Private stock vs Public tradeoff

King WbUj87
Sep 16 6 Comments

Curious for everyone’s approach to evaluating offers between private and public companies. If you were considering a role at Google/FB that came with $600k TC, and $250k of that was in liquid equity, what kind of multiple would you need in ‘paper value’ from a company that’s pre-IPO to make the offer comparable? 1.5:1, 5:1? Assuming you believe in the private company’s future, but knowing that ~1/3 of your total cash equivalent take home each year with the private company is illiquid.

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TOP 6 Comments
  • NVIDIA / R&D TC?
    I asked a similar question and the answer was that it depends on your risk tolerance and negotiation skills. It's a bimodal distribution of either mild lottery ticket or zero. But when you discount the future value minus strike price with a public companies money invested over years it's very rarely a sensible decision. At a larger company your contributions rarely make a huge difference and at a smaller company the chance of zero return is much higher regardless.
    Sep 16 1
    • King WbUj87
      OP
      That’s helpful. I guess I’m also interested in hearing others opinions on risk tolerance. I feel like 2.5-3x is the right range for myself and curious to hear how others compare
      Sep 16
  • Rubrik rapido
    Depends on the phase of the private company and the associated risk. If its too early, probably 10:1 since there is a high risk of failure. If it’s fairly late in the game and close to an IPO, then probably 1.5:1 (private valuations tend to be inflated)
    Sep 16 0
  • AT&T MsdR32
    Depends on company details and how mature it is. If it's like AirBnb and profitable and stable, with increasing evaluations, probably pretty close to a public company, or maybe even more if you think IPO will pop.

    If it's a company with a questionable path forward who's valuations keep getting lowered (WeWork for 47 billion... Yea right), the might not be worth the paper it's written on.
    Sep 16 0
  • King WbUj87
    OP
    L7
    Sep 16 0
  • LinkedIn mmakisvsj
    What level is the 600k offer for ?
    Sep 16 0