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> Easiest strategy is to just assume the options are worthless and base your comp assessment on that. But that easy thing leads to: a. Having no basis to nego

> Easiest strategy is to just assume the options are worthless and base your comp assessment on that. But that easy thing leads to: a. Having no basis to negotiate your options. (X% of $0 is always $0 regardless of X) b. Your comp will always look like crap compared to a publicly traded company.

xchaotic 8y ago
Then negotiate a higher salary which is the statistically correct course of action. Many of my colleagues are 10+ years stuck waiting for an IPO that may never come.
yowlingcat 8y ago
B is kinda true a priori. It's easier to negotiate A should be negotiated in relationship to ownership and responsibility. You should get into the head the hiring manager in question and figure out what's the max/min range to motivate a candidate to do the job properly. That could be anything for single digit percentages for senior ICs at an early stage company to 50% for a pre funding cofounder to a couple bips for an IC at a series D medium sized company to a sizable fraction of a percent for an executive at a series B. Trying to value illiquid options as if they were fungible in cash is a fool's bargain. Reject it. They have value, but they're different.
- toomuchtodo 8y ago
  In your example, what would you consider an early stage startup? At what size org would 20 basis points be reasonable for a senior IC?
  - yowlingcat 8y ago
    Sorry, I should have been more specific -- I meant seed stage. I think you'll see 20 basis points for a senior IC around post Series A/B depending on the company and how they've set up their option pool, as well as the senior IC. At that point, 20 bips is material enough to be non-negligible if the company grows well enough to the next raise, but probably not enough to be thought of as cash in the lifetime of that employees tenure (on average, anyhow). At that point, cash comp should be on par with median salary, which is tier 4 and below for most ICs* *I'm putting FANG into T1, the next tier down of liquid companies into T2, large pre-IPO companies into T3, and everyone else into T4 -- the interesting part obviously is that company salary tiers can and do obviously change if/as companies grow successfully.
    - toomuchtodo 8y ago
      Thank you!
jonathankoren 8y ago
a) That's not true. More is more. You just do it from a basis point perspective. b) If you're at a pre-ipo company with options, your comp is crap compared to a publicly traded company. If you're counting your lottery tickets as real money, you're a fool. You can't even sell them on Sharespost for the valuation the company tells you.
code4tee 8y ago
Yes, on Point B the comp IS “crap” and hence why most startups try to convince you to take the options. They can’t pay you what the competition would give you in liquid comp so they try to get you to take the bet. Such startups are typically paying well below market on liquid comp. it’s not like they’re asking you to make a “bet” with a 10% haircut on liquid comp (which would make more sense). I’m not against options, but if what you will make over the next X years based on liquid comp is not something you are totally OK walking away with as your total comp over that period then one is probably making a bad choice.
bradlys 8y ago
But your comp is almost always crap compared to a publicly traded company. (i.e. FAANG) Just look at the numbers on this website to get the expected value of startup stock. Short of getting an obscene amount of stock in a startup, it's not worth it. And almost no startup is going to give you 5-10x+ the amount of stock that other employees are getting for the same position.
- roguecoder 8y ago
  Many people aren't comparing to FAANG companies: they are comparing to other places they actually want to work. FAANG companies aren't paying that much because they get so much more value out of employees: they are paying that much more because that's how much extra they have to pay to convince people to take the jobs they are offering.
  - dasil003 8y ago
    Obviously if they paid less they would get fewer engineers, but there are plenty who would take peanuts to work on problems at that scale. The actual reason they're paying that much because they have no limit on the number of 1% engineers they can put to work, and they want as many as they can get.
kradroy 8y ago
I think the subtext is that you're always taking a risk with start-up options, so minimize the risk by assuming the worst. Your basis for comparison/negotiation should be other offers, or your existing job and other offers. In a vacuum you'll never be able to make a realistic evaluation.

xchaotic 8y ago

Then negotiate a higher salary which is the statistically correct course of action. Many of my colleagues are 10+ years stuck waiting for an IPO that may never come.

yowlingcat 8y ago

B is kinda true a priori. It's easier to negotiate A should be negotiated in relationship to ownership and responsibility. You should get into the head the hiring manager in question and figure out what's the max/min range to motivate a candidate to do the job properly. That could be anything for single digit percentages for senior ICs at an early stage company to 50% for a pre funding cofounder to a couple bips for an IC at a series D medium sized company to a sizable fraction of a percent for an executive at a series B. Trying to value illiquid options as if they were fungible in cash is a fool's bargain. Reject it. They have value, but they're different.

toomuchtodo 8y ago
In your example, what would you consider an early stage startup? At what size org would 20 basis points be reasonable for a senior IC?
- yowlingcat 8y ago
  Sorry, I should have been more specific -- I meant seed stage. I think you'll see 20 basis points for a senior IC around post Series A/B depending on the company and how they've set up their option pool, as well as the senior IC. At that point, 20 bips is material enough to be non-negligible if the company grows well enough to the next raise, but probably not enough to be thought of as cash in the lifetime of that employees tenure (on average, anyhow). At that point, cash comp should be on par with median salary, which is tier 4 and below for most ICs* *I'm putting FANG into T1, the next tier down of liquid companies into T2, large pre-IPO companies into T3, and everyone else into T4 -- the interesting part obviously is that company salary tiers can and do obviously change if/as companies grow successfully.
  - toomuchtodo 8y ago
    Thank you!

jonathankoren 8y ago

a) That's not true. More is more. You just do it from a basis point perspective. b) If you're at a pre-ipo company with options, your comp is crap compared to a publicly traded company. If you're counting your lottery tickets as real money, you're a fool. You can't even sell them on Sharespost for the valuation the company tells you.

code4tee 8y ago

Yes, on Point B the comp IS “crap” and hence why most startups try to convince you to take the options. They can’t pay you what the competition would give you in liquid comp so they try to get you to take the bet. Such startups are typically paying well below market on liquid comp. it’s not like they’re asking you to make a “bet” with a 10% haircut on liquid comp (which would make more sense). I’m not against options, but if what you will make over the next X years based on liquid comp is not something you are totally OK walking away with as your total comp over that period then one is probably making a bad choice.

bradlys 8y ago

But your comp is almost always crap compared to a publicly traded company. (i.e. FAANG) Just look at the numbers on this website to get the expected value of startup stock. Short of getting an obscene amount of stock in a startup, it's not worth it. And almost no startup is going to give you 5-10x+ the amount of stock that other employees are getting for the same position.

roguecoder 8y ago
Many people aren't comparing to FAANG companies: they are comparing to other places they actually want to work. FAANG companies aren't paying that much because they get so much more value out of employees: they are paying that much more because that's how much extra they have to pay to convince people to take the jobs they are offering.
- dasil003 8y ago
  Obviously if they paid less they would get fewer engineers, but there are plenty who would take peanuts to work on problems at that scale. The actual reason they're paying that much because they have no limit on the number of 1% engineers they can put to work, and they want as many as they can get.

kradroy 8y ago

I think the subtext is that you're always taking a risk with start-up options, so minimize the risk by assuming the worst. Your basis for comparison/negotiation should be other offers, or your existing job and other offers. In a vacuum you'll never be able to make a realistic evaluation.