Incentive Stock Options value

Cisco / Eng yohellow
Feb 23 18 Comments

Is it worth joining early stage startup with giving up cash value at current company.
Example current TC at Cisco approx 220k
10 yoe

Offer from start up:
150k + stock options worth 100k (based on their current valuation)

Their product is in stealth mode, and very early stage. Does those stock options mean anything?

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TOP 18 Comments
  • New / Eng
    errfileno

    New Eng

    BIO
    Software Engineer. 15yoe. Seattle. $205k TC
    errfilenomore
    "options worth 100k" would cost you 100k to exercise, and when you did, they would be worth 100k. That would is a net zero gain to you as it stands. The hope is that they'll be worth more at some point in the future when they are liquid, but odds are strong they'll be worthless before they are liquid.
    Feb 23 9
    • New Fe62G
      and what is your experience based on iso grants you received from startups you worked at?
      Feb 24
    • New Fe62G
      not to mention ISOs are not covered by 409a
      Feb 24
    • Indeed zegra
      ISOs are only not covered by 409a if they meet a set of requirements. One of those requirements is that "The exercise price may never be less than the fair market value (FMV) of the underlying stock on the date the option is granted". Which is what I said in the first place. Any value in the ISOs outside of that FMV is purely speculative.

      I've gone through two successful startups.

      You're welcome for the education.
      Feb 24
    • New Fe62G
      then you should know the option exercise price for an early stage startup is nowhere near the price paid by investors in the latest round. you would know there's an internal valuation and external valuation.
      Feb 24
    • New / Eng
      errfileno

      New Eng

      BIO
      Software Engineer. 15yoe. Seattle. $205k TC
      errfilenomore
      Fe62G most companies have multiple classes of stock, and investor class shares tend to have preferential treatment. For example, if the company is acquired, investors often have a "guaranteed return" clause for their shares, which if not met will trigger the cancellation or extreme devaluation of common shares in order to meet that return.
      Feb 27
  • New / Eng sparked
    No they don’t. At that point you’re not even thinking IPO you’re hoping for acquisition and anything can happen in that scenario. Options at a start up that early is the definition of Monopoly money
    Feb 23 0
  • VMware mikehsu
    Please explain what you mean by 100k worth of options, Is that the difference between common stock and preferred stock price? If you're multiplying grant price by grant size to arrive at 100k, that is wrong. Options are worth something only if the stock price rises above the grant price
    Feb 23 2
    • Cisco / Eng yohellow
      OP
      Someone in company gave over view of thats their current stock price market value is. Based on that they said every year i will be getting 100k value worth stock.
      Feb 23
    • VMware mikehsu
      OP it looks like you don't fully understand equity compensation. You should read this doc so you can understand what you're being offered: https://github.com/jlevy/og-equity-compensation
      Feb 24
  • OpenTable Meliodas
    The stock options are most likely worthless. Value them at the likelihood of an exit or IPO.
    Feb 23 0
  • New abc8144
    No, it’s a lottery ticket
    Feb 23 0
  • Mode DvVM00
    financially, no it’s not worth it
    Feb 24 0
  • New Fe62G
    assign a 10% probability of success to the options. 100k*0.1 gets you 10k over 4 years expected value
    Feb 23 0