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Ask HN: Considering a job offer at a “unicorn.” What should I know about equity?
I'm deciding between job offers - one at a Big 4 company, one at a so-called 'unicorn.' I like them both and know I'd enjoy the work and teams at either. On paper, the later offer is better - slightly higher base, much more equity (on paper).
My question: how does one compare the value of RSUs from a Big 4 company (with a clearly known value and relatively predictable future performance) with shares in a private company? On paper, the shares in the latter are worth much more (based on the current public valuation). Are there any caveats I should know about - can I assume the numbers I'm being given are reasonably accurate? Obviously, there is much greater risk at a company where the valuation is heavily based on future growth.
What questions should I ask about the shares, or what other factors might I want to consider when weighing these offers purely on compensation? I've read about different types of shares, liquidation preferences, etc. How much of this could a candidate expect to know about and should it factor into a decision?
- rahimnathwani 11y agoWhere do you need help? - Valuing stock options or shares in a private company? (http://www.payne.org/index.php/Startup_Equity_For_Employees http://www.payne.org/index.php/Startup_Equity_For_Employees) - Negotiating compensation? (http://www.amazon.com/Negotiating-Your-Salary-Make-Minute/dp... http://www.amazon.com/Negotiating-Your-Salary-Make-Minute/dp...) - Establishing a benchmark? (check AngelList) Similar questions are asked every few months on HN. Search hn.algolia.com to see answers provided by others. A few of them are worth reading. Mine aren't the best, but might be worth skimming: https://news.ycombinator.com/item?id=7370839 https://news.ycombinator.com/item?id=7370839 https://news.ycombinator.com/item?id=8092653 https://news.ycombinator.com/item?id=8092653
- trying222 11y agoThanks for these. First link (and similar others I've found) has helped me get up to speed on terminology and other issues at play. I haven't been given information about what % of the company the shares I'm being offered represent. How critical is this do you think? Can I take the company at their word in terms of what the shares are worth at what they state is the current valuation of the company?
- rahimnathwani 11y ago"Can I take the company at their word in terms of what the shares are worth at what they state is the current valuation of the company?" You can. I wouldn't :)
- argonaut 11y agoYou should definitely press for as much information as you can - how many shares (or stock options, or RSUs) you're getting, how many shares are outstanding, the common stock / preferred stock breakdown, liquidation preferences, etc. It's unlikely any startup will be willing to share all of that with you, though. That being said, they definitely cannot lie to you.
- trying222 11y agoThanks, this is a helpful list of questions. I'll go ahead and ask and see what they say, worst case they won't be able to answer any of them.
- ams6110 11y agoEquity is something that is often effectively worthless. Ask yourself, if you were in a position to exercise your options, is there actually a market for them. Paper value is meaningless, if there is nobody who will buy your shares.
- trying222 11y agoI've been told that there are various gray market (?) channels to sell shares in a company that is not public, but I don't even know what to search for to find more about these. Do you have any pointers on that?
- mindcrime 11y agoSecondMarket is involved in that space in some fashion. I know almost nothing about that world though, so I can't do much more than point you at the Wikipedia page. https://en.wikipedia.org/wiki/SecondMarket https://en.wikipedia.org/wiki/SecondMarket
- jyu 11y agoThe people most interested your shares are people who agree that company is a unicorn. Usually existing shareholders with some money (angel investors, VC, advisors, founders, other employees) or potentially new shareholders that want a piece. Your ideal time to take money off the table is while they are raising the next round.
- rahimnathwani 11y ago"On paper, the shares in the latter are worth much more (based on the current public valuation)." By 'public valuation' I assume you mean a $ figure that was announced after the last funding round. Your shares probably don't have liquidation preferences, whereas the investors' shares probably do. So, you can't rely on a valuation calculated by a journalist. You need to do the math. "How much of this could a candidate expect to know about and should it factor into a decision?" Companies are used to dealing with people who don't understand, or do not look too deeply into the numbers. So, I guess they will expect you not to ask for details. However, without knowing the details of the cap table (including, as you say, the volume of shares outstanding, and the different rights attaching to different classes of shares) you can't hope to arrive at a useful valuation. Many people on HN suggest valuing startup equity at $0, and this is one of the reasons.
- trying222 11y agoWell, the number I'm using is what the company has told me is their current valuation (it's slightly higher than what was reported by press after the last round of funding, but not dramatically so). The share prices I'm being given are stated as a fact based on this valuation (along with optimistic projects of what they might look like were the company to multiply in value). Should I ask about liquidation preferences? % of company that the # of RSUs I'm being offered represents? I guess there's no harm in asking.
- mindcrime 11y agoYou can ask about all that stuff, but at the end of the day, you're almost certainly not going to get stock with any kind of liquidation preference yourself, and your stock is almost certainly going to be at risk of dilution in a way that you can't control or even effect. If the company raises 12 more rounds of funding before going public, you might wind up going from owning, say, 2% of the company, to owning .000000000000012% of the company. The thing is, there's just really no way to know what will happen. I say "value the stock at $0 and if it turns into more than that one day, consider it 'found money'".
- rahimnathwani 11y ago