What amount of options should I expect when joining a startup?

https://news.ycombinator.com/item?id=15100741

by msaun008 • 9 years ago

4 8 9 years ago

news.ycombinator.com

What amount of options should I expect to receive in a offer from a startup company as a junior / mid / senior level software developer?

I assume this is a topic that is dependent on each individual company and their current situation, but is there a general range or expectation for these different career levels?

toocool4• 9 years ago

Always use percentages with respect of the fully diluted number of stocks (preferred + common), absolute numbers are worthless. In my current company:

- I joined as a senior software engineer among the first 3 employees (seed round) and got 1.8%. Junior engineers got ~0.5%

- At series A (30 employees), senior engineers got ~0.5% and junior ~0.1%

- At series B (70 employees), senior engineers got ~0.2% and junior ~0.05%

- At series C (100 employees), senior got ~0.1% and junior ~0.01%

rahimnathwani4• 9 years ago

"absolute numbers are worthless."

Percentage figures are also worthless, unless (A) there's only a single class of shares, or (B) you know all the financial terms (liquidation preferences etc.) attached to each class of shares.

EDIT: I just noticed that OP was talking about options (not shares, as I had assumed). So, of course, strike price, vesting period, and vesting cliff are also important. When presenting the offer, the company may justify the strike price based on the valuation of the company at the last funding round. However, this valuation is often an overestimate, as they're based on the value of just one class of share, rather than the actual mix.

toocool4• 9 years ago

Good points. Two considerations:

First: Is it correct to assume that in normal conditions you should run away from any company with shady liquidation preferences?

I've been in a few "high quality" startups, and in most cases if the company was liquidated for a price larger or equal than the last valuation, essentially the preferred shares would convert to common, since the preferred status didn't give any advantage to them from that point on.

If the company sells for less than the last valuation then yes, common holders will be progressively wiped out since investors (preferred shareholders) need to recoup the money they invested, but at that point you really just placed a bet on the wrong startup, nobody has been "screwed".

Second: on strike price, from what I've personally seen one "advantage" of common options is that the strike price is usually a fraction of the actual preferred share price (let's say from 1/10th up to 1/3rd) so, even if the company valuation doesn't increase much, the employee can still gain some benefits (and this is assuming that my first consideration holds, since if there are aggressive liquidation preferences you're going to be screwed, and that there won't be too many dilutions down the road).

Mind to share your opinion? You seem very knowleadgeable

What amount of options should I expect when joining a startup?

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