While you probably won't receive a 5% grant as a non-executive hire at a venture-backed startup, my point still stands for salaried employees. If you can make $125,000/year, a company offers you $80,000/year and suggests that it's making up the difference in equity, you should still run the numbers. For 5% to compensate you for your sacrifice in this scenario, the company would need to be worth $900,000.

One of the problems employees face in Silicon Valley is that the valuations on angel and venture-backed startups are exorbitant, so the equity is overpriced. Seed stage startups with no traction (and sometimes no launched product) can still sport million-plus valuations. As an employee, it takes a leap of faith to believe in these valuations and use them as the basis for valuing your equity. Fortunately for these startups, enough individuals are willing to take that leap of faith.