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Understanding Startup Offers

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Re: Understanding Startup Offers

#61

Post by xtracto »

mcgingras wrote: post #36
devnulll wrote: post #27

Earlier quoted context omitted.

No, I don't believe that's normal. That sounds like a CEO trying to take advantage of the labor force.

Thanks everyone, that's what I was thinking as well, but I'm fairly new to startups so I wasn't sure.

Mhmm, I wouldn't put it like GP (someone wanting to take advantage of...). The large majority of employments DO NOT give stock options. Shit, in most countries that's unheard of (in Mexico for example, someone with a similar offer would think of the stock options as the cherry on the cake).

Nonetheless, given YOUR market, you should check whether the other parts of the compensation they are giving you are right. For example, there was the case of Mailchimp a couple of days ago: They gave no stock to their employees. However, in theory their compensation package was good in other ways. So if the company is offering you a good salary + benefits (what about 401k matching? PTO? sick days? gym membership, WFH and whatnot), that will give you the full picture.

Re: Understanding Startup Offers

#62

Post by caenorst »

preseedthrwwy wrote: post #15
clpm4j wrote: post #9

Earlier quoted context omitted.

This is a good 'best-case' example that anyone could hope for, and like you say - you probably need to be one of first few engineering hires to have a shot at this type of outcome.

absolutely agree - wasn't trying to give the indication that I think my situation is a likely outcome

And it's not 100% luck neither, as one of the first employee you probably participated to the success of those companies! Kudos to you!

Re: Understanding Startup Offers

#63

Post by caenorst »

preseedthrwwy wrote: post #8
qqtt wrote: post #6

Earlier quoted context omitted.

With things like dilution mattering and stock options being popular vehicles for early stage start up it would be really interesting and elucidating to have practical examples to compare against. It's easy to understand a FAANG style offer in this context. You join Google in 2017, you get RSUs pegged at 800$ a share valuation, about 150k$ a year vesting, by 2021 those shares are worth 2800$ so you've earned about 2.1…

throwaway for obvious reasons.. I joined a seed company w/ a $10m valuation in early 2014, starting offer was 1%. after series a, b, c, and some smaller retention grants, I had about 0.4%. Left before fully vesting, so ended up with 0.3%. Company was acquired for $4b and I made $12m. After taxes, netted about $7.5m Joined another seed company with $10m valuation in 2016, starting offer was 3%. after a few dilutive fu…

May I ask if you had some non-startup years of experience before joining this seed company?

Re: Understanding Startup Offers

#64

Post by mkhizar53 »

qqtt wrote: post #3

It would be interesting to see some analysis comparing pre-IPO offers versus standard FAANG-style engineering offers and see what the monetary difference actually is. In the not-so-distant past, start ups were pretty much the only avenue to secure a multiple-million dollar personal liquidity event, in the off chance you join a successful start up, work your tail off, and the company gets to a point where that exit ha…

Check out Levels.fyi, also their last pay report has a bunch of (then) startups at least for new grad: https://levels.fyi/2020/

Re: Understanding Startup Offers

#65

Post by dasil003 »

nostrademons wrote: post #41
qqtt wrote: post #3

It would be interesting to see some analysis comparing pre-IPO offers versus standard FAANG-style engineering offers and see what the monetary difference actually is. In the not-so-distant past, start ups were pretty much the only avenue to secure a multiple-million dollar personal liquidity event, in the off chance you join a successful start up, work your tail off, and the company gets to a point where that exit ha…

"In the not-so-distant past, start ups were pretty much the only avenue to secure a multiple-million dollar personal liquidity event" I'm actually not sure this is true, and wondering if this was reporting bias. When a startup exits for a billion and all the employees get rich, you hear about it on the news, and you can do the equity calculation yourself based on public funding round press releases. When a big compan…

Considering the vast swathes of 1.5M homes across the Bay Area that were <$100k in the mid-70s, you didn't need to be anywhere near a millionaire to making a killing in real estate if you've been here 50 years.

Re: Understanding Startup Offers

#66

Post by dasil003 »

akomtu wrote: post #30
quokkafriend wrote: post #12

Earlier quoted context omitted.

My equity grants as a non-eng (but involved in prod dev) have ranged from 0.05% to 0.6% over the course of 10 years in startups (age 25-35). All Series A to Series B. My take is that unless you are very good at judging leadership teams and company prospects, that joining a FAANG or a Series C+ scale-up (and even that takes thoughtful research and luck) is the better play. Early stage at my past grant levels has to hi…

A typical 4-year vesting plan at 500k/year gives 2M in "nominal" dollars. 2x that to account for stock market growth, 2x for work life balance (startups demand 2x more of your time than FANG), 3x for dilution and other startup shenanigans, 5x for the risk (how many C series get bought for 1B within 5 years?), and you need a 60x2M offer from a startup to just match FANG. 120M looks outrageous only because it's fake mo…

This is a silly way to think about the tradeoff between startup and big-co. Startup equity is typically ISOs which is to say it's literally worth zero the day it's granted, and it only gains value if the valuation increases, and even then subject to dilution, cliffs, etc. The reason you buy into it is some combination of believing in the company and valuing the experience, not because of some expected value calculation.

Re: Understanding Startup Offers

#67

Post by nostrademons »

dasil003 wrote: post #65
nostrademons wrote: post #41

Earlier quoted context omitted.

"In the not-so-distant past, start ups were pretty much the only avenue to secure a multiple-million dollar personal liquidity event" I'm actually not sure this is true, and wondering if this was reporting bias. When a startup exits for a billion and all the employees get rich, you hear about it on the news, and you can do the equity calculation yourself based on public funding round press releases. When a big compan…

Considering the vast swathes of 1.5M homes across the Bay Area that were <$100k in the mid-70s, you didn't need to be anywhere near a millionaire to making a killing in real estate if you've been here 50 years.

That's very true in dollar terms, but wealth is owning 4 homes, or a couple apartment blocks, or being able to retire at 40, right? That's what most people are seeking. And if folks were able to achieve that in the 80s from being extremely-impactful ICs at big companies, maybe big companies were paying select employees more than the general public was aware?

Re: Understanding Startup Offers

#68

Post by destitude »

What happens to those that run into the 10 year limit for exercising their options? If there is no hope for liquidation event and you've been their for 9 years and haven't exercised your options it seems like you might as well leave, especially if there will be a huge tax burden to exercise them.

Re: Understanding Startup Offers

#69

Post by entangledqubit »

The questions included here are good to see.

For a more complete guide, my preferred document these days is the Holloway Guide ( https://www.holloway.com/g/equity-compensation ). Though now I have to add a warning that there's a slightly annoying attempt to get your contact info and it has gotten rather long...

Re: Understanding Startup Offers

#70

Post by [deleted] »

nostrademons wrote: post #41
qqtt wrote: post #3

It would be interesting to see some analysis comparing pre-IPO offers versus standard FAANG-style engineering offers and see what the monetary difference actually is. In the not-so-distant past, start ups were pretty much the only avenue to secure a multiple-million dollar personal liquidity event, in the off chance you join a successful start up, work your tail off, and the company gets to a point where that exit ha…

"In the not-so-distant past, start ups were pretty much the only avenue to secure a multiple-million dollar personal liquidity event" I'm actually not sure this is true, and wondering if this was reporting bias. When a startup exits for a billion and all the employees get rich, you hear about it on the news, and you can do the equity calculation yourself based on public funding round press releases. When a big compan…

[deleted]
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