Ask HN: Offer to join a startup. Is this deal good?

#1

Post by pittip » Sat, Mar 12, 2011, 7:31 PM UTC

Hi,

I am a regular HNer and this is a temporary account I made for this question.

I was recently approached by a guy who is starting up. His company has got funding to the tune of 1 mil with a valuation of close to 6 mil. I will be the first hire and will lead the tech efforts. The company is pretty much tech oriented, and when I join, the focus will be 100% on building the product (a web application).

The offer made to me is that of options worth 120k at a nominal price (i.e. Upon vesting, I can buy stocks which are worth 120k today for say 6k at the time of vesting), along with salary to cover my expenses of lodging and food plus some.

Please help me decide.

Re: Ask HN: Offer to join a startup. Is this deal good?

#2

Post by pg » Sat, Mar 12, 2011, 7:40 PM UTC

Don't measure the stock in money, but in percent. Sounds like you're being offered 2%. That's lowish but not terrible.

The real question is whether you want to join this company. Is it founded by a single, nonhacker founder? I would steer clear of those. Empirically they don't do well.

Re: Ask HN: Offer to join a startup. Is this deal good?

#3

Post by pittip » Sat, Mar 12, 2011, 7:49 PM UTC

pg wrote: post #2

Don't measure the stock in money, but in percent. Sounds like you're being offered 2%. That's lowish but not terrible. The real question is whether you want to join this company. Is it founded by a single, nonhacker founder? I would steer clear of those. Empirically they don't do well.

Its in fact a single, non-hacker founder. The investors seem to be bullish though.

Re: Ask HN: Offer to join a startup. Is this deal good?

#4

Post by mindcrime » Sat, Mar 12, 2011, 7:50 PM UTC

Doesn't sound like much of a deal to me. And the reason I say so is because my theory is this: There's no reason to join a startup except to get rich, or to change the world (or both.) If you wanted a "competitive salary" you could go work for Oracle or IBM or Cisco or somebody and get that. So why join the startup at all, unless you're going to make big bank, or unless you just really, really believe in their idea? So, that said, you're looking at options, and not an outright stock grant? As the first hire? IMO, f!@# that... If I were joining an early stage startup, I'd be thinking "forgo all salary except enough to eat Ramen noodles, and give me x% of stock up front (allowing for vesting periods, etc.)" Otherwise, it's just another job, with the possibility of a nice little bonus thrown in. But a "nice little bonus" isn't "FU Money" which is what I'd be looking for, if I were to join a startup.

But that's just me.... if your motivations are different, it may be more appealing to you.

Re: Ask HN: Offer to join a startup. Is this deal good?

#5

Post by pittip » Sat, Mar 12, 2011, 7:54 PM UTC

mindcrime wrote: post #4

Doesn't sound like much of a deal to me. And the reason I say so is because my theory is this: There's no reason to join a startup except to get rich, or to change the world (or both.) If you wanted a "competitive salary" you could go work for Oracle or IBM or Cisco or somebody and get that. So why join the startup at all, unless you're going to make big bank, or unless you just really, really believe in their idea?…

I am sorry about that mistake, its not competitve, rather enough to cover my expenses (not as harsh as eating Ramen noodles though). So it would be, in my opinion, substantially less than what an IBM or and Oracle will offer me.

Re: Ask HN: Offer to join a startup. Is this deal good?

#6

Post by pg » Sat, Mar 12, 2011, 7:56 PM UTC

pittip wrote: post #3

pg wrote: post #2

Don't measure the stock in money, but in percent. Sounds like you're being offered 2%. That's lowish but not terrible. The real question is whether you want to join this company. Is it founded by a single, nonhacker founder? I would steer clear of those. Empirically they don't do well.

Its in fact a single, non-hacker founder. The investors seem to be bullish though.

Are you hearing about their bullishness from him or them? And are they prominent investors, or noobs?

Re: Ask HN: Offer to join a startup. Is this deal good?

#7

Post by pittip » Sat, Mar 12, 2011, 7:59 PM UTC

mindcrime wrote: post #4

Doesn't sound like much of a deal to me. And the reason I say so is because my theory is this: There's no reason to join a startup except to get rich, or to change the world (or both.) If you wanted a "competitive salary" you could go work for Oracle or IBM or Cisco or somebody and get that. So why join the startup at all, unless you're going to make big bank, or unless you just really, really believe in their idea?…

What is this x% which will make the deal sweet?

Re: Ask HN: Offer to join a startup. Is this deal good?

#8

Post by pittip » Sat, Mar 12, 2011, 7:59 PM UTC

pg wrote: post #6

pittip wrote: post #3

Earlier quoted context omitted.

Its in fact a single, non-hacker founder. The investors seem to be bullish though.

Are you hearing about their bullishness from him or them? And are they prominent investors, or noobs?

From him. Yes they are prominent.

Re: Ask HN: Offer to join a startup. Is this deal good?

#9

Post by geophile » Sat, Mar 12, 2011, 8:01 PM UTC

You say that you are the first hire. How many people are there besides you and the founder? If it's just the two of you, 2% is on the low side, but I wouldn't necessarily walk away from it. If there are others who were there pre-funding, then 2% sounds about right.

Other things to consider:

- What do you think of the product you're building? Are there others like it? What is unique about this one? Would you use it? Is there a voice in the back of your head telling you saying that this is great, or that this is dumb, or that it has fatal problems? Listen to it and think about what it's telling you.

- Similarly, what is your instinctual reaction to the founder? Is he focused, or does he have shiny object syndrome? What value does he bring to the venture, other than having convinced someone to fund it? Does his background and track record suggest that he can make this work? Or that he's worth betting on?

Good luck.

Re: Ask HN: Offer to join a startup. Is this deal good?

#10

Post by pittip » Sat, Mar 12, 2011, 8:04 PM UTC

geophile wrote: post #9

You say that you are the first hire . How many people are there besides you and the founder? If it's just the two of you, 2% is on the low side, but I wouldn't necessarily walk away from it. If there are others who were there pre-funding, then 2% sounds about right. Other things to consider: - What do you think of the product you're building? Are there others like it? What is unique about this one? Would you use it?…

I will be the first hire in absolute terms. Nobody before me i.e. pre-funding