Startup stock options questions to ask
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And that is just one example of how stock options are becoming an integral part of the employee benefit package within tech startups.
Google, RescueTime and a number of other smaller companies are placing stocks on the table as a tool to attract and retain better talent. Before you gladly sign-off the deal and get dreamy about the millionaire retirement , you should make a realistic assessment of your options by asking the following questions. Venture Hacks have created a good breakdown of what employees may expect in terms of equity.
Establishing the current share price is generally easy: you divide the value of the company at the latest fundraising round by the total number of shares. Look out for clauses detailing what will happen if the company is acquired. This can create quite a challenge if your potential employer is more than a few years old and successful which is what you want — see The Silicon Valley Career Guide. Well, phew, that takes some of the pressure off. The best use of stock options in a startup mode is as a message. Sign up for HerMoney today. Notify me of new posts by email.
As a lead engineer you can be offered somewhere between 0. All the options are typically vest over 4 years. Most commonly success does not happen overnight. However, the question remains — what happens with unvested shares? There are two most common scenarios:. Authorized options are those, which have not yet been granted.
Obviously, as the pool grows, your stake will get diluted. Having a lower pool may mean that:. Obviously, at early stages the number would be more of an educated guess than an exact sum. However, a good employer should provide you with an acceptable valuation range. Failing to do so should appear as a red flag for you. Your tax options will depend on the specific type of stock options you own and a few other variables related to your individual case.
What is equity? Are stock options valuable? Don’t sweat it—we’ve got you covered.
Also, make sure your company has passed are recent A Valuation and you have studied the data. We're sorry this article didn't help you today — we welcome feedback, so if there's any way you feel we could improve our content, please email us at contact tech. She's slightly addicted to apps and viral media trends and helps different companies with product localization and content strategies.
You can tweet her at dilabrien. Home News. How many shares will I be granted and under what terms?
That is just a financial risk you take in the startup world. Of course, you should still advocate for yourself at the negotiating table. A startup is not a get-rich-quick scheme; it takes some serious hard work.
With the previous tip in mind, you should negotiate for equity with the knowledge that it is not worth anything yet. It only might be worth something in the future. If the company that you joined early on becomes one of the small percentage of startups to be financially successful, it will be thanks to your hard work. We mentioned earlier that equity that is typically offered to employees is called common stock.
No matter what kind of equity you are offered, make sure that you fully understand the terms and conditions. The prevalence of social media in our work lives can make it seem as though everything about our careers are casual.
This is dead wrong: Any career-focused negotiation, including one about equity, is a serious discussion that should be done verbally. It is acceptable, however, to use email to follow up on the details — but only to follow up. A good standard is to trust, but verify with your own research.
Evaluating ESOPs: Questions that CXOs should ask
Discreetly acquire more information about similar companies to ensure everything checks out OK. Knowledge is power and you can advocate for your professional well-being more effectively with data. Give yourself some time to decide whether you want to accept the offer which might entail circling back to your network to get their point of view. Whether you decide to accept the equity offer you receive or make a counteroffer for more money is up to you.
If you decide to make a counteroffer, Harquail has some good suggested scripts to follow. And I know that this is really important, so I want to come back with a counteroffer. You could also frame your negotiation as another skill you bring to the table, which just might impress the person who is about to hire you.
When you ask for equity at your company, make sure you that you feel good about what is finally decided upon. Hire a lawyer who specializes in startups to look over your package after you ask for equity in your company. Why should you do this? However, it never hurts to have a second pair of eyes to look documentation over. And of course, you should never sign any documents that you have not read or that you do not understand.
Startup Equity 101
Try looking for such an attorney on a site like UpCounsel , which allows you to search for startup lawyer by state. Fundera also provides options for finding a startup lawyer. Although these resources seem targeted towards startup founders, they could be worth checking out to find someone who will help an early employee. Harquail warned against putting too much pressure on yourself when you ask for equity in your company. Of course, you should not make this mindset apparent to your employers — no one wants to hire somebody who is half-way out the door! But it is an idea that you can keep in your back pocket.