I have an offer from a company that is expected to go public in a year. What are the advantages of joining a pre-IPO company with good upside over FAANG? If I get a 500k offer (200k base + 300k stock) / year, it means the stock grant over 4 years is 1.2 million. Now if the company doubles its stock price on the day of the IPO, does it mean that my stock grant becomes 2.4 million? Essentially, *accepting* an offer a day before IPO gets me an extra 1.2 million than *accepting* it a day later. Is that understanding correct? #equity #startup
well it depends. Most likely you get RSUs, which yes, that’s the case. If you have upside, you stay. If stock crashes you leave to limit your downside. That’s it. Joining pre-ipo means you get optionality. If you get options instead of rsu, you have the ability to be liquid and exercise whenever. This is advantageous for tax reasons. If you get 5 year options and giant upside like Roblox, you can basically pay very little taxes via exercising only a little or transferring those options to a holding company you control AND you get optionality to decrease downside.
I didn't understand this at all, but thank you
Listen to anyone from Roblox about his this works. Their stock 20xed right before the IPO and nearly everyone who got in before is likely pulling in at least 7 figures for the remainder of their grant.
Once a company IPOs there is a 6-12 month lockout period when you cannot sell your shares. If the company's shares increase in value during that time, you will make money. Many startups offer options, not RSUs, which you will need to purchase, once they are vested and before the options expire. Companies generally have mechanisms in place to help employees purchase their shares such as sell to cover.
For a caveat, with a direct listing, there is no lockout period. Nonetheless, a direct listing is more of a exception rather than a norm.
There can be a lockout period for a direct listing. Dealing with that issue right now.
If the company is at pre-IPO stage, your strike price for the option might be high (if that is not the case, it is a different problem in itself!). So know that you may need to bring more cash to exercise shares.
Ok.. so.. I went through this a few months ago. I can help. Are they still giving options? It's very likely they already switched to RSUs.
Tell your story! I had been curious about those who joined snowflake pre-IPO.
Bumping Amazon’s comment ^. Missed out on Snowflake and want to hear. We’re all sitting around the campfire
So I’m one of those people who’s earning pre IPO comp (ISOs) What I don’t get (and have been afraid to ask) is doesn’t our TC plummet at the end of the grant? Won’t everyone just leave for the next place? I must be missing something because it feels designed to make sure nobody stays more than 4 years
High stock growth mostly imply that company is growing at rapid pace. With that hyper growth best performers are expected to be promoted fast which might cover some of the cliff and give them scope which they won’t get elsewhere. For others company doesn’t care whether they stay or leave.
This is where refreshers come into play. Ideally they layer on top of each other to always give you upside.
no that’s not correct. you don’t get a grant until the board meets *after* your *start date*. this could be weeks to months. if you start the day before IPO you missed it.
Nope. A day before IPO the strike price will be same or close enough to post IPO price. So not much gains. Basically the earlier you join the more the gains cuz strike prices will be lower. Also keep in mind your strike price will be determined in the board meeting AFTER you join. Which can be weeks or months after you join.
the question was about post IPO gains meaning first day pop. not the literal IPO price.
If it pop, it can also plummet. Yes joining just before IPO makes it more volatile, it's a gamble basically.
whats the company?
Instacart
People have been mouth watering over pre-IPO companies lately because of the market conditions, but if one joins now the low rate market could be over in a couple years and we'll all start to remember how much of a lotto ticket private equity can be...
Tech Industry
6h
1431
350k tc is nothing in bay area
Tech Industry
4d
20202
ChatGPT 4o vs Gemini 1.5 Pro: It’s Not Even Close
Tech Industry
Yesterday
1335
Programmers are the smartest people in the world
Personal Finance
16h
2706
Retire by 45? Rate my NW, lifestyle creep and portfolio
India
Yesterday
1252
Why Worshipping Lord Ram Important in Hinduism?
Following. I've also wondered about your scenario there