You’re hungry, and you want to join an exciting small team working on a project that could or could not change the universe. The company can’t pay you a lot of money because it hasn’t raised much yet, but they will offer you equity to make up for it.

Wow, owning a percentage of a company? That’s awesome.

Not so fast, there’s a lot to learn when it comes to what all of the different stock options and shares means.

David Weekly has come up with a document that I like to call “Startup Equity for Dummies”. Not that we’re dummies, because this tangled world of equity, stocks, and options even trip up the smartest of MBAs. He calls it “An Introduction to Stock & Options”.

Written in a way that even my mom could understand, David Weekly’s work is a must-print-and-read if you’re thinking of starting your own company, or joining a startup.

When will Facebook finally IPO?????

David Weekly breaks down what an “IPO” actually is, since a lot of the armchair quarterbacks seem to think it’s a process that starts with a magical fairy flicking a wand:

When the company “goes public” and has an “Initial Public Offering” (IPO), it creates some new Common stock that it sells to investment banks called underwriters that in turn sell the stock to members of the general public or other investors. Done well, this process generates a bunch of cash that the company can use to grow, and the company’s employees can sell some of their stock on the market after a brief “lockup” period.

Even I can understand that.

David Weekly teaches us the difference between common and preferred stock, what a board actually does, breaks down the different types of investors, and dips into liquidity events.

So if you’re ready to move to Silicon Valley and live the “dream”, give this priceless PDF a read first.

An Introduction to Stock & Options (PDF)