
TLDR Stock Options - ingve
https://tldroptions.io/
======
eries
Our goal with building this was not to be comprehensive, but to give founders
and employees a way to have a more productive conversation about options and
what they are worth. Too many startup employees I meet don't properly value
the options they have, and too many potential hires don't negotiate for the
right things, and wind up disappointed.

We hope this will take a small step towards correcting this problem.

~~~
zitterbewegung
Neat tool, I was able to put more than 100% ownership into a Company though
and I don't think that should be possible.

~~~
akeck
If you press "9" enough times:
[http://imgur.com/a/wUvOy](http://imgur.com/a/wUvOy)

~~~
ryanmarsh
Yah but is the math wrong?

------
bumbledraven
From a purely monetary and risk-based viewpoint, whether to join a start-up
depends on how much money you already have.

Suppose you regard tldroptions.io's probability distributions and outcomes as
correct, and the only thing you care about is maximizing the long-term rate of
goal of your capital. Then the Kelly Criterion
([https://en.wikipedia.org/wiki/Kelly_criterion](https://en.wikipedia.org/wiki/Kelly_criterion)
, a.k.a. Fortune's Formula) says that you should try to maximize the geometric
mean of your capital, which amounts to maximizing the expected logarithm of
your capital.

To make this concrete, suppose you are choosing between two options:

\- (Startup): Working at series C+ start-up for three years, where you receive
1% equity and $100k/yr salary, and have a 20% chance of getting ~$60 million
in 3 years (according to tldroptions.io)

\- (AmaGooFaceSoft): Working at AmaGooFaceSoft for three years, where you
receive $300k/yr total comp (according to patio11)

For simplicity, I will ignore taxes and the time value of money. All monetary
amounts below are in millions of dollars. If you have no money in the bank to
start with, the geometric means of your alternatives after 3 years are:

\- (Startup): exp(.2 log[60+0.3 ] + .8 log[0.3]) = $0.86 million

\- (AmaGooFaceSoft) = $0.9 million

In this case, AmaGooFaceSoft is slightly better.

On the other hand, suppose you already have $1 million. After 3 years you will
still have the $1 million, plus your salary and whatever money you get from
your equity. Here the geometric means are:

\- (Startup) exp(0.2 log[6+1+0.3] + .8 log[1 + 0.3]) = $2.8 million

\- (AmaGooFaceSoft): 1+0.9 = $1.9 million

In this case, it's better to join the start-up.

The base salary matters a lot. If you have no money in the bank, but you get
$150k year at the startup instead of $100k, then the geometric mean of the
Startup option after 3 years is better than that of AmaGooFaceSoft:

\- (Startup): exp(.2 log[60+0.45 ] + .8 log[0.45]) = $1.2 million

~~~
anorwell
1% equity in a series C startup sounds wildly optimistic. You would most
likely not get that much equity as a senior software engineer. It's
interesting that your first calculation still favours the other choice.

~~~
fnbr
Yeah, I agree. There's no way that an engineer is getting integer percentages
of equity after seed round. Maybe if they're highly recruited, in which case
Google et al. would pay more.

~~~
ruleabidinguser
Who would get integer percentages after seed round?

~~~
kasey_junk
C-suite hires that have other choices and capital investors.

------
temp246810
Shit could always hit the fan though.

I joined Zenefits when everyone had dollar signs in their eyes. It felt like
the roaring 20s (or at least the accounts I've heard of them).

How are they doing nowadays?

I always say don't compromise on salary for equity. Compromise for the
experience, for an entrance into the field, because the chick at the counter
was digging you, but not because of some payout you think you'll get in the
future.

~~~
econner
They're still a unicorn aren't they?

------
johnny99
This is fantastically useful both as a side-of-the-barn estimator, and a
teaching tool. Thanks!

Two things a lot of startup employees are unaware of that are worth
highlighting: they actually have to buy their options, which eats into
returns, and that if they leave the company they have a limited window (30
days, typically) in which to do so. In would behoove them to save/plan for
this fact.

~~~
morgante
> they actually have to buy their options

Yup. It honestly astounds me how many people don't factor this into their
decision-making. Your _only_ equity compensation on joining is the delta
between your strike price and the current market value of your stock. This is
often very little, far less than you give up in salary at many companies.

~~~
robomc
How does this tool help you work that out though.

~~~
bethly
This tool reflects that profit by assuming a current strike price based on
average valuation changes between rounds. Instead of saying that you get the
full value of the stock you buy, the calculation takes into account that you
also have to purchase the stock.

This tool doesn't explain the dynamics going into the estimated profits
(though it links to things that do), but it helps people avoid over-estimating
the value by missing dynamics like strike price.

------
calcsam
It's easy to point all the details that matter in valuing your stock options
-- liquidity preferences, strike price, options vs RSUs. The genius stroke
here is to focus on the two big details that matter (% ownership and exit
value) and focused on that.

Caveat: this doesn't work in a "down exit" less than the previous round's
value.

As @bethcodes says, this is _not_ a calculator, because while these two
numbers will get you within a factor of 2, knowing the details will help you
get even closer.

(Disclosure: I built a calculator to help you do that:
[http://www.optionvalue.io/calculator/](http://www.optionvalue.io/calculator/))

~~~
eries
Totally agree. We hope this will be an on-ramp to more sophisticated tools and
analysis for beginners.

------
duderific
I have a bunch of options in my company, but I don't know what the total
number outstanding are, so I have no idea what percentage of the company I
own. 1) Is this a common scenario? 2) Is there a way I can find out what the
total number outstanding are?

~~~
mandevil
Send an email to the people who manage the options. Say that you are trying to
figure out your finances, and would like to know how many options are
outstanding.

Note that there are complicated ways that that more options might appear,
depending on the company (e.g. sometimes debt can convert to equity) that they
might be a bit more hesitant to talk about, but they should be pretty open
about the total number of shares currently outstanding.

~~~
blakecaldwell
This. If you have a CFO, contact that person. If not, then anyone in finance,
or a partner. Everyone is there for pay. This is a reasonable request.

------
gesman
\+ Most new sparkly eyed employees who sacrificed cash pay for options are
blissfully unaware of preferred shared.

This could keep slider at $0.00 for a longer (further on the right side).

~~~
bethly
Thanks for the feedback!

Preferred shares are reflected in the current payoffs; that's what's
responsible for the "low exit" portion of the slider not paying off at all.
Are you talking about participation preferences that let VCs double-dip? Those
are a whole different kettle of fish, but also not as standard as preferred
shares.

------
wtvanhest
This is an area that YC has the oppotunity to step up and lead founders to be
transparent but chooses not to. I wish i understood why.

~~~
ryacko
information asymmetry is part of the secret to business success

~~~
wtvanhest
I assume you are not being sarcastic. It is true, but in this case its a
limiting to early stage companies. I know, I personally will not join one that
doesn't disclose liquidation preference, type of shares I had etc. unless they
were offering more base comp than big corp to offset my risk of joining a
company with a 65%+ chance of failure.

By disclosing terms of the shares, great companies could attract better
people. You are not going to trick good people with shares, only fools.

~~~
mahyarm
It might be part of the reason why you tend to see older people in bigco and
younger people in startup co.

~~~
wtvanhest
I actually think the biggest reason is that start ups need an army of really
good individual contributors. They dont need managers or leaders until they
scale. At that point, the speed is too fast for experienced people to just
enter so young people become managers. And young people dont want to manage
people older than them. Bias continues.

~~~
wtvanhest
Just curious why the downvotes?

~~~
roguecoder
You offer no particular evidence for your claims, they are unpersuasive and
you manage to insult both older and younger employees in the space of three
sentences.

A. You assume young people are "really good individual contributors" and older
people aren't, which is very often exactly backwards.

B. It has been my experience that startups often hire people with management
experience as they scale.

C. Your assertion that young people don't want to manage old people is
unsupported and pretty much just sounds bitter.

The original hypothesis that younger developers are more likely to be
overconfident about their chances of success and so are willing to accept
lower effective pay makes way more sense than that older developers are less
good at being individual contributors.

~~~
wtvanhest
Thanks for summarizing. I completely see your point, but I want to explain in
a little more detail. Wasn't trying to insult anyone!

> A. You assume young people are "really good individual contributors" and
> older people aren't, which is very often exactly backwards.

Not my assumption. But, as someone ages, if they are an excellent individual
contributor, they often find themselves in management roles. There are
exceptions, but the real problem is that as people age, they want to be called
"people managers". And, startups don't need people managers, they need
contributors so there is a mismatch.

If an older person only wants to be an individual contributor, there are of
course places for them, but my contention is that the cross section is
extremely small. I can see why it seemed insulting, that isn't want I meant.

> B. It has been my experience that startups often hire people with management
> experience as they scale.

Sure, they do, but more often than not, they are hiring their strongest
individual contributors from within. Only a small percentage of people hired
are hired from very senior roles.

> C. Your assertion that young people don't want to manage old people is
> unsupported and pretty much just sounds bitter.

I have worked in 3 large organizations and 2 small organizations, it is
extremely rare for a younger person to hire someone older than them. I cannot
imagine that there is evidence counter to this claim. I have seen it
repeatedly.

------
capoDanger
Nice app! I have to admit this made me chuckle:

> Instead of trying to get the _right_ answer, we set out to build a tool that
> could get _an_ answer.

I'm curious though, from where did you get the numbers about the likelihood of
an exit? I thought it was pretty interesting that a Series C is statistically
less likely to make you money than a Series A, according to this.

~~~
bethly
Hi! I'm the engineer :) I used two sources of data:
[https://www.cbinsights.com/blog/venture-capital-
funnel-2/](https://www.cbinsights.com/blog/venture-capital-funnel-2/) which
was specific to tech companies and
[http://files.pitchbook.com/pdf/PitchBook_1H_2016_VC_Valuatio...](http://files.pitchbook.com/pdf/PitchBook_1H_2016_VC_Valuations_Report.pdf)
which covered more than just tech companies. Both only consider companies
backed by American VCs.

Interestingly, data I found from 2010 was _very_ different. It seems like more
recently the popularity of early acquisitions (especially in biotech) and more
robust seed funding have shifted the distribution of outcomes. It could
definitely change again: success rates are by no means consistent.

~~~
toomuchtodo
Serious question: Would you have enough data at this point to tell me how many
lottery tickets I could buy to replace the odds of winning on startup options
based on option metadata (startup round, options granted, etc)?

Think of it as investment diversification.

~~~
bethly
In the worst case, an option is going to be worth 0 and in the best case it's
going to be worth > 0, so the value of an option is always positive until the
company actually dies.

Lottery tickets, unlike options, cost money up front. You still can't lose
more than you pay, so the payoff curve is similarly non-linear, but unless you
can trade options for cash options will always beat lottery tickets.

Lottery tickets are easy to diversify in that you can buy a variety of
numbers. (The times when lotteries have become a net-positive buy the buyers
takes advantage of this fact.) Employee startup options are more like buying
one set of numbers over and over again. On the other hand, the odds of getting
any payoff from options are somewhere around 15-30%, whereas the odds of
getting any payoff from a California SuperLotto Plus ticket are ~4.3%. Because
you can diversify ticket numbers, you could get the same odds of getting any
payoff by buying 14 tickets with different Mega numbers, which would earn you
$1 to the $14 you spent. If you could buy stock in many different startups,
you would be called a "venture capitalist" and those folks on average do much
better than people who play the lottery.

Finally, the maximum payout of a lottery ticket is capped and known ahead of
time. The largest lottery win in the US was $656 million. On the other hand
you don't know going into a startup what the payoff for that particular
startup is going to be, and the largest exit of all time was Facebook at $104
billion. Just like with the lottery you don't know how many ways you are
splitting the payoff, but unlike the lottery it's going to be based on the
decisions of the board/founders, rather than random.

Basically, the lottery is a lot simpler than a startup, with few sources of
actual uncertainty, and so there's no real risk involved. It is just gambling:
you can do the math to figure out what edge the house has and figure out for
sure that you shouldn't do it. Startup options, on the other hand, reflect
actually-unknown unknowns, and so are more valuable to those who hold more-
optimist-than-average beliefs about the probability of that particular startup
succeeding.

~~~
bcbrown
> In the worst case, an option is going to be worth 0 and in the best case
> it's going to be worth > 0, so the value of an option is always positive
> until the company actually dies.

That's only true as long as you're still working at the company. If you leave,
you have to exercise, and then the worst case becomes negative.

~~~
bethly
You can also choose not to exercise and just walk away, in which case the
value is still 0. Though I imagine a lot of people would have trouble doing
that even if they didn't think the company was doing great.

------
Yizahi
This was linked on HN previously - "What I Wish I'd Known About Equity Before
Joining A Unicorn"

tl;dr in one word: "Beware"

[https://gist.github.com/yossorion/4965df74fd6da6cdc280ec57e8...](https://gist.github.com/yossorion/4965df74fd6da6cdc280ec57e83a202d)

------
dsr_
A QA engineer loads up a webpage and orders 0.1 percent of a company. Then 1%.
Then back to 0.1%. Then clicks the down arrow -- ah, zero percent.

Then clicks the down arrow again. Negative numbers ensue.

True story, except I'm not usually a QA engineer.

~~~
Double_a_92
I bet you it's still 100% coverage tested...

------
godelski
I find a more important question is "What percent should I ask for?"

The company I work for is about to get major investment and they are
transitioning from an LLC. Only the 3 founders have equity currently. As
engineers we have no idea how much to ask for. Because we have already been
working without equity. How do we account for the years we've worked? Or that
our salaries aren't that great right now.

~~~
mgummelt
Wealthfront used to have a great compensation estimation tool:
[https://blog.wealthfront.com/startup-employee-equity-
compens...](https://blog.wealthfront.com/startup-employee-equity-
compensation/)

But it was mysteriously deleted without reason.

~~~
godelski
Thanks, that at least gives some area for me to guess within. Noting ".15 –
the percent of shares that employees excluding executives typically own"

So I would take it we should ask north of this number. Being that we're small,
don't have great salaries, and have been working for the company "because we
believe in it" before getting any real promise of compensation.

------
tlrobinson
Are these numbers accurate for "% of companies will never exit"?

Seed 74%

Series A 65%

Series B 68%

Series C+ 71%

If so I'm a little surprised that seed and series C+ companies have
approximately the same chances never exiting.

~~~
jy1
Series A and B are easier (cheaper) to acquire.

------
i_live_ther3
Correct me if I'm wrong. But from what I tested you get $0 unless the IPO/sell
is over $40M. No matter if Seed or Series C or how much of the company you
own.

~~~
alain94040
Yes, but the default is set to the employee getting 0.01% of a company that
raised series A. That's a very pessimistic percentage. Think of it this way:
the startup could hire 100 employees, each at 0.01%, and only give up 1% of
its total equity. That's way too low.

Typical grants for post-series A employees (the 10 to 50 first employees) are
at least 10X more than that. With that calculator, you get something (~ $20K)
for a $40M exit. Not 0. Not amazing either.

------
ndonnellan
Needs an NPV field and equivalent effective average salary difference per
year. :-)

------
anovikov
Why probability of exit of series B company lower than series A? That sounds,
at least, counterintuitive.

~~~
habosa
Total guess: maybe there's a greater chance of exit for very early stage (easy
acquisition target) or very late stage (IPO). A lot of the failures that make
the news are companies that hit the Series B or C phase and realized they had
no path to IPO or acquisition.

------
orthoganol
Yep, IMO unless you are a founder, if your company isn't one of the top
companies of the decade your 4-6 years of pay-cut toil as an early employee
will likely just not be worth it, at all.

The expected value of working at an early startup gets overestimated, by a
lot. If you're optimizing your career, either make the most you can at an
established company, or start a startup.

Or... work at an enlightened startup, that understands the state of affairs,
and offers really generous lifestyle advantages - i.e. go work remotely for a
couple months if you want, otherwise they are just exploiting misinformed
young people and their founders likely have some ego issues.

~~~
austenallred
I completely disagree. It's really not hard to find a company with great
product market fit, say series B, get a bunch of equity, a decent salary, and
wait a couple years for your equity to be valuable. Assuming the company is
successful (of course there's risk there, but by series B a _lot_ has been
mitigated), your equity will likely be quite valuable. I actually think, risk
adjusted, that's the easiest way to make a bunch of money.

I joined a startup long after product market fit, it was pretty obviously
going to be moderately successful, and I was employee ~100. I never worked too
terribly hard, and my equity was worth about 50% of my (not too low) salary
each year.

If you're not joining at or before series A, a _lot_ of the risk has been
mitigated, and there are markets opening up to sell your equity into.

~~~
bumbledraven
> my [startup] equity was worth about 50% of my salary each year.

The equity of many AmaGooFaceSoft employees is also worth at least 50% of
their yearly salary.

~~~
austenallred
Yes but that's if I were to sell it after ~1 year at a company you've likely
never heard of. If I wait 3 more and there's a large exit it could easily be
worth millions.

~~~
bumbledraven
Do you have a convenient way to sell your startup equity after ~1 year? (i.e.
before there's an exit)

~~~
JumpCrisscross
There is a developed secondary market for venture-backed companies' stock.
(Source: I do this.)

~~~
AlexandrB
I thought private stock transactions were subject to board approval, or is
that just Canada?

~~~
JumpCrisscross
It depends on the company. Some companies are quite liberal with transfers. If
you have a _bona fide_ offer, they'll amend the cap table. For others, my
having a relationship with the founder or Board is critical. A good starting
point for American companies is is their Certificate of Incorporation. If you
exercised options, the Restricted Stock Purchase Agreement should also contain
terms, _e.g._ the company's transfer policy or right of first refusal.

I have never heard of a Canadian company looking to raise capital structuring
itself under Canadian law. Commonly, you'd have a Canadian law subsidiary
wholly owned by a Delaware corporation.

 _Disclaimer: I am not a lawyer. Hire a lawyer before selling private stock.
Do not take investment or legal advice from my Internet comments; they are
neither._

------
ndonnellan
A little monkey patching and you've got some salary info too!
[https://pastebin.com/3WdXMSdL](https://pastebin.com/3WdXMSdL)

Unfortunately doesn't parse the "$1 million" mark. But that's ok, because
let's be honest. It's not going to exit that high.

------
jredburn
Something feels off with the data here. 65% of Series A companies will never
exit, but 71% of Series C+ companies will never exit?

Edit: Thought about this a little deeper and it is possible with a lot of
companies exiting prior to the Series C, but suspect the data set of Series C+
companies may just be too small?

~~~
bethly
The data set is definitely small (CB Insights data only had 61 companies that
raised four rounds, for example), but it also surprised me how many Series C
companies failed to raise. It might be because earlier acquisitions are an
easier exit than trying to become a self-sustaining company with predictable
growth? I would love to see more exploration of that question, though.

~~~
RonanTheGrey
> It might be because earlier acquisitions are an easier exit than trying to
> become a self-sustaining company with predictable growth?

This is exactly it.

------
jtvestboard
Equity is confusing and the various moving parts all matter. It's often
difficult to know what % of the Company you own, but you are entitled to
knowing the 409(a) valuation which is going to be equal to your strike price
when your options are granted. As this increases, you have an opportunity to
capture some value at some point if/when the company has a private market, is
acquired, or goes public. I've always believed this process is personal and
not one that "general guidelines" can always solve. Self-awareness is
critical. [https://www.vestboard.com/okta-inc-ipo-what-employees-
should...](https://www.vestboard.com/okta-inc-ipo-what-employees-should-be-
doing-now/)

------
mericsson
Links don't appear to be working to [https://captable.io](https://captable.io)
or [https://angel.co/clear/how_much](https://angel.co/clear/how_much)

~~~
bethly
Thanks! I really appreciate you letting me know; it's fixed now :)

(For the curious, I added a click mask to the modal contents and forgot to
update the links to fire anyway.)

------
chrisballinger
Shouldn't a TLDR about stock options include critical information like 83(b)
election, etc?

~~~
roguecoder
That's probably in the too long tool people didn't bother reading.

------
flavor8
"This simulation doesn't estimate taxation at all."

Well, then it's misleading.

Between AMT, capital gains / income tax, there's potential for a huge chunk of
what you might earn to be removed.

~~~
maerF0x0
I think the point is, "The number is probably not as big as you're thinking...
oh and by the way, also even smaller because of taxes"

------
benmathes
Hi Eric, Tiho, Marcus, etc.

This is a fantastic start. Yes, angel.co/clear was complicated. I hope you
have better luck driving adoption.

What you are charting at the top is the _company_ exit value. But the UI
controls enter info tied to the _employee_. You should chart the _employee 's_
exit value.

You should also put the "or not*" controls as totally optional toggles as an
exploratory UI. I.e. the user can toggle "preference" and see what it does to
their value.

------
rebuilder
So taking the numbers at face value, we should be able to calculate the max
acceptable cost you should be willing to incur to get those stock options. If
you get, e.g. a 20% chance at a payout of 500 000 USD, not allowing for
interest you might earn if applicable, or opportunity cost, whatever you need
to do to get the options should not be worth more than 100 000 usd.

Reality is probably a little fuzzier than that, though.

------
peternicky
Thank you to LTSE and everyone participating in this discussion. It is filled
with GEMS of wisdom that a junior like myself is absorbing like a sponge.

------
scosman
Correct me if I'm wrong, but this seems to be assuming a seed round valuation
of $40 million (it's returning $0 unless the exit is > $40m). That's absurd.

Edit: the assumption of 0.01% is also absurd.

A simplified calculator should include reasonable defaults. This is like a
mortgage calculator called tldrCanYouAffordAHouse.com that assumes 25%
interest rates and doesn't disclose that.

~~~
RonanTheGrey
Why is the assumption of 0.01% absurd? From what I have seen, that's exactly
what an early employee can expect. 10% of the available stock gets split
between the early employees, most of which (9%) goes to the founders/c-suite.
The other 90% is reserved for investors, of which the founder(s) may be one.

If you have 100 employees by the time you exit, and 1% of the stock was
divided among them (exactly the situation where I am), each would get.. 0.01%.
That is 0.0001 of the issued shares..... as options.

This is no longer uncommon.

~~~
scosman
That's not correct. The founders already have stock before any round. They
typically don't get any of the ESOP. In early rounds the ESOP is essentially
carved out of the founders stock, it doesn't make sense to give some of it to
them (just negotiate a smaller ESOP). Also, founders are not considered
investors in the sense you mention (different stock classes).

Secondly "by the time you exit" isn't relevant. Your stock is setup by when
you join. If you join a company with 100 people, sure you get less. But 0.01%
for Seed/A isn't even close. If that's what you get offered, don't take it.

------
siliconc0w
Maybe add a field for salary difference vs 'expected market rate' and compute
the amount of money you'd be looking at over six years investing the
difference in something like a vanguard fund.

As an example - say you traded around 60k a year in cash in return for higher
equity. In six years you're looking at around half a mil which means with, say
.2 in a Series A, you're looking at a pretty big exit (i.e 700M) before you
even have a chance of breaking even. This is obviously a terrible choice (i.e
care for 20 dollars or a chance at 20 dollars)

To make it 'worth it', from an 'expected value' POV you'd need to make 2-3
million on around a 3.5B exit which are, of course, exceedingly rare.

You also have to be careful about things like options windows on exit, tricky
term sheets with liquidation preferences for preferred shares, etc.

I'm going through this process now and it's shocking how most people really
have no idea how this stuff works. Even with recruiters/HR/CTOs/etc who deal
with this stuff day to day.

------
tsm
I'll​ never forget when a startup tried to poach me to be Employee #2 or 3 and
refused to even match my previous salary and suggested that I really wasn't
taking their equity (.15%, I think?) seriously enough. I told them that if
they had a billion dollar exit in five years it still wouldn't bring me up to
what I wanted, and then they said, "Well, all the tech guys we talked to said
$YOUR_COMPANY overpays by 20%. We also think that we're spending too much time
talking about money here and are worried you have the wrong priorities".

~~~
bagels
I had a similar offer. $0 pay and maybe 1% equity. Sent them a spreadsheet
explaining how inappropriate the offer was.

~~~
blackflame7000
Were any of you guys able to negotiate a better offer? I am in a similar
position where I have been offered comparable salary but only 3% equity as the
4th member. Not sure it's worth giving up the job security without a higher
stake.

~~~
morgante
I've negotiated with multiple founders and gotten several good offers,
including $150k+ salary and single digit equity. The important part is not to
fall in love with a company before an offer—a significant number of founders
think engineers should work for under-market, and it's not worth talking with
them.

~~~
blackflame7000
If you have the time, Id appreciate advice. I was offered low 6 figures base
salary plus 3% equity for a CTO role at a startup. I would be the 4th member
Joining. As I know, there is a CEO bankrolling most of it, an expert in the
field of the business who is taking little pay, and a marketing guy who is
unknown but most likely taking some payment. Prior to the offer letter I built
a prototype (out of contract) as a sort of demonstration I could do the job.
However, I wish to be compensated for the rights to the prototype upon joining
as it is about 50k lines of code. What would you do in my shoes?

~~~
morgante
> I was offered low 6 figures base salary plus 3% equity for a CTO role at a
> startup.

That's not an unreasonable offer. You should try to negotiate it up to around
$150k.

> However, I wish to be compensated for the rights to the prototype upon
> joining as it is about 50k lines of code.

I'd suggest you mostly give up on that idea. It's naive thinking. The market
value of this code is close to 0—it's very unlikely anyone else would want to
buy it from you. At best, it's just an additional reason to hire you (instead
of someone else).

~~~
blackflame7000
I appreciate your insight. One thing I might add to bolster my reason for
wanting compensation is that the prototype is critical to their business and
without it they will be set back several months which they cannot afford.
Furthermore, their vesting schedule gives them the potential to work me to
death in the first year and then take everything I've built (past and future)
and show me the door before anything vests.

On the other hand, if I walk, I might have wasted a few months time but at
least I will have comparable salary in a stable job. 3% in early seed rounds
just seemed pathetic to me when my role would be vital to the companies
ability to grow.

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pcmaffey
Fyi to the site developer: I highly recommend giving the links at the bottom
of the page their own routes, as clicking on one makes it impossible to use
the browser back button and return to the main page.

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adamdonahue
I'm having trouble grokking the results here. If I put in 50 basis points for
a seed-funded company it calculates as no return until a $40M exit. I'd like
to see the justification for this.

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otto_ortega
It doesn't matter what percentage of a "seed company" I put, if it has a "low
exit" (<$25M) I get $0... How is that possible?

~~~
maerF0x0
Lots of investors have "Preference" which means they get a guaranteed minimum
return on their investment. A rough example is like a 2x preference means when
they put in $10M, the first $20M of the sale price goes to just those
investors first . So if it sold for $20M, then everyone else gets $0.

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tnt128
Sorry if I missed something obvious, is the number averaged out per year or
total over 6ish years? (nowhere mentioned on website or help link)

~~~
bethly
It's the total, and reflects all shares whether or not they are likely to have
vested by then; vesting schedules vary widely, and hopefully are something
people will be told about when getting their offer.

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sjg007
The answer is to start a startup. Before that, work at a startup. See if you
like it. Specifically, work at a YC startup then apply to YC.

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kmonsen
Does this include dilution?

~~~
bethly
Yep! That's part of what changes with the round: we assume a relatively-
average dilution of 35% per round.

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hvmonk
Bookmarked!

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Midaber
There's also another result: negative!

You could owe taxes on money you never saw. Under the AMT rules, if you
exercise options at a discounted price, you have to consider the discount as
"income". If several years later, when you're ready to sell and the stock is
below what you paid for it, you'll still owe the taxes on your discounted
price.

Ask your tax person for the details before engaging in any stock option
purchase.

~~~
encoderer
You will get credits to offset this in later years. It was far more painful
after the Dotcom crash before the carry-forward rules were added.

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hijinks
#savedyouaclick

Answer is $0

