Ask HN: Value of “Shares of Stock options” when joining a startup

https://news.ycombinator.com/item?id=19789564

by cdeveloper • 7 years ago

5 3 7 years ago

news.ycombinator.com

I got an offer from a US start-up (well +25 employees) which has an office in EU where I would join them.

The offer's base salary is good (ie. higher than average for senior positions for that location) but I intend to negotiate it further, as I have possible other options. patio11's negotiation guide was a great read in that regard.

However, I'm relocating from a non-EU/US country, and I don't have a single idea about the financial systems, stock markets, and how to evaluate "15k shares of stock-options" or what "Stock Option and Grant Plan" means, I'm asking you fellow HNers about this part.

Do I just treat them as worthless and focus on base salary (as some internet sources suggest) or is there a formula to evaluate what they would be worth in say 2 years for instance ?

mindcrime• 7 years ago

Do I just treat them as worthless and focus on base salary

Yes. Always assume the value of stock options for startups is zero. If you ever happen to benefit from that equity ownership in any way, treat it as "found money".

is there a formula to evaluate what they would be worth in say 2 years for instance ?

You could come up with an infinite number of such formulas. And they'd all be based on assumptions which you have no way to validate, until the two years has actually passed. And most of those things are also things that you can't control, or even influence very much. Ergo, startup stock options are basically a lottery ticket.

uberman• 7 years ago

It would not hurt to ask about current and future dilution and how exactly the company is currently estimating share value. Getting a straight answer is likely going to be a challenge though.

Assuming the company in question is not "public" then yes it would be good to be conservative about the valuation of their stock. It would be safe to assume that any number of shares of stock (options or grants) are worthless.

From my personal experience, you will likely be disappointed in whatever is left after investors and principles take their cut. They are almost certainly going to be privileged in a buyout over the holders of "common" stock. I have been in acquisitions where my option price was more than the value of my shares. I don't think this is uncommon.

Sorry, I see you also asked what "Stock Options" and "Stock Grants" are. Grants are like a flat out gift. The company gifts you some number of shares. Options give you the opportunity to purchase shares for a set prices regardless of what the current value of the shares actually is. Options are great if the option price is less than the actual price. They are worthless if it is the other way around.

Again, remember that "investors" and "principles" will almost certainly be compensated first out of the pot of money from an acquisition. After that, whatever is left (usually little to none) will determine the actual share price. However with a "big exit" what is left might make you rich :-) Just don't bet on it.

westurner• 7 years ago

There are a number of options/equity calculators:

https://tldroptions.io/ ("~65% of companies will never exit", "~15% of companies will have low exits*", "~20% of companies will make you money")

https://comp.data.frontapp.com/ "Compensation and Equity Calculator"

http://optionsworth.com/ "What are my options worth?"

http://foundrs.com/ "Co-Founder Equity Calculator"

Ask HN: Value of “Shares of Stock options” when joining a startup

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