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Even if you knew the number of shares outstanding at the time of the option grant, it would still be useless. The company can issue new shares at any time leadi

Even if you knew the number of shares outstanding at the time of the option grant, it would still be useless. The company can issue new shares at any time leading to dilution. Also at some future liquidity event (acquisition, IPO), a significant number of new shares can be issued leading to more dilution. So yes, options are somewhat of a lottery ticket with ever changing odds. If the company does extraordinarily well, you will do well also. If you truly believe the company has a very good chance at financial success, you should stay irrespective of the number of options. If you are making a significant contribution to that success, a rational company will want to reward you and incent you to stay with more options. If both those things are not true, it is best to seek your fortune elsewhere.

rahimnathwani 11y ago
"The company can issue new shares at any time leading to dilution." Yes, but the directors of the company are obligated to act in the best interest of shareholders, so hopefully they would do that iff it increases the value of existing shares. (OK, there are many things wrong with this, including the fact that option holders are not shareholders.) "If the company does extraordinarily well, you will do well also." Yes, but if the company does very (but not extraordinarily) well, you might end up with nothing. "If you are making a significant contribution to that success, a rational company will want to reward you and incent you to stay with more options." But your contribution may not be constant. An early engineer who took a risk (low salary, high chance of being laid off) and built the prototype may not fit in when the company grows, so there may be little rational incentive to treat her fairly.
- puppetmaster3 11y ago
  "obligated to act in the best interest of shareholders". Obligated how specifically? Also, all shareholders, or the majority?
  - mamon 11y ago
    Obligated by law: deliberately acting against (some) shareholders interest is a criminal offense.
    - moron4hire 11y ago
      people holding options are not shareholders until they exercise those options.
      - dasil003 11y ago
        Excellent point, but equally important is the fact that even if you purchase your < 1% of shared, if you are a regular middle class person, you will probably have no real legal recourse to sue if you get screwed. The investors who are most likely behind it will cover their asses and so far outgun you legally that it is probably hopeless to try to fight even if you have the means. This is where the GGGP (davidwihl) is both right and wrong—knowledge of the cap table at signing won't guarantee anything, but that combined with a good judgement of character is the best you can do. In the end you can get screwed either way, but if there is any caginess up front then run don't walk away.
    - puppetmaster3 11y ago
      So my interpretation is: this is good for shareholders. Can you give me examples of people in jail for this 'crime'? At worst people saw social network, and it seemed a ok. My understanding is that options for common shares, such as terms at YC, have not even anti dilution protection. So the # you have is a snap shot, and nothing to do what that % would be when you fully vest.
dexterdog 11y ago
They can issue new shares but they would have to notify you. You should have a clause in your agreement that any new grant you have the ability to get more options to stay at leat less dilluted or you can walk.
- GeneralMayhem 11y ago
  What does "walk" mean in this context? My (naive) reading is that you can cut all ties and run because they've essentially broken a contract; that's trivially true, but doesn't help with the actual goal of getting money from those options.

rahimnathwani 11y ago

"The company can issue new shares at any time leading to dilution." Yes, but the directors of the company are obligated to act in the best interest of shareholders, so hopefully they would do that iff it increases the value of existing shares. (OK, there are many things wrong with this, including the fact that option holders are not shareholders.) "If the company does extraordinarily well, you will do well also." Yes, but if the company does very (but not extraordinarily) well, you might end up with nothing. "If you are making a significant contribution to that success, a rational company will want to reward you and incent you to stay with more options." But your contribution may not be constant. An early engineer who took a risk (low salary, high chance of being laid off) and built the prototype may not fit in when the company grows, so there may be little rational incentive to treat her fairly.

puppetmaster3 11y ago
"obligated to act in the best interest of shareholders". Obligated how specifically? Also, all shareholders, or the majority?
- mamon 11y ago
  Obligated by law: deliberately acting against (some) shareholders interest is a criminal offense.
  - moron4hire 11y ago
    people holding options are not shareholders until they exercise those options.
    - dasil003 11y ago
      Excellent point, but equally important is the fact that even if you purchase your < 1% of shared, if you are a regular middle class person, you will probably have no real legal recourse to sue if you get screwed. The investors who are most likely behind it will cover their asses and so far outgun you legally that it is probably hopeless to try to fight even if you have the means. This is where the GGGP (davidwihl) is both right and wrong—knowledge of the cap table at signing won't guarantee anything, but that combined with a good judgement of character is the best you can do. In the end you can get screwed either way, but if there is any caginess up front then run don't walk away.
  - puppetmaster3 11y ago
    So my interpretation is: this is good for shareholders. Can you give me examples of people in jail for this 'crime'? At worst people saw social network, and it seemed a ok. My understanding is that options for common shares, such as terms at YC, have not even anti dilution protection. So the # you have is a snap shot, and nothing to do what that % would be when you fully vest.

dexterdog 11y ago

They can issue new shares but they would have to notify you. You should have a clause in your agreement that any new grant you have the ability to get more options to stay at leat less dilluted or you can walk.

GeneralMayhem 11y ago
What does "walk" mean in this context? My (naive) reading is that you can cut all ties and run because they've essentially broken a contract; that's trivially true, but doesn't help with the actual goal of getting money from those options.