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Even without getting into the magnitude of the difference, and just talking about the direction, I think a lot of folks at private startups expect external cand

Even without getting into the magnitude of the difference, and just talking about the direction, I think a lot of folks at private startups expect external candidates to value $1 of their stock (based on their last 409a) more than $1 of stock in a public company. I don't have a strong opinion on how big the liquidity premium for equity in a private tech startup should be, but I feel pretty strongly that it shouldn't be negative.

lumost 4y ago
Honestly, I think most startups are betting that employees don’t know any better. This was true up to maybe 5 years ago, but sites like levels.fyi have really made this trade off clear to potential employees. Half the time when I talk to a potential hiring manager at a private company, they really don’t know what the equity is worth or how it’s structured. I’d argue that an effective 20-30% discount on 409A for employees in series C+ is about right. On a successful, but expected, exit - this gives the employee some premium compared to working at a public tech company in exchange for deferred compensation and liquidity risk.
- tfehring 4y ago
  > Honestly, I think most startups are betting that employees don’t know any better. Yeah, that's probably accurate. For whatever reason, many seem to view equity as a "check the box" formality rather than a material part of your compensation. I mostly avoided non-unicorn startups during my last job hunt for that reason, but the few that I got around to talking numbers with offered <$50k in equity over 4 years (and in the form of options to boot); the equity comp for the role I ended up taking is around an order of magnitude higher.
pclmulqdq 4y ago
Yeah, this expectation is nuts, and it's why people who work for startups tend to be true believers in the mission. The startup has literally priced in the belief of the employees.
nwatson 4y ago
What does current price/share have to do with value of a stock option? The price/share is what I PAY to acquire the stock ... if I buy it at that strike price and it's valued at that price I have zero net gain. I've had various conversations where people making offers in more mature companies try to correlate my potential stock option grant X price/share as some measure of worth. It's only the gain that matters.

lumost 4y ago

Honestly, I think most startups are betting that employees don’t know any better. This was true up to maybe 5 years ago, but sites like levels.fyi have really made this trade off clear to potential employees. Half the time when I talk to a potential hiring manager at a private company, they really don’t know what the equity is worth or how it’s structured. I’d argue that an effective 20-30% discount on 409A for employees in series C+ is about right. On a successful, but expected, exit - this gives the employee some premium compared to working at a public tech company in exchange for deferred compensation and liquidity risk.

tfehring 4y ago
> Honestly, I think most startups are betting that employees don’t know any better. Yeah, that's probably accurate. For whatever reason, many seem to view equity as a "check the box" formality rather than a material part of your compensation. I mostly avoided non-unicorn startups during my last job hunt for that reason, but the few that I got around to talking numbers with offered <$50k in equity over 4 years (and in the form of options to boot); the equity comp for the role I ended up taking is around an order of magnitude higher.

pclmulqdq 4y ago

Yeah, this expectation is nuts, and it's why people who work for startups tend to be true believers in the mission. The startup has literally priced in the belief of the employees.

nwatson 4y ago

What does current price/share have to do with value of a stock option? The price/share is what I PAY to acquire the stock ... if I buy it at that strike price and it's valued at that price I have zero net gain. I've had various conversations where people making offers in more mature companies try to correlate my potential stock option grant X price/share as some measure of worth. It's only the gain that matters.