Every offer I've ever gotten that included an equity/options component omitted key information that I would have needed to have even a fuzzy understanding of the offers value. When I asked for details it was like pulling teeth to get the information if they would disclose it at all and often they would only do so verbally and not in writing. I turned them all down because that sort of thing leaves a bad taste in my mouth.
Do the math on your stock options
121–130 of 259 posts
Re: Do the math on your stock options
#122I'm really interested in other people's experiences with understanding how their stock options work. It seems really easy to misunderstand something serious, even if you know quite a lot about equity.
I got offered a job 4 years ago at a very early stage company with really generous stock options. I didn't know what options meant, I didn't know that I had to exercise. That was pretty silly on my part but in my defense I was getting my visa, moving across the world, and working as the first employee trying to keep up with insane growth. When the time came to raise our second round, I got intrested in how it would a…
Assuming you followed a professional’s advice I would really not worry about this stuff. Unless you make a lot of money or do something really strange your unlikely to get audited. Also, they don't generally go back very far even with an audit.
As to stock options they are best treated as lotto tickets. Unless you think the company is very likely to get sold or go public at a high valuation you’re generally better off ignoring them.
Re: Do the math on your stock options
#123I am considering an offer from an early stage startup. Salary is being dragged down ~40% under market due to stock options. The role is being a 'first key engineer' hire after the three co-founders. What kind of common-stock equity offer is 'average' in this case? 1%? 2%? 5%?
40% is a _dramatic_ cut.
You are not gonna see raises no money ifor years till options vest. Say three years.
Now stack 40% of your gross yearly rate times 3 and ask yourself: what are the chanches those options will be worth that much?
Re: Do the math on your stock options
#124Earlier quoted context omitted.
If they told you that the number of outstanding shares was privileged and confidential they are crooks in nice suits. Also at this point in time there is so much shady stuff going on with options that you should always always value options at zero. Frankly if all you are offering is your labor in return for options you don't have the pull to get a particularly good deal. (Example: Friend worked three years at a start…
> If they told you that the number of outstanding shares was privileged and confidential they are crooks in nice suits. Never attribute to malice that which is adequately explained by stupidity. Getting a seed round doesn't magically confer the founders/C*Os with an comprehensive understanding of how company equity works. Or common sense.
>Never attribute to malice that which is adequately explained by stupidity.
I honestly strongly dislike this quote, because at the end of they day just about every malicious activity could be wrongly attributed to stupidity.
Re: Do the math on your stock options
#125Earlier quoted context omitted.
I got an offer from a late-stage (not sure if that's the right term, but they had a shipping product) non-public startup that included 10,000 stock options. That sounded like a lot, but I had problems evaluating that number without knowing the shares outstanding. I asked for that figure, and was told it was privileged and confidential. I decided to value the options at $0, and instead think of them like a non-monetar…
You did the right thing. The situation is analogous to someone telling you the numerical amount of your proposed salary, but not telling you the currency and/or frequency. You don't have a right to know the details, but without the details it's hard to evaluate them as worth more than 0.
If you are signing a contract, why don't you have the right to know? If I tried to defend the fact that I never specified paying in US currency in some contract and instead used what ever the new hyper-inflated currency is, a judge would kick me out of the court room. Only if it was explicitly stated would a judge uphold such a contract.
Re: Do the math on your stock options
#126Earlier quoted context omitted.
Are they offering options for stock, or stock? Make sure it's real equity. If it was me, I would start at 5-6% and negotiate from there. Assuming that this opportunity could turn into something huge, I highly recommend taking some negotiating training, if you have the time. Back when I was an executive, I was given a week-long negotiating training session. It was seriously the best, most useful training that I'd ever…
What kind of training was this, can I look it up? Or perhaps the training isn't available, but it's derived from somekind of methodology. In that case, what methodology was it?
I tried to look up the team that they brought in to give the training, but I couldn't find them. It was several years ago, but I remember that the main guy was one of the more popular authors. He had a series of books written that ranged from basic to advanced skills. I wish I could remember his name.
The books are probably useful (there are a ton of them), but the live sessions are likely much more effective because you get to practice the techniques, see the subtleties, and experience the results directly. For me, seeing the results really helped train my brain.
Honestly, I went into the training dragging my feet and expecting the worst, but it's given me a huge edge. The results have been amazing - especially when negotiating with unskilled negotiators. I've gone into negotiations expecting X and consistently getting 2X, sometimes even 10X.
Re: Do the math on your stock options
#127Earlier quoted context omitted.
> If they told you that the number of outstanding shares was privileged and confidential they are crooks in nice suits. Never attribute to malice that which is adequately explained by stupidity. Getting a seed round doesn't magically confer the founders/C*Os with an comprehensive understanding of how company equity works. Or common sense.
>Never attribute to malice that which is adequately explained by stupidity. I honestly strongly dislike this quote, because at the end of they day just about every malicious activity could be wrongly attributed to stupidity.
Exactly! Plausible deniability is a very low hurdle to jump over. If it's your only hurdle, you're in big trouble.
Re: Do the math on your stock options
#128Earlier quoted context omitted.
Righto, and asking a lot of demands/questions means the company is not going to like you as much and will influence your relationship after the offer is accepted. The info you get will be standard and there is certain info they are not going to want to share. Basically a casual ask for "can you share how many options are outstanding?" is about as good as you are going to get. Totally good. Non-stand demands? Not so g…
There is absolutely no reason not to disclose the number of outstanding shares. Failure to do so means the denominator in the equation can be anything. One or one billion. At that point you have to value the entire option nonsense at $0 total, or even negative given the tax implications. It takes all the truth out of the statement "our cash compensation is below market because of our generous option grants." If I can…
Reasons exist.... One reason is likely that they want to keep the valuation confidential outside of the company (people talk), because as a private company that information doesn't have to be public. It's not a great reason for the employees - but it's there, nonetheless.
It's tricky to share that with employees and not have it get out.
That being said, if it were all public, I think that would be fine, I'm not sure what results that would cause if every company did that, and it might be cool if every company were required to by law (hint, hint, congress!).
Re: Do the math on your stock options
#129Earlier quoted context omitted.
"Restricted stock" means the securities are un-registered [1]. The minimum holding time is 6 months. All stock issued by a privately-held company is "restricted stock". Practically all other transfer restrictions are at the company's discretion. ROFRs are the only restriction I've seen widely enough to merit calling "standard". Everything else exists in different forms in different companies, all the way up to being…
What I meant by "restricted" is that it's a restricted class of common stock. i.e. you don't have the same voting rights as the owner or investors in the company. Your experience is working with investors. Your advice makes more sense from that point of view. Employees are rarely (read Never) afforded the same privileges as the investors.
I think that this is a reasonable right to hope for.
No need for us to boot-lick and perpetuate a minor injustice against employees and labor here...especially one that is causing long-term harm to the ecosystem.
Re: Do the math on your stock options
#130I'd rather have the RSUs (https://en.wikipedia.org/wiki/Restricted_stock) that my company gives us, than stock options. A chunk of them vests each quarter, they allocate an appropriate fraction of that chunk to cover taxes, and the resulting shares are ours to hold or sell. No dilemma of when to exercise or whatever,
no risk of being underwater.
My father once got stock options from Nortel Networks right before the dot-com bubble bust (sometime between 2000 and 2002). He exercised them, sold some to buy a car, but held onto the rest, had to pay a hefty tax bill, and then when the price nose-dived, they were worth less than what it had cost him in taxes.