tech-company, stock-options, salaryI have a general question about stock options in startup offers. Specifically I’m interested in understanding the packages for startups at different stages.
Scenario A:. A less-than-1-year old startup with less than 5 employees besides founders with some seed funding. If you are about to join, how much stock option would be decent? I will be the first and only scientist/engineer in the area of my expertise.
Scenario B: A 1-year-old startup that just raised 20M at series A round. There are about 20 employees. How much stock option would be decent? I will be a mid- to senior- level scientist/engineer. Currently, there are 1 manager with a bit more experiences and 2 other entry-level scientists with less experience than me.
I think a startup offers the opportunity to be very independent and to take on many responsibilities. At the same time, for a new graduate from graduate school, it would be nice to have someone more senior to guide me in the early stage of my career. What would be a better option among these two types of startups?
Edits: add my role.
It’s all relative and based on the valuation (or lack thereof) of a company.
In general, it’s always better to get in as early as possible, while the company is worth very little, because the relative size of your contribution is profoundly greater. However, this also entails more risk because most startups fail.
If you get into a later-stage startup, one having secured a $20M A Round of investment, your contribution is likely quite small compared to the cash investment. There is still risk, but now the cash investors are shouldering the bulk of it.
If experience is more important than money, “cutting your teeth” in a startup that is well funded is extremely worthwhile–whether the company ultimately succeeds or fails, you will have learned a great deal.
In general, unless you are a founder or the skills you bring to the table are uniquely critical, the equity you receive will be a small fraction of founders’ equity. In this situation, you’ll want something commensurate with other employees of similar value. This is fair because the founders’ shouldered all of the early risk.
In terms of uniquely critical, an example might be Carmack going over to Occulus Rift. I only have news reports to go by, but if the idea that Occulus without Carmack can’t actually deliver the promised functionality, Carmack would be in a very strong position and be worth a relatively large amount of equity.
Another scenario might be a company that is increasingly dependent on AI. If none of the founders are mathematicians by trade, it may be necessary to bring in a creative mathematician interested in the problem. Such a person should be worth a lot of equity, partly because the company would want to be able to retain their services into the future. (Enfranchising employees is useful in Tech because it makes it difficult to poach talent as a company takes off. This would be a case where generosity = “enlightened self interest” and greed works against the company’s interest.) However, as Machine Learning becomes more commoditized, the company could simply outsource that task, or find that building an AI suitable for their purposes does not require a singular talent, in which case the equity offered would be akin to that of other valued employees, but not at the level of a full partner.
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