Do all startup offers price in next round valuation growth?
Dec 27, 2021
19 Comments
I got an offer from a series C startup. The offer says I will get stock options to buy 30k shares over 4yr, with strike price of $4 and preferred price as $10. This seems extremely low, but the way they pitched the offer goes like “we are very confident that the valuation goes 5x in the next 12months, and by that, your shares will effectively be $1.4m!”
I called this BS but a chat with a couple of my friends who got multiple startup offers tells me this is a norm, for example Confluent, when they were still offering options vs RSU.
Wondering what others’ experience is like.
PS: it’s a L6/E6 equivalent offer
comments
- If the last funding round happened multiple years ago and their revenue or other metrics have increased significantly since then, it’s probably valid that their stock is worth more than the last funding round. You should try to come up with your own estimate of its value which should be lower than theirs.
- If they have no revenue, or they do not tell you the numbers, it’s very difficult to believe anything other than their last round unless you’re willing to just believe them, which would make you a bad negotiator.