOW, tomorrow you can be diluted. It's meaningless to stress over this. Join because you love the company or are going to be a decision maker.
First off, if you're comparing multiple offers with similar salaries, equity considerations may be a good way to make a decision.
Beyond that, understanding how companies handle equity compensation can tell you a lot about their culture and treatment of employees. There are companies out there that are eager to answer these questions because they give generous stock compensation and want you to know it. There are also companies that will obfuscate and hide behind misleading numbers. I once had an offer and asked for more equity, only to be told by the recruiter that the stock was about to split, so I'd actually get twice as much (this is absolute nonsense, to be clear, and a huge red flag).
Lastly, with regard to your initial question about compensation, asking these questions absolutely can be useful to that end. When you're negotiating with early to mid-stage startups, one of the things that you can negotiate is your equity/salary split. I once took a pay cut from the initial offer in exchange a much greater amount of equity than I was initially offered. That was because I found a lot of positives about the company and preferred higher risk and more reward (thankfully it looks like that is going to work out very well in my favor, but obviously that was in no way assured). If a company's giving you bad answers as it relates to equity, you may well want to try to negotiate for a higher salary in exchange for less equity, so your financial circumstances aren't tied as much to the company's performance. Understanding equity gives you one more dimension on which to negotiate, and the more things you can negotiate, the better off you are.
There is this prevailing idea in Silicon Valley that you should just ignore equity and treat it like a lottery ticket, and while I think that is very good for financial planning, it is otherwise awful advice. Just because you don't have full control over the way things go with equity doesn't mean that you shouldn't educate yourself on what can be a meaningful portion of your compensation.
> only to be told by the recruiter that the stock was about to split, so I'd actually get twice as much (this is absolute nonsense, to be clear, and a huge red flag).
It’s nonsense, but coming from a recruiter, it’s not a red flag to me. If I red flagged every recruiter who didn’t quite know how the world worked, I don’t how many I’d have left. If a founder or a CFO tells you that, it’s a red flag; if it’s a recruiter, they’re still wrong, but I don’t count it nearly as sharply against the company.
It's a big red flag to me, because understanding compensation is an important part of a recruiter's job. The recruiter either did not understand it, which is bad, because you've got someone doing important work (negotiating with potential hires) who doesn't understand a basic part of their job, or they did understand it and were purposely trying to mislead it. Either way, it doesn't reflect well on the company.
For every person who is talking about how well they analyzed the success of their startup, there are nine who thought they were smart that you never hear about because their equity end up being worthless.
You're way off with that number. Nine out of ten startups may fail, but far greater than 10% of employees receiving equity ultimately see some value from it.
Startups that fail tend to do so early, before they've hired a lot of people. Far more equity grants are given out by series C-D-E startups because they're able to hire vastly more people, and the rate of failure of those companies is much lower.
And again, that's still not a reason just to ignore the equity component of an offer. You're clearly cynical about equity - that's fine. Understand your equity and use that information to negotiate for less of it and more salary (or whatever else you prefer).
They are only talking about investors who have first preference in any “success” of the company and they are usually well diversified and not depending on one successful exit. You as an employee get lower preferences and have all of your eggs in one basket.
Now given a choice, why would I work for a startup instead of a profitable FAAMG (not a typo) where I get RSUs or even a “second tier” profitable tech company like Salesforce, Adobe, Intel, Nvidia, etc. where at every vesting event I have the opportunity to immediately sell and diversify my risks? I don’t need to depend on the long term viability of my RSUs. Just the viability over the next six months?
Diligence on the startup so you know what you're getting into. Also prevents early employee churn because people feel duped once they look under the hood.
The greatest frustration is usually around: 1. feeling like your equity cut is not enough once you know what other people are paid; 2. not knowing how much you pay in exercise cost / taxes / exercise window until it's too late
Is the motivation that asking these questions is going to be used in some way to get better compensation?
Could be. But these questions can also be useful as (1) bullshit filters and (2) signalling (that you know your stuff and are not to be toyed with).
In particular as to (1): you should be able to readily get answers to these questions; any hint at evasiveness, or a refusal to answer, should be taken as a red flag.
1. Ask questions 2. ??? 3. Profit!
The true is that equity in a startup us extremely risky. So you're either going to get a large chunk and be a decision maker or you're ganna be a passive participant and hope for the best. No questions is going to change that. Even if the answers to these questions may be desirable NOW, tomorrow you can be diluted. It's meaningless to stress over this. Join because you love the company or are going to be a decision maker.