Xavier describes how things work in theory. Unfortunately, many startups grant options that systemically deprive workers of realizing the value they have created.
Chief among these are the "90 day rule," "repurchase rights" and "lock-up periods" that apply to workers but not investors.
Indeed, these terms are considered "standard" in some "off the shelf" option notices because they benefit investors at the expense of workers (most especially early employees).
Even worse, some companies will refuse to disclose the information you need to compute the expected values. Most nefariously, quoting only a number of shares and not your fully diluted percentage stake.
Moreover, computing your expected value from your fully diluted percentage stake requires knowledge of the capitalization structure, including preferred and convertible notes. Most startups will not share their cap table with prospective employees.
- Good: Have a contracts lawyer review your agreement.. A small business lawyer should be able to review for under $500, and will flag these shenanigans.
- Better: Have the company change the agreement
- Better: Refuse to work for startups that issue "unethical" options grants
The bottom line is indeed, don't join a startup only for the money. Every step of the process is rigged to the benefit of capital to the great detriment of labor.