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A somewhat dual question, can anyone offer advice on what to look for when negotiating an offer with an early-stage startup with a view towards achieving an out

by nilkn 12y ago

A somewhat dual question, can anyone offer advice on what to look for when negotiating an offer with an early-stage startup with a view towards achieving an outcome in this range? What are some red-flags in an equity offer that suggest it won't be worth what it seems? What are some reasonable stipulations/demands to make as the employee, to protect yourself and your stake? I've been told that there are so many loopholes that equity in the range of half a percent or so is mostly worthless after dilution and taxes. But it seems there are folks here saying they had equity in that range which was worth a lot.

ryan-c 12y ago
Ask if they allow early exercise, and do it if you can afford to. It will probably be money down the drain, but it will save you a lot in taxes if there's an exit. If you do not do it and the company takes off, exercise can become unaffordable due to AMT, and you may feel "trapped" by your options.
limeyx 12y ago
I think it's mostly the trushworthiness of the founders (plus if they have a track record) coupled with the kind of industry/product they are working on. Some categories inherently need more capital (hardware, network-based) so chances are maybe higher that you will have more dilution but hopefully the pie gets bigger each time so that may not be the worst thing. Even though "making money" seems so passe these days, the startups I've experience with that were not viciously focused on revenue and at least break-even are dead and the other two still exist so not a big-enough "N" for a sample but ....
loumf 12y ago
For results in the $X00k range, I think it's easier to just pick more inevitable startups (relatively). I would also say that you should plan to stay through the vesting and event and to only work for market salary. Picking at the Founder+epsilon stage is not easy -- if you are doing that, pick serial-winners.

by nilkn 12y ago

ryan-c 12y ago

Ask if they allow early exercise, and do it if you can afford to. It will probably be money down the drain, but it will save you a lot in taxes if there's an exit. If you do not do it and the company takes off, exercise can become unaffordable due to AMT, and you may feel "trapped" by your options.

limeyx 12y ago

I think it's mostly the trushworthiness of the founders (plus if they have a track record) coupled with the kind of industry/product they are working on. Some categories inherently need more capital (hardware, network-based) so chances are maybe higher that you will have more dilution but hopefully the pie gets bigger each time so that may not be the worst thing. Even though "making money" seems so passe these days, the startups I've experience with that were not viciously focused on revenue and at least break-even are dead and the other two still exist so not a big-enough "N" for a sample but ....

loumf 12y ago

For results in the $X00k range, I think it's easier to just pick more inevitable startups (relatively). I would also say that you should plan to stay through the vesting and event and to only work for market salary. Picking at the Founder+epsilon stage is not easy -- if you are doing that, pick serial-winners.