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Did you get the cash and options the wrong way round in your example ($100k + 5000 options / $110k + 3000 options)? That bit confused me for a while. Or maybe I
by nippoo 11y ago
Did you get the cash and options the wrong way round in your example ($100k + 5000 options / $110k + 3000 options)? That bit confused me for a while. Or maybe I'm missing something about how they work!
- jeremyjh 11y agoWhy would you assume 3000 options at Startup A are worth less than 5000 at Startup B?
- SeoxyS 11y agoActually, his example works either way. Imagine this: - $110k + 5k options, with 5M shares outstanding, at a strike price of $1 / share. - $100k + 3k options, with 1M shares outstanding, at a strike price of $0.01 / share Both are realistic scenarios for an early-stage startup. The 3k options in the second deal are worth much more than the 5k options in the first deal, on paper. (This is without even brining in valuation in question.)
- patio11 11y agoMy understanding is that strike price can be virtually unboundedly below current valuation of the share, given particular circumstances of a company, which makes this calculation quite sensitive to the valuation. A call option on a share of Google with a strike price of $50 is worth a heck of a lot more than a call option on "name any startup" with a strike price of a tenth of a penny. There are, naturally, cash flow implications to this.
- dripton 11y agoI did that on purpose. Options in company A are completely different than options in company B, and assuming that more is better is just silly. 3000 out of 100000 is 3%; 5000 out of 500000 is 1%. But you can't just compare percentages either, because a percentage of a more valuable company is worth more than a percentage of a less valuable company. As an employee, you just don't know. So value them at zero. Or, if you want to be fancy, epsilon. And take the cash.