The company recently got $3M investment. I’m being offered $152k salary and 2% equity, vested over 4 years. Is this good?
My thinking is that 2% of $3M is about $60k, so I could treat that as an extra $15k per year. But if I look at the valuation based on that investment, it is probably worth 5x that, like an extra $75k per year. All in all it is over $200k compensation, which I’m grateful for, but it’s on par with a tech job at a big tech company. Are these reasonable assumptions, or am I missing something?
Startup stock options need to be viewed as a lottery ticket, nothing more.
Outside looking in…. that seems like a hell of a deal especially if you believe the company is going to be successful
If the company recently raised $3M, it’s considered a seed stage company and is likely valued at $15M by its investors. Your 2% equity stake would actually be worth $300K on paper right now.
If things go well and the company hits $1M-$2M in annual revenue in the next 12-24 months, the founder(s) will raise another of funding, probably in the $10M range, which will be considered a Series A financing that values the company somewhere in the $50M range. Your 2% ownership stake will get diluted to 1.6%, but with the increased valuation, your paper position increases to $800K.
If the company continues to do well, say triple its revenue over 12-18 months, the founders will raise a Series B round of funding, probably somewhere in the ball park of $30M, which would likely value the company around $187.5M. You’d get diluted down to 1.3ish%, but your paper position would hover in the $2.5M range.
If the company sold at that price, this would be a great outcome for an early employee. An incredible outcome, however, would be IPOing or exiting for $1B+, where you would likely make 8 figures.
The catch however, is that only about 100 companies or so out of a couple of thousand funded every year go the distance, and something like 60-80% flat out fail… That is, your paper shares ultimately are worth zero. So you have to decide whether you really believe in the team and the opportunity enough to risk having to look for another job in 12 months because things aren’t working. At a minimum you’ll get paid to learn what it takes to get a tech startup off the ground.
Bro. I work for FAANG. Take this job. You can come do big tech after you’ve made a shit ton. I’d leave my company right now for an offer like this lmfao
What you’re missing is the possibility your 2% equity could be worthless in 4 years (or less).
Startups are high risk so plan accordingly.