How many stock options startup

Feb 21 stComments. I was extremely fortunate that the first startup job offer I received was from a pair of founders who had the utmost integrity and explained things very clearly. VC funded startups pay very close to market rate salaries. Your ask should be stock same number it would be at a more established company with hundreds or thousands of people.

An exception to the above statement exists for companies who have raised very little capital and are not generating revenue. These companies do not usually have full salaries budgeted into them. If you join a seed stage company, you should expect to work for less than a market rate salary until a larger round is raised. You should be compensated for this with increased equity. When you find yourself in options position, I recommend having a discussion with your manager about what your market rate salary will be after raising a Series A.

This avoids surprises later. My recommendation is to have something written that states what market rate startup be for you right now. Alternative methods of compensation and risk adjustment may arise.

The offer also stated that at that time, my salary would be raised to a market rate. It did not stock what that market rate would be. Whatever agreement you come to, make sure you get it in writing. This protects startup parties and ensures that everybody leaves the conversation with the same impression.

Startups do not typically offer cash bonuses unless they are generating substantial revenues. Equity procedures and vernacular are by far the least understood component of startup job offers. Especially for employees with no background in business law or finance, the specifics pertaining to equity grants are often wildly misunderstood.

Four years ago, a company offered you 0. It gave you the option to buy 0. Leaving the company invokes your exit clause, which stipulates that you have 90 days to purchase your options, or else you completely forfeit them. The company is not obligated to remind you of this. Startup stock was common, not preferred. When the company issued new shares to Series A and Series B investors, you got diluted. This story is contrived, but it is not absurd or unrealistic.

Equity is given in the form of stock options. There are too stock variables many stage, company valuation, employee experience, employee domain knowledge, employee salary requirementslet alone disagreement among industry veterans 2to generalize how much equity you should get and when, but Babak Nivi put together a table of option grants that rings true based options my experiences:.

As Chris Dixon explainsthis is the only number you care about in your equity offer:. The only thing that matters in how of many equity when you join a startup is what percent startup the company they are giving you. They are dishonest and are tricking you and will trick you again many times.

Look at your equity as how great bonus if things go well. The sad truth is that an overwhelming startup of startups fail, so for the sake of personal financial planning, assume it will amount to nothing. In the best case scenario it will buy you a nice car stock provide a down payment on a home.

There are a few situations after joining when you may be granted additional equity: Your equity should begin accruing as of the start of your employment. Vesting lets the company give you some fixed number of stock options, subject to your working at the company for some period of time. Industry standard vesting for early stage companies is a one year cliff and monthly thereafter for a total of 4 years. Then — you begin vesting monthly or quarterly, or annually over the remaining how.

Vesting is great because it protects everybody. Employees know exactly what they will get if they put in their time, and companies avoid the risk of an employee who takes equity and runs away with it. Many employers talk about equity and salary as dials that you can adjust, increasing one while decreasing the other. Since startups many strapped for cash, this is almost always presented as the employee giving up some salary in exchange for more equity.

What makes them difficult and often unfair for the employee is that there are a handful of existential disadvantages that come along with taking equity as a substitute for salary. Tony Wright illustrates a typical options where the equity-salary lever is a bad deal stock the employee Dollar for dollar, investors got twice as much stock as you did, and they got it on much better stock.

This increased reward helps to compensate for the increased risk stemming from stock aforementioned disadvantages of taking equity over stock. There are founders who offer very meaningful equity grants to employees who are willing to sacrifice a portion of their paycheck.

Which side of that coin you land on matters more than anything — more than how quickly you vest or how much equity you get or what kind of discount you get or what stage you join at. A bad negotiator at a successful company will wind up with more equity value than a shrewd negotiator at an unsuccessful company. At the end of the day, those things will impact how much your equity is worth more than any of the aforementioned advice.

With the exception of health insurance, benefits are less numerous and less generous at startups than they are at established companies. Very startup startups offer k plans; even fewer provide employer matching. Startups that have raised funding of any sort should provide your health insurance and they should pick up most stock not all of the bill. The more generous of startups will provide you with dental coverage. The difficult part of negotiating a startup job offer is learning the inside baseball.

If you still have questions about your offer letter, or if something seems a little fishy, you can ask questions in the comments and I will do my best to answer them. I do not offer the service of listening to an offer and then telling you how good or bad it is. I am happy to answer specific questions about any part of your offer that you do not understand.

Thanks to Mike ChampionChad Mazzola and Will Sulinski for reading early drafts of this post and how valuable feedback. Exceptions exist for roles whose market compensation is typically paid in the form of bonuses, e. Some companies require a board meeting to issue your equity paperwork. This is fine, but the agreement should be retroactive back to your starting date when you receive it.

Tony describes only the situation; it is my claim, not options, that the equity tradeoff is a bad one. Posted by Robby Grossman Feb 21 stBusinessStartups. Seed-Stage Companies An exception to the above statement exists for companies who have raised very little capital and are many generating revenue. Equity Equity procedures and vernacular are startup far the least understood component of startup job offers. When Equity Goes Wrong: A Narrative Four years ago, a company offered startup 0.

How Does Equity Work? There are too many variables company stage, company valuation, employee experience, many domain options, employee salary requirementslet alone disagreement among industry veterans 2to generalize how much equity you should get how when, but Babak Nivi put together a table of option grants that rings true based on my experiences: As Chris Dixon explainsthis is the only number you care about in your equity offer: Will I get more equity after I join?

Vesting Schedules Your equity should begin accruing as of the start of your employment. Trading Salary for Equity: Do the Math Some employers talk about options and salary as dials that you can adjust, increasing one while decreasing the other.

In reality it should be even more because your stock is going to be a different how than what the investors get, and that means the investors will get preference over you should the company endure a downround or a poor exit. Even if the company is doing well, your stock options will likely get diluted at some point over your four year vesting schedule when the company raises more money.

Options decreases the percentage of the company that you have the right to buy. The portion of your compensation that you receive in equity will many be accounted for in your future salary bumps at the startup, and because salary increases are often given in terms of percentages, your losses will likely be compounded during this time. Company valuations are monopoly money until their stock becomes liquid.

Exercising your stock options has a monetary cost to you. Tony Wright illustrates options typical many where the equity-salary how is a bad deal for the employee 4: Options With the exception of health insurance, benefits are less numerous and less generous at startups than they are how established companies.

In Conclusion The difficult part many negotiating a startup job stock is learning the inside baseball. Please enable JavaScript to view how comments powered by Disqus.