Startup offer and potential financial payoff for an experienced engineer
Experienced engineer (>12+ years) in tech, been with Amazon for 7+ years, 350k in total comp. Received an offer from a startup (currently valued in $100-300mil range). While the base is just a tad better than Amazon (as Amazon has 160K limit), the stock options given would theoretically provide a payoff of $1mil if the company hits $1bil valuation and Ipo say in three-four years. The financial payoff looks better if the company hits $2-3B valuation but the probability to do that is unknown! Is this relatively lowball offer as they are not willing to increase stock options? I could stay in my job and get similar financial payoff (or better if I get promoted - most likely in a year). Not sure if it is a rational financial decision to consider this startup offer (the area of work for the startup is quite interesting but I can get similar work in my current firm if I take an internal transfer).
Not worth it
It certainly is not!! If you are just making enough what you can make in your stable job, moving to a startup is not a sound financial decision. Please remember that 3-4 years to reach 1 billion dollar valuation from 100 million is not easy. Infact it’s very rare. $100 on the other hand is comparatively quite easy. So the risk actually begins now. Financially speaking, you must have at least 1.5 times potential so as to minimally cover the risk factor. Work wise, only you can decide. Until this is the only company which can give you the work which you want to do, don’t fall for the startup utopia. As you said you can get similar work through internal transfer, you should try that.
At $350k total comp at Amazon you're doing well, with the difference in TC you make up that 1M payoff with zero risk. If its $ you're after go to Google or FB or Netflix. Why gamble when you can have the sure thing?
Yeah, same feeling for startups. I am sure most of us receive numerous emails related to jobs at startups with the recruiters pitching that it’s doing some earth shattering stuff and all that hyperbole but the big question is statistically how many of them have successful exits? I assume the answer is less than 5%. I would only join a startup if that’s the only thing I want to do in life, not for money. As others said, if compensation is main criteria exploring Google, FB will be more worthwhile. Plus from my personal experience, some startups are really good but quite a few are very mediocre as well.
Read up on Preferred Stocks, Ratchetting, Square IPO - employees, especially lateral hires do not benefit as much even if Startup has an exit
Just don’t do it. And I am in a startup which grew 10x, but still just don’t do it.
Any reason why?
Because they are offering you like 0.1% and the exercise price is probably already insane. You’ll get diluted, you’ll get frustrated, you’ll get handcuffed. The only startup worth joining is your own. I wish I knew this back then I joined.
What lvl at amazon are you?
All said, the equity portion for you is 0.1%. Is that low or high? That depends on their current employee count ( > 50) and valuation.
The company has 200 odd employees.
It's highly unlikely to get 0.1% equity in a 200+ startup. Unless you are an exec
*while compensation is not the main criteria, my rational was if I stick around for 3-4 years and the company grows 10x (assuming that happens), shouldn’t it at least provide me a reasonably better return than my current one! I am preferably looking for a change outside Amazon - 7+ years feels so long that a change would be refreshing.
Lol you should check what percentage of startups actually exit at over $1b valuation. I don’t mean valued at, but actually exited so you have cash. You should value the stock options at half of the current valuation instead of 10x of what they are now. Amazon is straight up cash so dont drink their fucking koolaid of “omg we are gonna 10x in 3 years”. I say that even though databricks did go more than 10x in 4 years, but trust me we are a very very rare case and its still illiquid so there is more dilution on the way to an exit
Theoretically speaking the old employees can still sell the stocks at the secondary market though at some discount over preferred. So the stock is partially illiquid at least for good startups. Also, the companies valuation going 10x doesn’t mean yours would after accounting for the dilution. I would agree with the above and say value them at close to 60-70 percent since the equity would grow too at a faster rate hopefully than amazon.
Hello mesosphere. Another amplab company. Whaddup