4 ms·

Is the startup giving you equity or options?

• lief79 17y ago
  Options ... any recommendations on how to interpret these?
  • anamax 17y ago
    For each possible exit, multiply fraction of the company you're likely to have at that exit, the value of the company at that exit, and the likeyhood of that exit points and account for time. Add up those numbers. For example, let's say that you're being offered 4%. Suppose that you think that there are two likely exits - a complete crash and burn and a $100M exit after four years and two rounds of 50% dilution. We can ignore the crash and burn because 0*any finite number = 0. If you think that the $100M exit is 25% likely, the value of the options is $250k over four years. In reality, there are probably a couple of exits worth considering. Since big exits tend to be relatively rare, you'll find that much of the expected value comes from small/medium exits. (Redo the above with a 1% likelyhood of $1B, a 4% likelyhood of $100M, and a 10% likelyhood of both $10M or 20M exit.) You should be able to ask them about the various exits.