equity, stock-options, salaryI’m considering an opportunity as a developer with an early stage Real-time chat startup with focus on language translation (pre-series A, market value of 5.2m, 4 employees, I’d be the 2nd developer) with:
The CEO gave me three options packages and I’m new to options so I’m struggling to figure out which to take:
1 year cliff, 4 year vesting.
So my question is about how to decide whether to take higher options or higher salary.
I currently have a stable job and would need to relocate for this (from NYC to Boulder, CO), but I’m interested in their product as mentioned. The $20k less than highest salary is about on par with what I make now, so I wouldn’t be losing much (Boulder is a 8% less cost of living than NYC), but am unsure of whether to go all in on equity.
My questions in detail are:
Personally I would start by asking whether or not employees have the ability to buy additional options in the company and, if so, I’d take the higher salary and then reinvest what I’d feel comfortable with as things develop. If the company allows this (and some do) then it buys you the greatest amount of flexibility without having to risk the loss of both additional income in the short term and the options if the company doesn’t make it.
When we do exit (IPO or get bought out), I have the option to exercise my shares for the purchased price. This means I’d have to pay ~$40k to then cash out for a higher value. So the $ I’d receive is the share price at startup sale - my initial purchase price, right?
The amount of money you get is:
X = Number of shares.
Y = Option Price
Z = Price at IPO
Assuming you sell when the IPO happens
Amount = X * ( Z - Y )
Note 1: normal employees are prevented from selling their shares
for a period just after the IPO (called a blackout).
Note 2: You will be taxed on this amount.
I’m aware of the statistic that 90% of startups fail. Yet, taking the highest salary is sort of betting against myself if I join. Moreover, it looks better to the company if I go for equity. Is it generally better to go in on higher salary? As the 2nd full time dev, I’d expect to be responsible for 30-40% of the dev work. Therefore, I want to make sure I’m paid.
That is totally a judgement call.
We have a number of previous investors (some Angel), and the CEO has 30% share in the company- While he told me the board is aligned with his vision, he doesn’t have controlling share. Meaning, the investors may be able to set unrealistic milestones. Should this worry me?
No. Milestone’s are meaningless.
CEO has day to day control of the company. What he/she says goes. Not having a controlling share is also meaningless. The only rite of the board is to fire the CEO.
I can’t get find much information on how much foreign language translation chat platforms typically sell for. Some chat platforms sell for 5m, others 50m. Obviously owning equity, this matters. Any ballpark for this could be helpful.
I would expect this would depend on the number of customers more than anything else. For the two data points you have can you find the number of users (more specifically the number of active users).
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