If all goes well I might be in a situation this week where I will be negotiating compensation at a $B bay area startup. I've never negotiated shares (public or pre-ipo) before so I have a few questions like how do I approach this? How do I determine if I'm getting a good amount of shares? What leverage do I have to ask for more?
Negotiating shares @ pre-ipo startup
- Thread starter asdfghwy
- Start date
Schnellbandit
I see 4 lights!
When they are now just starting up to soak the small investors during the IPO?
Entoptic
Red Power!
Find out if they are RSU or RSA. Also what do you do? What lvl is the job in terms of company ladder? Look at it in terms of a percentage for public stocks.
Do you have good benefits? If not use that as leverage. Also you can say I’ll complete XYZ by ABC for a compensation of 123.
Lots of factors. Give us info.
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Schnellbandit
I see 4 lights!
and,
How will you deal with the issue if your shares become worth far less than anticipated? Watch out for blue sky predictions.
If you are discounting your services they can be discounted even further by a lower than anticipated share price, especially a year or two out when you would be in a position to cash out.
IPO shares are gravy, not compensation IMO. They are incentives to retain you, not compensation for the work you do. Take care of yourself first and then knowing that your needs are met, IPO shares are an early retirement.
Had 60,000 shares of a pre-IPO compensation package. Negotiated a compensation if the IPO did not come off or there was a parting of ways regardless of the share price before selling them was an option. While it was a second job, it came in handy that no matter what, I wasn't tied to a do or die IPO.
How will you deal with the issue if your shares become worth far less than anticipated? Watch out for blue sky predictions.
If you are discounting your services they can be discounted even further by a lower than anticipated share price, especially a year or two out when you would be in a position to cash out.
IPO shares are gravy, not compensation IMO. They are incentives to retain you, not compensation for the work you do. Take care of yourself first and then knowing that your needs are met, IPO shares are an early retirement.
Had 60,000 shares of a pre-IPO compensation package. Negotiated a compensation if the IPO did not come off or there was a parting of ways regardless of the share price before selling them was an option. While it was a second job, it came in handy that no matter what, I wasn't tied to a do or die IPO.
DataDan
Mama says he's bona fide
I have no idea what a billion-dollar startup is. If there's already $10^9 in assets, much of the equity is surely claimed.
My experience was with a small company that grew. I don't actually remember shares promised at hire (I didn't see it as a sure thing). Most of what I got was in bonuses that came with company growth and my performance.
What are you bringing to the dance? Sell your special skills and willingness to forgo current income (and sleep) to help them achieve certain concrete goals--e.g., release of a Klingon version of their product by 2020 Q2. Which will require your unique mix of expertise in programming languages, host platform OS's, and of course, the Klingon language.
Good luck.
My experience was with a small company that grew. I don't actually remember shares promised at hire (I didn't see it as a sure thing). Most of what I got was in bonuses that came with company growth and my performance.
What are you bringing to the dance? Sell your special skills and willingness to forgo current income (and sleep) to help them achieve certain concrete goals--e.g., release of a Klingon version of their product by 2020 Q2. Which will require your unique mix of expertise in programming languages, host platform OS's, and of course, the Klingon language.
Good luck.
2legs2wheels
Well-known member
Second that - IPO shares are gravy, not compensation
Source - worked for startups since two decades.
Source - worked for startups since two decades.
Maybe the wrong terminology. I've only worked at fortune 500 so this is all new to me. They aren't more than a year and a half-ish old.
It is RSUs. I work in supply chain. This reports to a Senior Manager --> director --> VP. Definitely room for growth in this role or adjacent roles utilizing this experience (and my current experience). Fully paid medical/dental/vision by the employer, 3 catered meals a day, etc
Base salary would be a massive increase. I'm talking shortening my goal to be able to afford a home in the bay area from 3-5+ years to 1+ tops. I'm just looking to create extra value if I am llucky enough to be offered the position.
Good advice. I will leverage everything I can offer them, should I get to the offer stage.
As stated above, base compensation is more than enough money for me to know what to do with myself. (except I do know -- save for a house/retirement)
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littlebeast
get it while it's easy
lol at start-ups. considered in once. mentioned stock in the negotiations. dude said - hey, you want stock? i’ll give you enough stock certificates to fill a file cabinet. his cavalier attitude was a huge red flag to me, and i was kinda like, yeah, no. passed.
afterwards, relayed the story to a few friends who are players. and they reminded me of the failure rate of start-ups, and how much worthless paper so many hopefuls have ended up with. and they endorsed my decision.
afterwards, relayed the story to a few friends who are players. and they reminded me of the failure rate of start-ups, and how much worthless paper so many hopefuls have ended up with. and they endorsed my decision.
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Schnellbandit
I see 4 lights!
Entoptic
Red Power!
Sorry to hear about your experience however mine has been the exact opposite. Been with two pre ipo companies amd both took off.
augustiron
2fast 2live 2young 2die
I looked at options as a signing bonus based on their current strike price/current value.
If I'd expect $10k or $20k signing bonus, I would take it as options if I thought the company had legs.
Yes, it likely has a one year cliff and several years vesting, but as said, it is gravy on the rest of your comp package, which also should be satisfactory.
If I'd expect $10k or $20k signing bonus, I would take it as options if I thought the company had legs.
Yes, it likely has a one year cliff and several years vesting, but as said, it is gravy on the rest of your comp package, which also should be satisfactory.
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25% on first anniversary and then 1/36th every month for the remaining 3 years
That's the deal my wife got. How much of the company is that if you get all the shares? Any guarantee on how much the company can dilute your stake in the company?
mercurial
Well-known member
The only party who is going to have leverage to obtain an anti-dilution guarantee is a big new investor that brings money that the company badly needs.
One thing that should always be a concern, is the ability to retain your right to exercise/own any vested portion of a grant, if you choose to leave the company. Lots of people have been stuck for years at pre-IPO "startups" who never seem to IPO, for fear of losing vested equity. This is usually a problem when the equity is in the form of options that require exercise to own (creating large current tax liability for an asset that you may or may not ever be able to sell.)
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My wife was given the option for 2.5% of the overall ownership which could not be diluted to less than 1.5% ownership upon influx of outside investors. But she isn't a code/software type engineer and works in a very small field. Her company will never go public on its own but the possibility of being bought ought by a European conglomerate is very high as that's was her competition does (recently bought the last company she worked for and has already made overtures to her current company). If that were to happen that would be the only realistic way her shares would be worth anything more than a few nickels a piece.
Last summer the owner made a deal with her that gave her options for approximately another 1% overall.
Last summer the owner made a deal with her that gave her options for approximately another 1% overall.
Guys so the process has been a bit slower than expected. HR wanted to "connect" with me on comp again but said there has been no hiring decision made yet--I think they are prepping an initial offer but I could be wrong. He said a couple hundred grand in equity obviously contingent on 1) going public 2) being valued at a very specific price.
What happens if the company is swallowed up by a larger one? Is the price generally fixed at hire date or can this number go up or down depending on what happens to the company?
RSUs, 4yr vesting. 25% first year and 1/36 every month
What happens if the company is swallowed up by a larger one? Is the price generally fixed at hire date or can this number go up or down depending on what happens to the company?
RSUs, 4yr vesting. 25% first year and 1/36 every month
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augustiron
2fast 2live 2young 2die
All of your options should be at a fixed strike price set at the time of offer, regardless of when they vest.
Whether or not you are +/- $$ on the strike vs current value at the time of vest is the risk you take.
The other variable is the tax implications of exercising the options at various times/values.
Whether or not you are +/- $$ on the strike vs current value at the time of vest is the risk you take.
The other variable is the tax implications of exercising the options at various times/values.
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