

Negotiating Your Startup Job Offer - freerobby
http://rob.by/2013/negotiating-your-startup-job-offer

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jamesaguilar
I have definitely come to the view recently that a seed-stage startup is not a
good thing for an experienced engineer to join unless it is as a founder. The
odds of it being worth the salary cut are just too low.

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isalmon
I think it's one of the best posts I've ever seen on stock options. Too many
people think too much of their stock options, while in reality in most cases
they are worth close to nothing. This is something everyone has to consider
when their employer offers them to trade salary for equity.

I made this mistake once, I wish I had read this post then...

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swampthing
Cool post - one correction:

 _Your stock was restricted, not common._

should be:

 _Your stock was common, not preferred._

You typically don't get restricted stock through exercise of a stock option,
you get common. And investors get their liquidation preference through
preferred stock, not common.

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freerobby
Thanks for catching this; I updated accordingly.

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neekb
I think this was the most important point regarding equity: "The only thing
that matters in terms of your equity when you join a startup is what percent
of the company they are giving you. If management tells you the number of
shares and not the total shares outstanding so you can’t compute the percent
you own – don’t join the company! They are dishonest and are tricking you and
will trick you again many times."

I have twice worked for companies that presented my options this way. Although
one of them worked out very well for me, and the other is likely to as well,
it's still sketchy. I wish this post had been around back then :) That being
said, I will be referring back to it in the future!

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run4yourlives
I have no idea why a person would want to be an _employee_ of a startup at an
early stage. Seems like you get all of the downside with none/little of the
upside.

Can anyone that sees things differently provide some reasons?

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freerobby
My goal at my first startup was to optimize for learning and it served me very
well for that. The perks I got:

\- Met investors and learned about the entire investing process

\- Got immersed in metrics/data-driven product development

\- Had a ton of autonomy even as a non-senior developer.

\- Made a name for myself in the local ecosystem.

\- Got to spend my time developing a product I loved and believed in.

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run4yourlives
These are all good reasons, but they strike me as being much more valuable to
a person that is new in the industry, rather than one with several years of
experience.

I can certainly see the appeal for someone looking for experience, but I still
don't see it for a seasoned professional.

To me it seems as the only valid dichotomy is between being a founder yourself
or working as an employee in a more established (but still perhaps small)
business.

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jonnysilk
A great read, all in all negotiation 101 techniques still work:

\- Put your fence post out first by setting a number that you could get
elsewhere \- Mention that you love the company and are willing to take a
partial cut on a higher alternative but cant do more than that \- Assume the
stock wont be worth much at all, explain although you strongly believe in the
company most start-ups fail \- Confidence is important

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lucidrains
This is great, thanks for this!

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citricsquid
Question regarding stock options: I have some but I'm not sure if the company
will ever sell for enough to make it lucrative for me, however that assumption
and my knowledge of the company are based on what I've casually been told,
what I've observed, does being offered stock options (or purchasing stock)
grant me access to financial information or some sort of "insider" information
that would allow me to make a better informed decision?

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freerobby
Not if the company is privately held.

Your options agreement should tell you how many shares you have rights on and
what your strike price is. The company, if run honestly and transparently,
will tell you how many shares are outstanding and what the current valuation
is. From there you can do the math on potential outcomes. If they won't give
you formal disclosure of that information, assume the worst.

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staunch
I'm pretty sure this is wrong. I think in California and Delaware (most
startups) stockholders are entitled to see the financials of the company.

I doubt most companies would deny this right if you sent a notarized/certified
letter with notice. And in the worst case a judge would most likely side with
the stockholder.

IANAL

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freerobby
The problem is that he's not a stockholder. He doesn't become one until/unless
he exercises the options.

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staunch
So he buys one share?

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dclowd9901
At what point did it become OK for investors to eat such a gaping chunk of
equity by simply contributing money, when founders/engineers/technical talent
contribute not just money, but time and effort as well?

Is it simply because they are the ones holding the cards? If so, fuck that,
and fuck investors.

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RickHull
> _At what point did it become OK_

When everyone agreed to it, I suppose.

> _If so, fuck that, and fuck investors._

This seems rather naive. No one takes investors for the fun of it. Investment
describes a mutually beneficial relationship that occurs when an enterprise
needs funding. Investors shoulder the financial risk and burden and thus
demand compensation in the form of (probably worthless) equity.

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slurgfest
You are right, the burden is on those taking investment to make sure it is
good for them. On the other hand, there may be negative externalities to a
mutually beneficial deal between an investor and a founder, for an early
employee.

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lightblade
How do I know how much a company is worth and how many shares it has? Is there
some public source where I can look up for this information?

Startup job offers usually just give you how much stock they're offering you
but without any information to see how much it's really worth

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andyjsong
This is not a sure bet, but just ask about their latest funding round and how
much they got and how much of a percentage they gave to the investors. For
example, Company X just closed a 1 million dollar Series A and gave up 50%
equity. That means the company is valuated @ $2 million.

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ishbits
Good read as I'm currently entertaining a 1% stake in a seeded company for 1/2
my market rate, with a valuation of $5 mil.

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STRML
Citing both the article and my personal experience, it would take more than
that to make that deal worth taking.

