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Towards the end he makes the comment: "Can you please let me know how much money I’d make from my options if the company were to sell or IPO for $100m, 200m, 30

by birken 10y ago

Towards the end he makes the comment: "Can you please let me know how much money I’d make from my options if the company were to sell or IPO for $100m, 200m, 300m, 400m, etc?" Here is a simple open-source site (FD: which I wrote) which handles this for you: https://friendlyoptions.org/ https://friendlyoptions.org/ Give the site to your prospective employer, ask them to fill it out with the details of your stock option grant and then share the link with you (all the information is stored in the URL so no data leaks to the site --- or just run it locally if you are paranoid). The site asks for the minimum amount of information possible for you to start valuing your stock options so if they can't fill it out, you essentially have no way to value your options. ---- With that advertisement out of the way, I disagree with this article a little bit. I think questions about the past/present are all completely fair game and should be asked and answered: * How much money have you raised and at what terms? * What is the current stock option plan and what are the details of my stock option grant? * Have their been any secondary sale transactions in the past? Who participated? But once you get into the future, prepare to be sold a very optimistic vision of the future that may or may not coincide with reality. And this isn't necessarily anybody doing anything wrong, generally the people who run these types of companies are very optimistic people who believe that what they are saying is true. However, this doesn't mean it is likely to happen. I'm not saying you shouldn't ask, get all the information you can, but a company will never tell you a pessimistic view of the future (and nor should they). They may say they'd never take debt and are shooting for an IPO in 2 years, but I guarantee you if something changes in a year those plans might all go out of the window.

econner 10y ago
Is a secondary sale good or bad? Why ask this question?
- hkmurakami 10y ago
  Some scenarios: 1) If there has been one in the past, you may reasonably expect another one in the future. They may even reveal that they have secondary sales at regular intervals. This derisks your equity illiquidity somewhat. 2) If there was a secondary sale where only part of the "leadership" participated, then that's at least a yellow flag for management's attitudes towards its workforce.
  - birken 10y ago
    haha I just get finished writing my response and see you wrote the same thing more concisely and before me :)
- birken 10y ago
  Generally good, but with one catch. I'd ask for 2 reasons: 1) Purely as a sign of disrespect to employees, I'd never work at a company where founders sold shares and employees never had the opportunity to. I think it is a very meaningful proxy of if the founders care about their employees or not. If founders want to have a policy prohibiting employees and themselves from selling shares, I'm perfectly fine with that (though I'd want to know that policy exists), but not founders get to sell and employees can't. 2) More importantly, a secondary share offering means that at some point in time the common shares were worth enough that somebody bought them. That is a good sign that at the time when the secondary sale was happening, the company was going well. If the secondary sales are ongoing it also gives you a realistic estimate of what the shares are worth right now. This is pretty rare but I think at least a few large "unicorn" companies have regularly scheduled secondary share sales.
- zenlikethat 10y ago
  Great if you can swing it but be forewarned, very few companies will allow this if they know what they are doing, apparently this caused nightmares leading to Facebook's IPO due to a bloated term sheet and very few companies will explicitly allow it if they want to eventually IPO. I wouldn't expect them to go along with it and it might be explicitly forbidden in your contract.
Terr_ 10y ago
> all the information is stored in the URL so no data leaks to the site Thanks, that's actually a nice feature. For anyone curious, it works because using an URL like http://example.com/page?foo=bar#secret http://example.com/page?foo=bar#secret in a browser will not actually send "secret" to the server, as per RFC 1808. Of course, there's nothing stopping some sneaky JS that runs later from reading the data and sending it back through another channel, but that's another story.
- saycheese 10y ago
  For more info on the anchor not being sent to the server see: http://stackoverflow.com/questions/3067491/is-the-anchor-part-of-a-url-being-sent-to-a-web-server http://stackoverflow.com/questions/3067491/is-the-anchor-par...
  - photomultiply 10y ago
    I have implemented pages that circumvent that detail with AJAX. var hash = window.location.hash.substr(1); Then you just quietly: $.ajax( "example.php?hash=" + hash ); No one will ever notice the difference without inspecting their network traffic, and docile, agreeable users will gaze reassuringly at the anchor, and lull themselves to sleep, feeling placated by the presence of the warm glow of the # character in their address bar. Here, see for yourself: data:text/html,<script>alert(window.location.hash.substr(1))</script>#because+anchors+are+always+safe Paste that into your address bar, and witness the simplicity.
  - digeridew 10y ago
    I have implemented pages that circumvent that detail with AJAX. var hash = window.location.hash.substr(1); Then you just quietly: $.ajax( "example.php?hash=" + hash ); No one will ever notice the difference without inspecting their network traffic, and docile, agreeable users will gaze reassuringly at the anchor, and lull themselves to sleep, feeling placated by the presence of the warm glow of the # character in their address bar. Here, see for yourself: data:text/html,<script>alert(window.location.hash.substr(1))</script>#because+anchors+are+always+safe Paste that into your address bar, and witness the simplicity.
abalone 10y ago
That's a fun tool (friendlyoptions). But I fear it may set false expectations, mainly because it bakes in assumptions about valuation growth and dilution per round, namely ~3X and 30%. But those are actually hugely variable while having a profound effect on the outcome. And of course if you were to make those configurable it would be more accurate but explode the complexity of the tool... but that's exactly true to life. If the goal is to gauge how a grant compares to competitive offers, I say we should focus on more objective, immediate metrics like percentage ownership. And some of the important terms you tool highlights, like exercise windows.
- birken 10y ago
  It is a great point and I did struggle with it. I think if you want to be pessimistic about stock options you can just assume the value to be low or nothing. The site attempts to give you a cautious but optimistic view of what could happen if things go well. This was based on my own personal experience, experience of friends and openly available data on how the rounds normally go. My perspective when making the site is that companies will often be too optimistic about options even when the company does blow up, which leads people to be misled even if the company does do extraordinary well. The site gives a realistic view of what you can expect in an optimistic scenario. Of course very few companies every achieve this, but the idea is to at least gauge what your upside might be if a really lucky outcome happens. If I had good statistics about what % of companies reach Series A, then Series B, then Growth it would be great to put that on the site as well but I'm not sure where I can find that...

by birken 10y ago

econner 10y ago

Is a secondary sale good or bad? Why ask this question?

hkmurakami 10y ago
Some scenarios: 1) If there has been one in the past, you may reasonably expect another one in the future. They may even reveal that they have secondary sales at regular intervals. This derisks your equity illiquidity somewhat. 2) If there was a secondary sale where only part of the "leadership" participated, then that's at least a yellow flag for management's attitudes towards its workforce.
- birken 10y ago
  haha I just get finished writing my response and see you wrote the same thing more concisely and before me :)
birken 10y ago
Generally good, but with one catch. I'd ask for 2 reasons: 1) Purely as a sign of disrespect to employees, I'd never work at a company where founders sold shares and employees never had the opportunity to. I think it is a very meaningful proxy of if the founders care about their employees or not. If founders want to have a policy prohibiting employees and themselves from selling shares, I'm perfectly fine with that (though I'd want to know that policy exists), but not founders get to sell and employees can't. 2) More importantly, a secondary share offering means that at some point in time the common shares were worth enough that somebody bought them. That is a good sign that at the time when the secondary sale was happening, the company was going well. If the secondary sales are ongoing it also gives you a realistic estimate of what the shares are worth right now. This is pretty rare but I think at least a few large "unicorn" companies have regularly scheduled secondary share sales.
zenlikethat 10y ago
Great if you can swing it but be forewarned, very few companies will allow this if they know what they are doing, apparently this caused nightmares leading to Facebook's IPO due to a bloated term sheet and very few companies will explicitly allow it if they want to eventually IPO. I wouldn't expect them to go along with it and it might be explicitly forbidden in your contract.

Terr_ 10y ago

> all the information is stored in the URL so no data leaks to the site Thanks, that's actually a nice feature. For anyone curious, it works because using an URL like http://example.com/page?foo=bar#secret http://example.com/page?foo=bar#secret in a browser will not actually send "secret" to the server, as per RFC 1808. Of course, there's nothing stopping some sneaky JS that runs later from reading the data and sending it back through another channel, but that's another story.

saycheese 10y ago
For more info on the anchor not being sent to the server see: http://stackoverflow.com/questions/3067491/is-the-anchor-part-of-a-url-being-sent-to-a-web-server http://stackoverflow.com/questions/3067491/is-the-anchor-par...
- photomultiply 10y ago
  I have implemented pages that circumvent that detail with AJAX. var hash = window.location.hash.substr(1); Then you just quietly: $.ajax( "example.php?hash=" + hash ); No one will ever notice the difference without inspecting their network traffic, and docile, agreeable users will gaze reassuringly at the anchor, and lull themselves to sleep, feeling placated by the presence of the warm glow of the # character in their address bar. Here, see for yourself: data:text/html,<script>alert(window.location.hash.substr(1))</script>#because+anchors+are+always+safe Paste that into your address bar, and witness the simplicity.
- digeridew 10y ago
  I have implemented pages that circumvent that detail with AJAX. var hash = window.location.hash.substr(1); Then you just quietly: $.ajax( "example.php?hash=" + hash ); No one will ever notice the difference without inspecting their network traffic, and docile, agreeable users will gaze reassuringly at the anchor, and lull themselves to sleep, feeling placated by the presence of the warm glow of the # character in their address bar. Here, see for yourself: data:text/html,<script>alert(window.location.hash.substr(1))</script>#because+anchors+are+always+safe Paste that into your address bar, and witness the simplicity.

abalone 10y ago

That's a fun tool (friendlyoptions). But I fear it may set false expectations, mainly because it bakes in assumptions about valuation growth and dilution per round, namely ~3X and 30%. But those are actually hugely variable while having a profound effect on the outcome. And of course if you were to make those configurable it would be more accurate but explode the complexity of the tool... but that's exactly true to life. If the goal is to gauge how a grant compares to competitive offers, I say we should focus on more objective, immediate metrics like percentage ownership. And some of the important terms you tool highlights, like exercise windows.

birken 10y ago
It is a great point and I did struggle with it. I think if you want to be pessimistic about stock options you can just assume the value to be low or nothing. The site attempts to give you a cautious but optimistic view of what could happen if things go well. This was based on my own personal experience, experience of friends and openly available data on how the rounds normally go. My perspective when making the site is that companies will often be too optimistic about options even when the company does blow up, which leads people to be misled even if the company does do extraordinary well. The site gives a realistic view of what you can expect in an optimistic scenario. Of course very few companies every achieve this, but the idea is to at least gauge what your upside might be if a really lucky outcome happens. If I had good statistics about what % of companies reach Series A, then Series B, then Growth it would be great to put that on the site as well but I'm not sure where I can find that...