I’ve done advisory projects that have included common stock as part of the compensation. And I’ve learned the hard way that the common stockholders are the last to get paid, and it’s even worse if you’re not an employee.

Every company goes through ups and downs. Even successful companies may have a “down round” along the way, where the existing stockholders get crammed down by investors (existing and/or new). The usual mechanism for this is anti-dilution protection, which protects existing investors if there’s ever a follow-on round at a lower valuation. Or, if the company is in a really tough spot, a new investor will insist existing investors convert their preferred stock to common, before investing at some rock-bottom valuation.

The net effect is that common stock holders take a massive dilution hit (say, like 95%). Now, the investors realize that employees need meaningful ownership, so they will “re-up” everyone with grants to get to a reasonable percentage. This ownership may be more or less than the pre-dilution percentage, based on how important the company feels the employee’s contribution is. The re-ups almost always start vesting over again, so the founders (vs the developer that was hired a month ago) get hit the hardest — their clock is reset.

And if you’re a non-employee, you’re totally screwed. I’ve never seen a company re-up anyone who’s not integral to things going forward (and you can’t blame them).

There’s nothing you do about this, other than to factor it into your thinking about stock compensation for a consulting or advisory project.