stock options in startup
Got a verbal offer from a start up in Boston. It is pre IPO and have been through all series funding. They have a strike price of 60. Total stock count offered is 2000. My questions: 1) Should I negotiate the stock option although it is paper money? I was thinking of negotiating base and bonus only. 2) I was told by the recruiter that the vesting cycle would be 25% of the total count after first year, and monthly afterwords. Does that mean it is cash value? The refresher I am offered is 35% of total stock count. Help please. TC 200k
First, you are probably getting options and not a grant, which means you have to spend money to exercise, see if you can get a grant, but probably not. Find out the current valuation, guess how big you think the company could be. Multiply your stock by that multiple, that's like the best case scenario. Vesting schedule sounds normal, you don't get cash value but some places will let you do cashless exercise.
@mercury10: you are confusing 'RSU' with 'grant'. Both stock options and RSUs are granted on approval by the board.
Thanks @mercury, don't know much about cashless exercise.
Questions: 1. What do you mean when you say the company has been through all series funding? They are not planning to raise any more capital? 2. What is the preferred stock price for the company stock. The value you are getting for every stock is preferred stock price - fair market value (which is your strike price of $60). 3. Have you planned how you are going to exercise your options. $60x2000=$120,000. You will need to pay this much money from your pocket to exercise and buy these options. 4. If you end your job with the company, how long do you have to exercise the options before they expire? The usual time frame is 90 days. 5. Do you know of AMT implications of gains on private equity when you exercise your options?
Good insight. I don't know most of the answer. The company has been 6 or 7 rounds of funding .I get the sense of what this stock option has to do with real cash values.
If you don't know the answers, you should both ask them and read up on your own to understand the risks and consequences of buying startup options.
Every company who is not public technically is a pre ipo company.
Unless there is an IPO on the horizon look at the options as a bonus, but you should try to negotiate. Remember, you can’t pay rent with options. The vesting schedule is based on the total number of options, not value.