Equity - Equity refers to partial ownership of a company. It can be thought of as a fraction of the pie. (Further reading: Startup Equity Investments and Typical Employee Equity Levels)

409A - A third-party appraisal of the company’s value that must be reported to the IRS annually or when a “material event” occurs. The 409A valuation is the primary factor used to determine the strike price. (Further reading: What is a 409A valuation?)

Strike price - The cost to purchase a share of the company in the future (i.e. when you exercise a stock option). The goal is to purchase shares, in the future, at a lower price than the current (i.e. strike) price and therefore make a profit. (Further reading: What is the strike price of an employee stock option?)

Exercise - Exercising a stock option means purchasing shares of the company at the strike price (i.e. the price you were promised when the options were granted). (Further reading: What does exercising stock options mean?)

Exercising stock options means purchasing shares of the issuer’s common stock at the set price defined in your option grant. If you decide to purchase shares, you own a piece of the company. You’re never required to exercise your options, though.

Incentive stock options (ISOs) - The right to purchase a share of a company in the future at a discounted price. ISOs are designed to retain key employees and are subject to a vesting schedule. (Further reading: Incentive Stock Options (ISOs))

Vesting schedule - Timeline that lays out when employees will receive stock options. The typical timeline is 4 years with a 1-year cliff (i.e. a waiting period before receving stock options to prevent employees from leaving the company prematurely). (Further reading: What is a stock option vesting schedule?)

Cliff - The period of time an employee has to wait before starting to receive stock options. After the cliff (typically 1 year), employees usually begin receiving stock options monthly. (Further reading: What is a stock option vesting schedule?)

Employee option pool - The percentage of company shares that are set aside for employees of the companies (i.e. not founders, advisors, or investors). An option pool is often roughly 10% of the total shares of the company. (Further reading: Option Pool)

Cap table - A capitalization table (commonly referred to as a cap table) is a breakdown of the people who own shares in a company and how many they own. The details of a cap table are usually only available to a core group of leaders at a company. (Further reading: Capitalization Table)