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This is a good article, and I strongly agree with the general premise (which is: when given an offer at a company involving stock options, get the percentage, n

by birken 12y ago

This is a good article, and I strongly agree with the general premise (which is: when given an offer at a company involving stock options, get the percentage, not just the raw number of shares). However, most startup exits aren't going to occur via IPO, they are going to occur via acquisition. This is where the "percentage" value can be somewhat inaccurate, because the terms and amounts of the previous funding rounds will have a massive influence on how much the common stock is going to be worth. Not to mention retention bonuses. And another massive factor that nobody ever talks about is the founder(s) attitudes about cashing out. Do the founder(s) want to IPO? Are they capable of running a company for that long? So few companies IPO. Would the founder(s) be happy with a 20MM exit? 50MM exit? This is going to have a massive effect on the value of your equity. The whole thing is just really hard. Stock options, even with complete information, are impossible to value. Certainly get as much information as you can (including the recommendation of this post), but basically whatever decision you make in regards to equity is going to be arbitrary anyways. Negotiating based on salary is probably a far more productive use of your time.

ivankirigin 12y ago
Many exits and acquisitions are essentially zero for employees. They might be slight bonuses, but it would be a rounding error on salary in many cases. Think of it like expected value of the stock. IPO is contributing to the lionshare of expected value, even if it is the least likely outcome. That said, the basis of judgement of value is on how much of the company you have. It all starts there. Also, I completely agree about probing what is in it for the founders. What is their goal? Unfortunately, it isn't unethical to bend the truth and project a vision deep into the future. People call that leadership.
- birken 12y ago
  But IPOs are essentially zero too. If I took a sample of 100 startup employees, the number who have made any significant money in an IPO is way below 1. The fact that the fraction of a person made a really huge amount of money doesn't matter if we are talking about the decision making process of these 100 people. I'm just saying the whole thing is very arbitrary in acquisition, IPO, or whatever. I agree that you should know how many shares are out there, if you think you are getting 1% and you are getting 0.1%, that is a big difference. But if one startup is offering you 0.8% and another is offering you 0.1%, how the hell do you know which is a better offer? You don't. Salary is very comparable and money is practically useful. Worry about that. Maybe you can estimate if something has a big enough market that it could IPO, do that. But you can't predict success. Look how bad investors are at it.

by birken 12y ago

ivankirigin 12y ago

Many exits and acquisitions are essentially zero for employees. They might be slight bonuses, but it would be a rounding error on salary in many cases. Think of it like expected value of the stock. IPO is contributing to the lionshare of expected value, even if it is the least likely outcome. That said, the basis of judgement of value is on how much of the company you have. It all starts there. Also, I completely agree about probing what is in it for the founders. What is their goal? Unfortunately, it isn't unethical to bend the truth and project a vision deep into the future. People call that leadership.

birken 12y ago
But IPOs are essentially zero too. If I took a sample of 100 startup employees, the number who have made any significant money in an IPO is way below 1. The fact that the fraction of a person made a really huge amount of money doesn't matter if we are talking about the decision making process of these 100 people. I'm just saying the whole thing is very arbitrary in acquisition, IPO, or whatever. I agree that you should know how many shares are out there, if you think you are getting 1% and you are getting 0.1%, that is a big difference. But if one startup is offering you 0.8% and another is offering you 0.1%, how the hell do you know which is a better offer? You don't. Salary is very comparable and money is practically useful. Worry about that. Maybe you can estimate if something has a big enough market that it could IPO, do that. But you can't predict success. Look how bad investors are at it.