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Having been on both sides here are my 2c. Pardon any brevity since i’m on mobile and in transit. Id advise reading up on these at this excellent guide (1). Com

by viksit 5y ago

Having been on both sides here are my 2c. Pardon any brevity since i’m on mobile and in transit. Id advise reading up on these at this excellent guide (1). Comp at startups are generally a sliding scale of cash to equity. A typical offer will ask you to slide it one way or another. To judge stock, ask for, - 409a valuation to know the current strike price of the shares - total outstanding fully diluted shares to know the total shares available - size of the employee option pool (eg, 10-15pct) - possibility of an 83(b) election - ISO vs NSO - what kind uf options are they? - re ups, and anti dilution clauses? - triggering events (eg what happens when the company gets bought?) The more you know the better you judge the value. If folks are cagey in giving details, definitely push back and ask why. Next, consider that the company’s progress is all that determines your shares net worth. - how much do you believe in this team, space and product? - and ask yourself - are you able to completely push this into a “lost cause financially” bucket in 5y? or do you need the cash? i’d advise being comfortable with the former :) lastly, look at how much value you bring to the table to determine how much you get. if you’re engineer 1 with two non tech cofounders - you’d be worth much more than engineer 10. In that case, look at some of the blog posts online (esp by folks like Leo Polovets) on some ways to think about these numbers. good luck! (1) https://github.com/jlevy/og-equity-compensation https://github.com/jlevy/og-equity-compensation

BikiniPrince 5y ago
I had a friend ask for their cap sheet after they were cagey with responses from similar questions. He figured they would had some massive expenses and An IPO was impossible or ridiculously far off. They eventually went under after three terrible years.
lkasdlkdad 5y ago
- 409a valuation to know the current strike price of the shares - total outstanding fully diluted shares to know the total shares available You can ask this, but has anyone actually had success getting an answer to these questions? Every time I've asked questions like these (which are generally considered sensitive financial information) I've gotten laughed at.
- hellcow 5y ago
  My company has always provided these. Applicants are obviously going to find out the current strike price as soon as their options are granted, so hiding that seems particularly strange.
- majormajor 5y ago
  I've gotten answers to both of those (sometimes had them volunteered unprompted). Haven't been offered (or asked for) some of the other ones mentioned, like size of employee-specific pool.
- molsongolden 5y ago
  Assuming you're through to the offer negotiation stage, the company should be willing to share the most recent valuation, fully diluted share count, and 409(a) val.
- 908B64B197 5y ago
  > Every time I've asked questions like these (which are generally considered sensitive financial information) I've gotten laughed at. That's a red flag that the company you are talking to isn't serious.
- icedchai 5y ago
  As the second employee at the company, I did get these answers. I also got cap table access.
- myrandomcomment 5y ago
  Yes. 100% of the time. If they do not answer run away.
- brudgers 5y ago
  Getting laughter is a tell about the high bit of company culture. People’s mental model of other people largely assumes that other people are about as trustworthy as themselves. Trustworthy people assume other people are trustworthy. Backstabbers assume other people backstab. Don’t misunderstand me, there’s a difficult conversation about stock. A few shares doesn’t give a person a say in how the company is run. It doesn’t make a person a principal. Doesn’t make them a “partner”. Worker bees are still worker bees with shares. Trustworthy people offer shares because it might make you rich. If someone laughs, they don’t think you deserve to be rich.
lxe 5y ago
Why does dilution matter? Why would one care if your ownership percentage changes? Unless you’re a cofounder or engineer #1, I don’t think there’s a lot of value in trying to understand number of shares and dilution.
- devoutsalsa 5y ago
  It gives you an idea of how much upside there is. If the stock is at $1/share, that tells you nothing. But is the valuation is $100 million and you think it could go over $1 billion, that means your funny money could maybe 10x. If you think it’s a billion dollar company and the valuation of $2 billion, maybe your shares are inherently worthless.
  - deleted 5y ago
    [deleted]
  - listenallyall 5y ago
    While technically this is reasonable advice, it should be noted that what you think the correct valuation ought to be, is highly likely to be wildly incorrect and a poor basis upon which to make decisions.
    - devoutsalsa 5y ago
      You’re not wrong. It’s more like you have an opportunity to get inside information on a company when you are interviewing. If the company sounds like it’s just plodding along and they’re on a series Q down round, maybe that’s less valuable than a startup that is about to blow up in the good way with a still modest valuation. You probably can’t tell if something is a diamond or a polished turd, but sometimes you can smell an actual turd. All stock options are a lottery ticket, but maybe you can pick the lottery ticket with the best odds compared when comparing them to the other options.
neumann 5y ago
Is there a similar guide for Australian stock options? Or advice on how to research the equivalent forms and rules?

by viksit 5y ago

BikiniPrince 5y ago

I had a friend ask for their cap sheet after they were cagey with responses from similar questions. He figured they would had some massive expenses and An IPO was impossible or ridiculously far off. They eventually went under after three terrible years.

lkasdlkdad 5y ago

- 409a valuation to know the current strike price of the shares - total outstanding fully diluted shares to know the total shares available You can ask this, but has anyone actually had success getting an answer to these questions? Every time I've asked questions like these (which are generally considered sensitive financial information) I've gotten laughed at.

hellcow 5y ago
My company has always provided these. Applicants are obviously going to find out the current strike price as soon as their options are granted, so hiding that seems particularly strange.
majormajor 5y ago
I've gotten answers to both of those (sometimes had them volunteered unprompted). Haven't been offered (or asked for) some of the other ones mentioned, like size of employee-specific pool.
molsongolden 5y ago
Assuming you're through to the offer negotiation stage, the company should be willing to share the most recent valuation, fully diluted share count, and 409(a) val.
908B64B197 5y ago
> Every time I've asked questions like these (which are generally considered sensitive financial information) I've gotten laughed at. That's a red flag that the company you are talking to isn't serious.
icedchai 5y ago
As the second employee at the company, I did get these answers. I also got cap table access.
myrandomcomment 5y ago
Yes. 100% of the time. If they do not answer run away.
brudgers 5y ago
Getting laughter is a tell about the high bit of company culture. People’s mental model of other people largely assumes that other people are about as trustworthy as themselves. Trustworthy people assume other people are trustworthy. Backstabbers assume other people backstab. Don’t misunderstand me, there’s a difficult conversation about stock. A few shares doesn’t give a person a say in how the company is run. It doesn’t make a person a principal. Doesn’t make them a “partner”. Worker bees are still worker bees with shares. Trustworthy people offer shares because it might make you rich. If someone laughs, they don’t think you deserve to be rich.

lxe 5y ago

Why does dilution matter? Why would one care if your ownership percentage changes? Unless you’re a cofounder or engineer #1, I don’t think there’s a lot of value in trying to understand number of shares and dilution.

devoutsalsa 5y ago
It gives you an idea of how much upside there is. If the stock is at $1/share, that tells you nothing. But is the valuation is $100 million and you think it could go over $1 billion, that means your funny money could maybe 10x. If you think it’s a billion dollar company and the valuation of $2 billion, maybe your shares are inherently worthless.
- deleted 5y ago
  [deleted]
- listenallyall 5y ago
  While technically this is reasonable advice, it should be noted that what you think the correct valuation ought to be, is highly likely to be wildly incorrect and a poor basis upon which to make decisions.
  - devoutsalsa 5y ago
    You’re not wrong. It’s more like you have an opportunity to get inside information on a company when you are interviewing. If the company sounds like it’s just plodding along and they’re on a series Q down round, maybe that’s less valuable than a startup that is about to blow up in the good way with a still modest valuation. You probably can’t tell if something is a diamond or a polished turd, but sometimes you can smell an actual turd. All stock options are a lottery ticket, but maybe you can pick the lottery ticket with the best odds compared when comparing them to the other options.

neumann 5y ago

Is there a similar guide for Australian stock options? Or advice on how to research the equivalent forms and rules?