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Two additional considerations:

The incentive stock options (equity) should be designed to get you to go all out to make the company worth a lot more in 4 years than the additional salary would be. If you think you can make it happen, then equity might be the better play as long as you can get by on the lower salary.

BUT (and this is big), If you are a US taxpayer, you will lose any unvested option shares if you leave the company and must purchase any vested shares within 90 days of leaving the company, or you will lose those too. As much as half the value of vested option shares is lost every year because of this trap. (It's a wrinkle in the Internal Revenue Code.) There are now option purchase finance companies that help mitigate this problem, but you should factor this into your decision.

Good question!

Mike Palmer

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