Ask HN: How to weigh the equity component of a job offer

3 pointsjustsocrateasin3y ago5 comments

I've recently been fortunate enough to land an offer with a pretty cool company! Unfortunately, I also love my current job, so it's a close call. My question for HN is how to weigh the equity component of a job, and what information should I be trying to get from the company to get the full picture on the total compensation?

The company is Series A/B and they've already raised $150m. When I asked what the current valuation was they said they weren't able to let me know but gave a ballpark of $300m-$500m, so I'm not sure they will give me the 409a. They're offering about 20,000 options at a strike price of $0.36. Obviously this is monopoly money until proven otherwise, but I'm an optimist and think such a dramatic Series A probably bodes well.

3 pointsjustsocrateasin3y ago5 comments

5 comments

5 comments · 4 top-level

leeny3y ago· 1 in thread

Do you know how many shares are outstanding, i.e., what % of the company you'd be getting?

Moreover, you should absolutely ask for the preferred price at the last fundraise. They should be able to give you that figure, just like they gave you the strike price.

Also ask about liquidation preferences: do investors get paid out at a multiple?

Finally, you should adjust that figure depending on how long ago the raise was. A 2021 valuation is very very different from a 2022 and 2023 valuation.

Once you have all of these figures, you can build yourself a probability-weighted model that factors in dilution and a few different outcomes (company ends up being worth nothing, company gets sold to PE at some small multiple, company has an IPO etc) come up with an expected value for the worth of your equity.

If you'd like, email me, and I'll share a redacted version of the model I give my employees at interviewing.io to do some reasoning about the value of their equity: aline@interviewing.io

P.S. Odds are that this equity is going to be monopoly money (because that's true for every company)... and odds are your stake is very small even if it's not because you're coming in late.

ttymck3y ago

Even with all that information, my understanding is the possibility remains that upon acquisition, shares are not necessarily worth anything. Even if the acquisition price is beyond the liquidation preferences, the terms of acquisition can still override whatever "value" your stock options may or may not have.

The fact of the matter is, as a line level employee, you have no leverage and no influence on your exit outcome. The only reasonable assumption is that your shares are worth $0, unless you have something in writing that says otherwise.

I think IPO is more straightforward, and presents a better opportunity to see some reward. But post-IPO lockup is usually 6 months?

strangattractor3y ago

Assume the chance of it becoming valuable is equal to the chance the startup will succeed. About %10 maybe - if you want to be optimistic. Best to not weigh it at all I think. Your time and effort is worth what it is worth and you should be paid for it. You will likely be asked to work more than you might have to work at a more established company.

If I remember correctly Founders and CEOs of startups were being given low interest home loans by Silicon Valley Bank because the startups deposited money there. You will not have access to those types of benefits as an employee. Employers will happily let employees under value their work and make sacrifices for their companies.

leros3y ago

Treat like it's worthless. Unless you're a co-founder or one of the first few employees, it's unlikely to be a substantial amount of money. If you're lucky and the company does succeed, you might have a house downpayment or a car's worth of money, basically a large bonus payment.

baremetal3y ago

Zero

The answer is Zero.

>When I asked what the current valuation was they said they weren't able to let me know

Zero--

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