If revenue is not revealed, how can I evaluate if option will become paper money?

New qfEB41
Jun 3 37 Comments

Got an SWE offer from a startup in SF. TC includes 10000 share (options) over 4 years. I am wondering how can I get an estimation? Strike price is somewhere $1.5.

Company finished Series D and plans to IPO in the next 2~3 year, may raise Series E. Please help or ask question, I will do my best to answer.

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TOP 37 Comments
  • Airbnb kYFK02
    If they won’t tell you revenue growth confidentially don’t join
    Jun 3 8
    • Credit Karma wjskc
      That’s what I would do
      Jun 3
    • Airbnb kYFK02
      You should ask for revenue at each round, valuation at each round, multiple for the industry. These should not be secret numbers to employees. If they won’t tel you under nda, don’t join
      Jun 3
    • New qfEB41
      OP
      Ok, I will do that. There are more than one ppl suggesting me doing this in this thread.
      Jun 3
    • Airbnb kYFK02
      You can also ask how long the runway is
      Jun 3
    • Airbnb kYFK02
      Also google this topic. There are many articles on what questions you should get them to answer
      Jun 3
  • Snapchat TCorYGTFO
    Ask for last round valuation price per share, multiply by your shares, that’s your paper money value today.
    Jun 3 5
    • New qfEB41
      OP
      Can I ask that? (wondering what if they feel offended then rescind my offer)
      And will that number be close to IPO price? (preferred price?)
      Jun 3
    • Facebook rlBt61
      If they get offended by a question like this you should probably reconsider whether you want to work there. As for IPO price, who knows. This is largely a function of how the market and company does between now and ipo. Look no further than Uber and Lyft to see how this can fall flat.
      Jun 3
    • New qfEB41
      OP
      I will try to ask this kind of info gently. Thanks for the advice
      Jun 3
    • Facebook rlBt61
      Of course you should be polite but also be firm. This is info you need to properly evaluate the offer.
      Jun 3
    • Facebook rlBt61
      Also take any future value they give you with a grain of salt. Lots of startups exaggerate big time. I once had a startup give me a sheet showing what my equity would be worth. It started at a $400M valuation and went all the way up to oracles valuation at the time (which is who’s market they were going after). They told me that the $400M valuation was a very pessimist scenario. I negotiated using it as my best case scenario. Sure enough they sold for $400M. And this was actually a great outcome. Most startups go belly up and the employee equity is worth zilch.
      Jun 3
  • Google / Eng modi_56
    Shouldn't they give you a dollar number instead of the number of shares?
    Jun 3 4
    • New qfEB41
      OP
      In the offer letter they only mentioned the amount of shares.
      Jun 3
    • Facebook rlBt61
      RSUs or options?
      Jun 3
    • New qfEB41
      OP
      Options. And strike price not revealed as well.
      Jun 3
    • Snapchat TCorYGTFO
      Remember you do have to pay to exercise options, so there are financial risks involved. As in it’s entirely likely for a company to have a down round and wipe out all previous options given.
      Jun 3
  • Indeed kfunsr
    Assume all options are always worth zero
    Jun 3 3
    • New qfEB41
      OP
      Nahh...so basically you are implying me decline that offer?
      Jun 3
    • Indeed ufneha
      No. You should decide whether or not to take that offer while assumig the equity will be worth nothing. Overwhelming majority of startups fail. And, depending on what the cap table looks like, even if the company has an exit event, VCs may take all the money.

      The options might be worth something some day but the risk is very high and so the only safe assumption to make id that they won't be worth anything
      Jun 3
    • New qfEB41
      OP
      It has gone series D in 6.5 yrs...I would assume it will not fail...(that fast)...this offer includes nothing other than base and option..
      Jun 3
  • Google / Eng
    bonni

    Google Eng

    PRE
    Google
    bonnimore
    At startup you should assume shares are worth $0.

    If you really believe in it, then you should ask for the pct of shares out of all outstanding shares. I can help you determine fair pct based on number of hire you are and current stability of startup
    Jun 3 4
    • Credit Karma wjskc
      Assuming it’s worth 0 from family expense planning sure.

      Assuming it’s worth 0 when computing the EV of compensation of the job offer, well we know that’s going to be inaccurate, even thought it’s potentially the mode.
      Jun 3
    • New qfEB41
      OP
      IIRC it is 0.5%~0.7%, yet if they raise a Series E, the number will be diluted. There are some 150 ppl.
      Jun 3
    • Quora ficbsnedk
      You sure on .5 - .7%? They hiring you as CTO?

      Usually a company with 100-200 employees offers new engineers around 0.01-0.03% equity. I’d double check that percentage figure again.
      Jun 4
    • New qfEB41
      OP
      @ficbsnedk I talked to them again, and still did not get the %. Yet they told an out-dated strike price: $1.5.
      Jun 4
  • Nvidia <script><
    Don't work for startups and you won't have to worry about it.. there are no tangible benefits.
    Jun 3 2
    • New qfEB41
      OP
      I am still actively interviewing other companies with RSU...but if this one is really good then I might just accept this offer.
      Jun 3
    • Nvidia <script><
      Cool hope you didn't plan on having a life outside work for the next few years
      Jun 3
  • Credit Karma wjskc
    If the TC good excluding the equity?
    Jun 3 1
    • New qfEB41
      OP
      No. Pretty average.
      Jun 3
  • Autolist eFks14
    People valuate company differently. You can do multiple of revenue or profit. If those numbers are not given, maybe ask for 409a valuation (?)
    Jun 3 1
    • New qfEB41
      OP
      you mean the section under TAX stuff?
      Jun 3
  • Amgen Fin4eng
    Ask for 409a valuation and what % of company your options represent.
    That’s what matters. They don’t need to provide revenue
    Jun 3 0