(this post is a feed post from my comments on reddit)
r/startups
it can be a combination of both. you could structure something like the following, and put it into a contract.
year 1 equity split uncapped, if this passes an acceptable threshold, then x% equity is rewarded moving forwards.
(heres the important part), the equity vests as follows (% for example) –
year 2 – 25%
year 3 – 25%
year 4 – 25%
year 5 – 25%
​
in other words, it equity with a 1 year cliff, during which time they earn a profit share