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Hmm..thanks .. quick follow up... So would a company at any stage be able to answer this ? Do they decide things only after getting seed / Series A ? ..or are t

Hmm..thanks .. quick follow up... So would a company at any stage be able to answer this ? Do they decide things only after getting seed / Series A ? ..or are these things decided upfront ?

jtfairbank 12y ago
So as an employee you would get stock options that are vested over a number of years, usually with a 1 year cliff. That means you have the right to purchase stock at a pre-agreed price (usually the current price - a discount). There are some important things to consider: * You have to pay for the options. You can negotiate to add this cost into a yearly bonus or salary. * You have to pay taxes on the options. This is a bit complicated- if you sell them within a year then you pay normal income tax. If you sell them after a year its long term capital gains. There may be some upfront tax concerns due to the difference in the price you paid vs. the amount the options are worth. Definitely talk to an accountant before negotiating so you understand this, and after you accept an offer so you don't mess up the taxes. * Most contracts specify that the options expire when you leave the company, so if you quit or are fired make sure to buy any options you want then and there. Build in a grace period into your contract (i.e. I have 1 week after leaving the company to actually purchase any options I've received). * If you leave the company before a year is up, you don't get any options due to the 1 year cliff. * Companies will know what % of the fully diluted stock pool your options represent. This pool includes all outstanding stock that founders or investors own, and options grants. It can and will get diluted as companies raise money. You'll never own less options, but the founders may elect to create more shares of the company to sell to future investors, which means you own a smaller %. This is ok though- the idea is you own a smaller % that is more valuable due to the new investment and opportunities it allows the company to pursue.

Hmm..thanks .. quick follow up... So would a company at any stage be able to answer this ? Do they decide things only after getting seed / Series A ? ..or are these things decided upfront ?

jtfairbank 12y ago

So as an employee you would get stock options that are vested over a number of years, usually with a 1 year cliff. That means you have the right to purchase stock at a pre-agreed price (usually the current price - a discount). There are some important things to consider: * You have to pay for the options. You can negotiate to add this cost into a yearly bonus or salary. * You have to pay taxes on the options. This is a bit complicated- if you sell them within a year then you pay normal income tax. If you sell them after a year its long term capital gains. There may be some upfront tax concerns due to the difference in the price you paid vs. the amount the options are worth. Definitely talk to an accountant before negotiating so you understand this, and after you accept an offer so you don't mess up the taxes. * Most contracts specify that the options expire when you leave the company, so if you quit or are fired make sure to buy any options you want then and there. Build in a grace period into your contract (i.e. I have 1 week after leaving the company to actually purchase any options I've received). * If you leave the company before a year is up, you don't get any options due to the 1 year cliff. * Companies will know what % of the fully diluted stock pool your options represent. This pool includes all outstanding stock that founders or investors own, and options grants. It can and will get diluted as companies raise money. You'll never own less options, but the founders may elect to create more shares of the company to sell to future investors, which means you own a smaller %. This is ok though- the idea is you own a smaller % that is more valuable due to the new investment and opportunities it allows the company to pursue.