Yes, they are offered stock options, and it turns out to be of zero worth, much more so than even usual employee options (which are rarely worth anything themselves).
Employees have to be thrown some crumbs so they don't quit en mass and go to the competitor. But who'll watch out for you? At the next equity restructuring (which happens with every investment, loan or liquidity event), your equity will be chipped down, and it will be worth exactly 0 by the time the company is worth anything, if it ever is.
Either take actual shares at a huge discount (though, depending on how far along this guy is with, might be a tax problem for you - unless you plan to put it on your tax return at fair value, you need to speak with a CPA first), or actual cash money.
And, to echo tarr11 below: First, figure out your market rate first; that will give you an idea of the opportunity cost, without which you can't evaluate any offer.
Employees have to be thrown some crumbs so they don't quit en mass and go to the competitor. But who'll watch out for you? At the next equity restructuring (which happens with every investment, loan or liquidity event), your equity will be chipped down, and it will be worth exactly 0 by the time the company is worth anything, if it ever is.
Either take actual shares at a huge discount (though, depending on how far along this guy is with, might be a tax problem for you - unless you plan to put it on your tax return at fair value, you need to speak with a CPA first), or actual cash money.
And, to echo tarr11 below: First, figure out your market rate first; that will give you an idea of the opportunity cost, without which you can't evaluate any offer.