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Ask HN: being offered stocks, how to estimate value?
I am consulting local start up on some specific technical issues. I am charging quite a lot to do more work on this start up, so I was offered stocks as a part of payment. But I have no idea how to evaluate this offer. Any tips on what I should look for and what I should base my numbers on?
- lukesandberg 14y agoYou should really try to get cash if you can. The value of any stock the give you will be highly volatile and very illiquid. The only way you could try to value the equity would be to look at what other investors paid for their equity, also you could try to actually look at their books. But really, there is no reasonable way for you to value their offer. I would take cash and possibly offer a payment plan instead.
- jfb 14y agoIs the company publicly traded? YES: Google can tell you; NO: $0. If you get equity from a startup, your expected value is nil, or near enough to be without distinction. Either the equity is utterly dilute, or the founders are incompetent. Neither case looks like getting paid to me.
- eduardordm 14y agoTwo answers, first, the cynical: Keep in mind that equity reflects possibilites, specially in startups. I would say that most of the value of a startup are just changes of succeeding. Read: How much does a lottery ticket is valued? Second, more useful: You need choose a target P/E ration, and calculate. PE == Share_value / Earnings_per_share. 30 is a reasonable target. The problem is, in tech you can get P/Es around 200-300 (which is stupid).
- jacobian 14y agoI'm a consultant as well. I never take stock or equity as payment; cash only. Look at it this way: if the company's so cash-poor that they can't afford to pay for work, what are the odds their stock/equity will ever be worth anything?
- pg 14y agoThis argument is valid except in a few exceptions, but the exceptions are so extreme that they make it dangerous to generalize. http://www.nytimes.com/2012/02/02/technology/for-founders-to-decorators-facebook-riches.html?pagewanted=all&_r=0 http://www.nytimes.com/2012/02/02/technology/for-founders-to...
- ivankirigin 14y agoIt might be easier to generalize by kind of work. Unpaid engineers is a very bad sign.
- 6thSigma 14y agoI think a better indication that the company's equity will never be worth anything is that they hired a consultant in the first place.
- johnrob 14y agoAsk how long it will take them to actually get you your stock certificate, should you accept. Doing anything stock related with a startup is can of worms - things always get delayed due to board meetings, valuations, fund raising, etc. These things all leave the door open to you, one way or another, not getting your stock. I'd definitely ask them about this. The answer will give you a preview of what the process of collecting your stock will be like.