[jameshart]

Given that the implicit bargain being made when you join an early startup is ‘I’m going to take a paycut to invest my time into the successful growth of this venture’, is there any kind of framework that exists that lets you put that investment into a more secure basis than common stock options?

Like, if you’re offering them a market-valued $300k worth of engineering skill over the next year for $150k, that’s a $150k investment in the company.

What kind of terms would an angel investor offering $150k get?

[lmeyerov]

Yes: Similar to the startup's financial investors, take a portfolio approach to spreading risk. As you are investing time instead of money, that means spreading risk over time: decide at 3mo, 1yr, and 2yr if this is the outlier to double down on. Likewise, if senior and in a non-engineering role, negotiate a single/double trigger in the case of an early exit / acquihire: https://www.cooleygo.com/what-are-single-and-double-trigger-... .

RE:Preferred shares, Investors get preferred shares -- first money out -- to protect against something like someone raising a round and instantly selling. If the investors were common, the founders would be self-enriching at the direct cost of the investors (and the pension funds etc. funding them.) Your protection against that sort of thing is initially worse -- vesting cliff means no stock for 1yr. This generally gets compensated by a signing bonus to the new firm, but not a big win/loss either way, beyond being grounds to get a new lottery ticket elsewhere (losing you say 6mo on that ground: it was a dud).

After that, more about whether the company has raised more (including participation multiples) than it sells for. With today's megarounds at all stages, this is quite the danger. So it's about knowing how much they need to exit for before common shares convert, and who has the voting rights on that/when, which is a very fair question (vs. seeing the cap table, which is unlikely). Likewise, another protection here is on dilution, like how much of the employee pool is remaining vs will increase dilution on next round... but that that's much less of an existential risk than the trend of revenueless startups raising $3-10M seeds on bad terms (so a quick $10-15M buyout won't work) and unprofitable ones raising $20M+ A's (so a VC-packed board with a drinking-their-own-kool-aid will veto a < $100M deal), and then racing to a unicorn status that prices out most previously viable acquirers who'd only do $100M-300M.