Start up offer based on 3x valuation of their previous fundraising

Apr 25, 2021 17 Comments

Recently got an offer from a startup company, but the stock options are based on 3x of their valuation from previous fundraising. Can I assume that the valuation will not go lower than this in the next fundraising?

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TOP 17 Comments
  • Rubrik
    saberli

    Go to company page Rubrik

    saberli
    Never trust this shit from recruiters. Calculate based on previous valuation and expect TC based on that. Any company that prices in future stock growth into compensation DOES NOT want to share their success with you. You can expect refreshers to suck as well.
    Speaking from personal experience.
    Apr 25, 2021 4
    • OP
      This is the part that I’m not very clear... the recruiter told me that their valuation went up because their revenue went up, but I’m not sure if the valuation could raise without fundraising?
      Apr 25, 2021
    • Rubrik
      saberli

      Go to company page Rubrik

      saberli
      It does not. Be very careful with the terminology they use and make sure to ask exactly how it went up. Valuation can be expected to grow based on revenue but valuation does not simply go up like stock price for private companies unless there is an event of some kind.
      Apr 25, 2021
  • Moveworks / Eng
    dCOw25

    Go to company page Moveworks Eng

    dCOw25
    Is your offer officially denominated in dollars or units? If it's units, you can use their valuation as a point of consideration but do your own analysis. If it's dollars, you're subjecting yourself to a lot of risk.
    Apr 25, 2021 2
    • OP
      In stock opinion units. The recruiter told me that their valuation is 3x since last fundraising because their revenue is going up, but I’m not sure if it is a common thing that a start up company’s valuation can increase without fundraising.
      Apr 25, 2021
    • Moveworks / Eng
      dCOw25

      Go to company page Moveworks Eng

      dCOw25
      For a growth startup it does make sense that the valuation would increase from the last funding round. Exactly how much is up to you to decide. It generally makes economic sense to accept a startup offer if your TC will be at least 3x FAANG in the best case, and at least 0.5x FAANG in the worst case.
      Apr 25, 2021
  • NVIDIA
    lotun

    Go to company page NVIDIA

    lotun
    Ask them for 3x pay based on your new valuation.
    Apr 25, 2021 0
  • When companies give stock options, is the strike price same as FMV at the time offer was made or is it lower (to give a sense of getting some profit right out of the deal)?
    Apr 26, 2021 2
  • ask what the current fmv is
    Apr 25, 2021 1