

Discussion on Joining a startup with high equity or high salary - johnalxndr

I have an opportunity to join a startup just finishing up a second round of angel investment. They have voiced a need for me join and I need to give them a number to start the salary talk. Im interested in understanding more about which option would be better.
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brudgers
Any non-controlling non-preferred equity in a privately held company is worth
only what the controlling interests give it via good-will. Controlling
interests can always liquidate a company to themselves for a nominal price or
award themselves preferred stock or pay themselves absurdly inflated salaries
or rent office furniture from themselves or their spouses or anything else
that allows them to move money from one pocket to the other while taking a cut
on the transaction. And that's before you get to Private Equity/Venture
Capital whose business consists largely of extracting as much value from a
company for themselves as is possible.

That's not to say everyone is ruthlessly sociopathic. But only that the odds
of turning equity into cash are lower than the odds of a startup having a
successful exit and to suggest that it is quite possible for people to
optimize their slice of the pie when the pie is filled with serious money.

Finally, on a $4 billion exit 0.7% versus 1% versus 2% isn't going to have a
dramatic effect on your lifestyle. Same is true at $40 million.

Good luck.

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pythoncloner
Just a general advice. I was in same position few months back and i took more
than a month to decide.

Before joining seed stage startups, you should verify that whether the
existing team can take the startup 100X or not. 1% of 100M exit is nothing but
0.1% of 10B is big deal. You should have interviewed with atleast 5 startups
before taking the decision. I interviewed at quite a few startups and i had
multiple offers and i finally got the best deal i can ever get. I know that
this startup founders are impressive and they are nice and they will do well.
But you have to move out of your comfort zone and talk with 5 more startups.
Then you will come to know about the startup market.

Please use wealth-front chart to find out whether you are getting right deal
or not. [https://www.wealthfront.com/tools/startup-salary-equity-
comp...](https://www.wealthfront.com/tools/startup-salary-equity-comp...).

Use www.Offerletter.io to validate that your decision is right or not. They
have really great people who knows the startup market better than us. It
doesn't cost you anything unless you get 20% more equity during negotiation.
Of Course, you will get more than 20% if you negotiate in any company. Talking
to them was worth it!

Don't join startups whose selling point is that they will get acquired as
well.

Also, if you don't know what's Double Trigger Acceleration now, don't just
join startup anytime soon. Read about startups and contact lawyers who are
expert in stock options. They charge $300 but they save you $300K - $3M.

P.S: I'm not an expert. But I took more time to decide between offers and it
gained me 2X stock options and 1.3X salary to me.

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paulhauggis
In very rare cases will you ever make a considerable amount of money when you
take an equity deal as an employee. As we've seen from many buyouts, the VC
get paid first and the employees usually get paid last after the owners.

I've had too many friends that got nothing after working months and even years
at a job they hated hoping they would be able to cash out on their equity. I,
myself, even got my equity liquidated to 0 after the CEO decided to completely
dissolve the LLC and create a new one (A Silicon Valley trick talked about in
the Social Network to push an undesirable partner out).

So, I would take the money every single time.

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byoung2
Obviously I don't have the specifics about you or this particular startup, but
I can speak in general. A startup this early in the game has a 99% of being
out of business in a few years, so you have to consider that. Let's take two
scenarios...high salary and minimal options, say $150k and 500 options at $1
or you could go for high options and low salary, say 2000 options at $1 and
$75k. Let's assume that if the company is not out of business in 4 years that
it exits at a valuation 100x the current valuation. In that case, 500 options
would be worth $50k, and 2000 options would be worth $200k. The guy who took
the $150k salary would have made $600k in salary over 4 years, and would have
a 1% chance that the options would be worth $50k. So the best case is $650k,
worst case is $600k. The guy who took the options would have made $300k in
salary, and a 1% chance of the options being worth $200k. The best case is
$500k, but there is a 99% chance that he would get the worst case and just
have the $300k of salary. In most cases it is better to just take the salary
and a token amount of options. That said, there is the possibility that if the
company is in the 1% that actually survives 4 years, that there is an even
more remote possibility that they may go on to be a unicorn type company and
make secretaries rich from options. In that case, even a token amount of
options should make you fabulously wealthy.

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bahador
Take the salary, and renegotiate options on raises/promotions at a later date.

