The one number you should know about your equity grant | Hacker News Reader

The one number you should know about your equity grant

cdixon.org

21 pointsprakash8 comments

Unfortunately, even this isn't enough. You have to understand the funding structure of the company as well. Who owns preferred stock? What payment options do the investors hold?

You may own 1% of the company and the company sells for $100M... that doesn't mean you get $1M. The investors may very well have preferred stock beyond that and you end up with nothing.

Understanding the WHOLE picture is very important for anyone joining a startup. Unfortunately this is a big topic with a lot of stuff you need to understand. You owe it to yourself to know it.

Sure, thats true. The article should really be titled "the absolute number of shares you get is irrelevant without more information" but that doesn't look snazzy.

also be aware when you join a pre-series-A company that your percentage of the "founding shares" will not be the percentage of the final shares that comprise the eventual company at the big liquidity event. during the various funding rounds the company may create many, many more shares arbitrarily to hand out to investors, employees, and the CEO's mistress. the dilution of your shares through the various rounds will depend on the perceived strength of your company and the general tech investment climate at the time.

Not to mention the potential for share buybacks. It's a rule of thumb in investment texts that if you're not an executive or on the board, your shares are worth less because of fewer liquidity options. See the recent Facebook share buyback, for example. If you were a former employee (i.e. not someone the executives cared to compensate) you were out of luck.

For the vast majority of employment decisions, it's my opinion you should basically just ignore stock or option grants.

What kind of percentage (order of magnitude) could one expect in post-series-A startup?

I understand that it's hard to say because it depends on a lot of parameters, but I did ask what percentage of the company I was getting and I have a hard time knowing if it was actually good or not. Should I get around 1%, 0.1%, 0.01%? I don't know and it makes it hard to argue I deserve more options.

It'd be interesting to have a service like Glassdoor for the stock options part.

It depends, but in terms of the ranges, you should probably expect something around the .1% order of magnitude for an engineer - could be higher or lower depending on how close you are to the funding round, how many employees there are total, and how senior you are.

Yeah, I fell for this. Not that I think anyone was actively deceiving me, I just didn't ask the obvious question. They said, "We're offering you X options." and I should have immediately said "Out of how many total?" I didn't ask, so it's really my fault.

Contrarian view (which to me is much more informed):

http://venturehacks.com/articles/share-price

This argues that all that matters is share VALUE, not percentage.

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