Startup Equity Offer vs Uber Equity Offer
Wondering if anyone has good advice for comparing a startup offer vs larger tech (using Uber as an example) At Uber offer, 4-year value of equity (without growth assumptions) is 1.5x annual salary - 95k base annual, 144k in RSUs at year 4 At a series B startup offer, my year 4 total value of options at current strike price is 40% of annual salary - 155k base annual, 50k in options at year 4 (without any growth assumptions) base salary at series B startup is 50% higher, but equity is so much lower. Is this normal? Maybe because there is so much implied growth assumptions at series B startup? Any advice or thoughts in general why there’s such a discrepancy? Thank you!!
Options are trash unless proven otherwise. There might be a lottery ticket in the trash, but it's still trash.
Can you elaborate? I’ve only had RSUs in past
Even if they exit, the options might not be worth anything if the stock price is below the strike price of the options. RSU's are at least worth something (even if just a few hundred dollars) if they exit.
Implied growth is what you go for and what the risk is all about at startups. It could 2x. It could 10x. It could go under. B is still risky but it depends on your age, appetite for risk, and experience also that you want. Your personal due diligence of the company, the market it’s in, leadership, etc, as well as underlying growth assumptions is on you to determine if the risk is worth it and whether equity will be something worth while down the road
Is it normal for the equity to be lower as a result of implied growth? Like, the 1.5x difference at Uber, is that normal? And a startup might say, it will eventually be 1.5x?
Yes 100% normal for larger more mature companies to be a multiple of your base vs startup that gives you on paper smaller value. Larger company is a safer bet and guaranteed liquidity. In the case of Uber, we’re going public in the near future so it’s gonna give you cash sooner. Smaller startup is a risky bet and may make you anywhere from zero to millionaire depending on how big the company grows. Either way in smaller startup, they’ll need liquidation event in order for you to see actual cash which may take a much longer time.
Well said.
Uber base is too low. Go for the startup.
Op, can you explain the difference in base? What role at Uber, what role at startup? Looks like the startup may have increased base to attract you away from Uber? Some considerations: - your base in startup is 60k higher which is significant. - for options, strike price has not much meaning. This is the money you would have to pay to get the shares. (Assuming you are not confusing strike price with the current investor price). You should ask the current investor price of shares. Subtract the strike price and the difference is what the options are worth right now. You should compare that with Uber’s. Secondly, talk to the company or other senior friends and ask them what valuation is the startup likely to exit at. Then ask the company what share price would be at that valuation (you can also do the math yourself from the current investor price they tell you and the current valuation: you will find the number of shares. Then factor in dilution). Then subtract the strike price from that to get your actual expected earnings assuming your prediction comes true. Compare that also with Uber’s predicted equity. - note re the startup, many startups fail or go nowhere for a long time. The chance of equity becoming money is very low at Series B unless you really believe in the product and the team. - Uber’s equity can be considered cash As it is close to IPO. - go for what you are interested in. Money is not going to be a big deal breaker in these two offers I think.
Isn’t the whole point of going to a startup is equity? If you don’t get that, then what’s the point?
That’s what i was thinking - but was unsure if maybe it was normal to be lower since implicit growth?
Given that Uber is easily worth 60-100x a series B company, the equity is fairly reasonable.