Joining a company that is about to IPO?
First off, let's skip the jokes about the Googler not knowing how something like stock/ipo's work, kay? I work at Google, stock IS money in my world. lmao So, I have the opportunity to jump ship to Databricks. Signficant salary bump, large amount tied up in stock. While I know it isn't official, Databricks is set to IPO "soon" and quoted summer 2023. Even if it is 2025 before they actually IPO, I don't care much since I don't need the cash immediately. Let's also ignore vesting schedules for the moment and assume I stay at Databricks for the full 4 years until it all vests. My question is this: If I join at this stage and get, let's say 300k stock per year as part of my total compensation for the next four years, how does an IPO impact that? I'm assuming in a "successful" IPO, the demand for the stock will increase by some factor (half? double?) since it is publicly traded, and my current stock of 300,000 * 4 = 1,200,000 RSUs will all of a sudden be worth /more/ than their current value of just over a million dollars. Is that accurate? Is this a bad way to look at this? I know we can't guarantee a good IPO, but what is reasonable to expect? I've heard of a lot of people making money from AirBnB and other companies by joining late but still ending up multi-millionaires. It seems like it can't be as "simple" as I'm describing it, or more people would just get job offers when IPOs are imminent. TC: 400k, YOE: 6 #IPO #stocks #idontunderstand
The value of your current stocks you can throw that out the window and simply think about how many shares you are getting. Total amount / share @ at valuation. Ideally it IPOs at the valuation given to you at the moment. It could be higher or lower than the current valuation they are using to determine your shares when joining. Valuation / num of shares = price per share. If the valuation suddenly jumps before IPO or people go crazy and pump the stock your additional earnings would be ( price of share on the market - price of share when it was given) * number of shares. Look into if you can actually sell right away when it IPOs or if employees have a blackout.
It's gambling. IPO can boom or bust and it's never guaranteed to come. Many young people have the mistaken idea that good company == guaranteed success due to a string of successful IPOs during a period of very accommodating monetary policy through the 2010s. Reality is that macro economics are just as important if not more important than the success of your particular company. I wouldn't leave a guaranteed money situation for private equity unless you (1) don't need cash right now or in the near future and (2) want a different mix of risk/reward with respect to both your financial future and career growth. Databricks is currently offering RSUs so it is more stable than options. As a rule of thumb I would always assume at least 5 years with no liquidity and divide the number your recruiter tells you by at least 2.
Bro, you’re everything blind needs. Why isn’t every post like this? Straightforward answer. No sarcastic quips, just super helpful and easy to follow. Thanks my guy. Keep doing what you’re doing!
Except most of it is wrong. It is virtually certain that Databricks will IPO in the next few years, and there was a news article two weeks ago that they were about to close a funding round above their last valuation — so hardly “half”.
It is that simple. But 9/10 there’s insider lockup periods of 6 months. For every airbnb and snowflake there’s 100 other company ipos where the stock fell quite a bit months after the ipo once the hype died off. Then it’s you and the retail investors holding the bag. Remember rivian? affirm? Blend?
You can get benifited from the ipo if everything goes well. In case of Databricks I don't see any issues, so most probably it will be a successful ipo. Coming to the actual math, it all depends on what is in your offer. If it is 300k worth stocks (meaning amount is fixed but not the number of units) and if they go IPO in say next one year then it may not benifit you much. On the other hand if the number of units is fixed then you may enjoy the higher profits assuming prices will go up after the IPO
Fwiw, even the pessimistic people here believe that we’ll likely IPO at a higher valuation than our last funding round (38B).
Is Databricks profitable? What does annual revenue look like? Projected growth? These things may not be public but OP can probably get this info if he has an offer in hand (and signs a NDA).
Without revealing confidential info, we’re not profitable yet but we are very much on the way there.
The key benefit of joining a pre IPO company is that you can accrue and exercise stock options and buy shares in the company before others have the opportunity to do so. If you buy early and hold longer than 1 year, the gain is long term capital gain and taxed at a significantly lower rate vs income. IPO price is presumably 10x more than current 409b valuation (typically the strike price for your options)
Databricks is giving RSU not options, and there’s no chance of a 10x at IPO. I’d still definitely go there from Google though.
Why? What’s the appeal?
How was the interview at databricks?
Cake. Coding rounds were jokes (twists on mediums) and sys design was fine. Behavioral was the only weird one because it’s been ages since I’ve had to think about “where I want to be in 5 years” and somehow “sitting on the beach not working for anybody” didn’t seem like the appropriate answer
What’s the data bricks offer
Are you getting RSUs or options? If RSUs then I’d make a guess at how much lower or higher the value can go from where it is now. I think you can get a feel for databricks valuation today by googling. As a general rule of thumb, the ipo valuation will be higher than the last round. Unless company has really screwed up. Idk anything about databricks so you’ll know better than me. If it’s options then it’s a bit more risky cuz you gotta make sure the strike price is gonna be a good chunk below the ipo price.
We haven’t given options for 5 years
Damn how long has the ipo been delayed. Don’t they give out RSUs when you’re pretty close to an ipo?
Most companies stocks fall after IPO.
RIP. lol, so I'd lose money? Why do I hear about so many startup folks being made "into millionaires overnight" from an IPO?
They don’t join a company so close to IPO. For that to happen you have to join a series B or C startup. Databricks likely is too well known and already overvalued due to private equity.