How are startup stock options valued in the TC?

Amazon
hfkkk

Go to company page Amazon

hfkkk
5d 8 Comments

If they say $100k stock options first year, what does it mean?
Number shares “buy right” 14,285

Strike price $5

A. They are not giving $100k since you pay $5 strike price. 100k/14285 is 7. You are only getting $2 per share so value should be just $28,571.

B. If the value is $28,571, they wouldn’t say that they are giving $100k. OP, You are missing something. Please explain.

#startup #ipo #seriesd

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TOP 8 Comments
  • Compass
    fl00912zg

    Go to company page Compass

    fl00912zg
    Option simply means “option to buy.” You get to buy shares of the private company which is usually based on a previous valuation (e.g. last time the company raised money). If the company is growing and is successful, you can be fairly confident that the share value will be much higher than your strike price.

    You’re assumption in A is correct that the amount you would net is: current price - strike price = your gain. But since the company is private, you shouldn’t really care that it’s only $2 difference per share. If you care about current value in your TC… you shouldn’t work for a startup.

    In most cases companies are purchased by another larger company. When this happens, there is a price per share determined based on the sale. (And it will likely be higher than that $7 in your example) Usually, at the time of sale options you’ve vested are sold (at that sale price valuation) to cover your strike price and you are given cash for the remainder (most common) or shares in the new company (least common unless you are senior management).
    5d 2
    • Amazon
      hfkkk

      Go to company page Amazon

      hfkkk
      OP
      Thanks for the details. It’s a series D. Shouldn’t employees get more than $2 when they need to invest $5? It seems poor return of investment. I don’t know fmv yet.
      5d
    • Chime
      !banker

      Go to company page Chime

      !banker
      but you don’t need to exercise the options right now, you usually have 7 years before it expires or within one month of your departure
      5d
  • New
    brooklyn:)

    New

    brooklyn:)
    What’s the FMV (Fair market value) per share in their latest private valuation? The options should tell you the FMV, or you can ask.
    5d 1
  • Compass
    fl00912zg

    Go to company page Compass

    fl00912zg
    Companies that are close to going IPO after a series D will usually offer RSUs as opposed to options, my colleagues at compass are well aware of this and many of us got screwed. The fact that you are being offered options has likely more upside and will (likely) carry better ROI long term than employees who join closer to the company’s exit. Bottom line, if you think the business is going to grow in value then you are getting in “on the ground floor” so to speak with your options. On the other side, maybe you think the company is floundering, they didn’t meet their goals with their series C which caused their value to lower with series D, and now their just trying to dig themselves out of a hole.

    Blind has a way of equating “value at work “= TC. If you’re able to look past that: if you believe this company is building something worthwhile that will have great value in the future, then that’s a great place to work, make lasting friendships, and grow your skills/career. TC in the moment be damned.
    5d 1
    • Amazon
      hfkkk

      Go to company page Amazon

      hfkkk
      OP
      Company series D value is 4.6x of series C value(in less than 2 years). I really don’t know how exactly they are growing this fast. Can I DM you?
      5d
  • Netflix
    bekindyo

    Go to company page Netflix

    bekindyo
    options have value because of the option value. options are hard to value. your math makes no sense.
    5d 0