How should I negotiate? I am thinking I should ask for more equity.
.5% sounds very high at 17 FTEs, post A. .1-.2% sounds reasonable. Cash comp isn’t off, maybe 140 or 150 would work.
Maybe .1% is normal, but run the numbers. It's not much.
You can’t run the numbers without the share price, it could be great depending on the last valuation
I would aim for .2, .1 seems low.
That's my target currently. Starting negotiation at a higher value.
Another question on a sidenote that's been bothering me. Let's say you get 50,000 (or more) options at $1 each, how do buy those options when leaving after say 4 years? I imagine the amount to pay might come around 50k (exercise) + 50k (taxes 25%, $5 fmv). Would you make a $100k investment in the startup options?
I am aware of the different options available like pay cash, or net exercise or forfeit. I just want to know how the smart people (you*) go about it
as always with startup equity comp, it’s complicated... the most important practical issue is your option grant’s expiration date. customarily, the date is 90 days after you quit the company. more recently, due to how long companies stay private (companies take 10+ years to IPO), more startups are offering longer exercise windows, sometimes up to ten years after you quit. my current and previous employer both offer ten year windows. if your job offer is one of these, you don’t have to worry too much. you can hold on to the options after you quit and not exercise them until the company gets bought or goes public, which eliminates all risk for you. the main downside is that you get less favorable tax treatment (NSO vs ISO) if you take more than 90 days to exercise, but this is a minor trade off compared to eliminating option exercise risk. if you’ve got the conventional 90 day window, that’s less fun. the question to ask in this case is whether your options are ISOs or NSOs. if they’re ISOs (likely), you don’t owe ordinary income tax at exercise time; instead, the difference in FMV and exercise price qualifies as income under alternative minimum tax rules. after the Trump tax bill, you likely don’t have to worry about AMT since that bill raised the AMT threshold, but it’s worth double checking. basically, my point is that you probably don’t have to worry about paying taxes when you exercise.
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Try to come up with an estimated TC based on the most recent preferred share price paid in Series A. Then at this stage you would want your company value to multiply 4x 8x 16x over the next 4-6 years. If they grow 8x for example how would be your TC after 4 years? That's is how I try to value the options. Also make sure you subtract the exercise price, but at Series A hopefully the exercise price is low enough that you would not need more than several thousands to exercise them comfortably. That said 0.1% seems low given the base salary, I would suggest to shoot for at least 0.5% or more.
Thanks that's helpful. What's usually the strike price for startup options at this stage. I think they said its $1 which also seems high!
It depends on how many outstanding shares there are and what the FMV the price was based on. You can rather look at how much you would need to exercise all your options when they vest.