I’m a physician, financially savvy but new to tech and start-ups. A healthcare start-up wants to hire me as a consultant. They offered to pay me either cash or shares. The initial offer was 2,500 shares (not options) per year. I don’t know how many shares they are going to issue or the valuation of the company so need to ask that. I would, of course, like a big payout if the company makes it, but since most start-ups don’t I don’t know the smartest course. Ask for cash + options? A percentage? A leadership role? And do I need language in the contract protecting me from a dilution of shares (if they issue shares to raise capital, for example)? Thanks in advance for explaining this to a newb.
Watch The Social Network for an illustration about how you’re going to get diluted. Key is to stay close to leadership as long as you can so you get new issues in each funding round
Stay close to leadership? Like park your car next to their cars so you can chit-chat on your way out?
Whatever it takes to stick around through each round
They offered you 2,500 stock units only? What about salary?
Weak offer
Not if OP’s gonna just be a consultant
For example think about a company that has an evaluation which is highly competitive (stock is worth a lot of money) then in this case it’s a cash cow. An early healthcare startup is unlikely to have a high evaluation. So you need to multiply the estimated price per per share by 2,500. Then once you get that number you should multiply your hourly cost for your time by the amount of hours you anticipate to invest in this engagement. There is always a possibility that this technology might not work out. And also in my professional opinion on average a tech consultant charges about $200-$300 an hour so whatever they plan on giving you should translate to that range. Not sure what doctor dates are like but specifically for tech consultants this is the range.
Ask to see the cap table. Without that there’s no way to even begin guessing at what 2500 shares would be worth. In general, cash is king. Try cash + options. Even if you get 2% of the company, your equity will get diluted in future rounds
Try to go for cash mostly. You can buy shares in the market of any pre-ipo company. You don't have to put all your apples in one basket.
I would ask for both. It depends on stage of company and what their last valuation was and what current shares are worth. If you’re joining late stage company it could be good deal if it’s early stage startup terrible deal.
Ca$h, a little stock to show willing. Read a startup offer for a friend, and it also protected their ability to work elsewhere. Had to have a shady clause removed which tried to speak for ANY IP created during the time working as a consultant. That didn’t fly with the university where he has a Chair. So pay attention to comp and also to conditions they ask for. AMA may have a contract review team you can tap if as a physician you’re a member of that or other professional bodies. Ask friends to read their offers/contracts, though I’m not sure if a contract counts as something under NDA?
Tell me you’re not financially savvy by telling me your financially savvy.
What’s their source of funding?? What series?? How many employees already?? What is the level of effort required from you.. Too many factors to consider… Unless it’s something interesting to you and very passionate, you should try to take cash…
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Shares will get diluted. Unless you are in high level executive role, you get general shares and those get diluted. But consider that when they raise capital the total valuations also increase. So even though your % shrinks. Your value might increase. Think like a pizza pie. If the whole pie gets bigger and your slice gets thinner. The total area might still increase.
High level executives’ shares also get diluted. Only investors’ shares don’t… to an extent… meaning if there’s a down-round, they’re the least to get affected