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Like investing in companies, its not a list of hard and fast criteria. You have to ask yourself if you could reasonably see this company being huge ($10B+) - do
by ericd 6y ago
Like investing in companies, its not a list of hard and fast criteria. You have to ask yourself if you could reasonably see this company being huge ($10B+) - do they have a great product? Does this have an aha! feel like Stripe and Dropbox did at their public launches? Do the founders really understand their market well? What are the risks - is this a hardware startup in a totally new market? Is the market saturated? How do people feel about the existing products? And do the founders respect you enough to share cap table/preference overhang, the percentage your equity stake represents, and growth metrics? Also, value your equity stake at the current valuation, not a future one - the current valuation already has the expected future growth priced in. What is that equity grant worth per year that it vests? Do you need a larger grant to make it worth the salary disparity vs your other offers?
But basically, you really need to do your homework and treat it like you’re making an investment.
- TuringNYC 6y agoThanks for the detail. For everyone else, the last point is CRUCIAL > treat it like you’re making an investment Remember, if you are giving up a market total-comp package (e.g., 200 or 300k+) for a below-market startup package -- you are literally investing the difference. Treat the difference as an investment. Also keep in mind, unlike public stock or real estate investments this major, you also often have no visibility into financials -- discount for that. You also cant sell when you may need to -- discount for that also. Unlike a property or stocks, you dont get interim dividends/yield -- discount for that also. You may also be forced to invest heavily or forgo stock if you leave the company -- discount for that.
- bob33212 6y agoYou may have different goals than the investors or owners of the company. Maybe you are happy to sell if that means you get 5M, but the investors are looking to add a "Unicorn" to their resume. They are willing to risk your 5M for that, and you don't get a say.