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Ask HN: What must I know about options before accepting a startup offer?

2 points by vdnkh ↗ HN
Some quick info:

The company is in the "late stages" of a startup - they've raised a sizable series D. I'm not too concerned about their staying power and I believe in the product. What I want to know:

1. How do I value my options? I have a sliding scale of more money-less options. What questions should I ask to get a better understanding of this value? All they've told me is I'd get N options.

2. A more broad question, but what's it like working at a later stage startup?

5 comments

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coreyp_1
1. You should probably know what the job is.

2. Is the job legal?

In all seriousness, your question is too broad. It would be better to state what you know about a particular aspect of the job, and then ask what you might be missing. But to simply make a vague question does not allow anyone to give you a good answer.

vdnkh
Good point, I'll update the description - I really want to know what questions I should be asking with regards to my options in order to assess their value.
gus_massa
Are they going to pay you in money = cash = real dollars, or only in equity?

(Assume that that the equity value is $0, but grab a little just in case it's really the new Google.)

brudgers
[IANAFA]

Two methods of valuing options:

1.0 Analyze the cap table and the liquidation preferences for any and all preferred stock.

1.1 Adjust based on liquidity [i.e. few companies are IPO'ing these days], an assessment of the good will of the founders toward employees [i.e. are the founders working to make employees rich], and it discount for the time value of money [i.e. opportunity costs].

1.3 Keep in mind that the valuation from a funding round is based on investors receiving preferred stock, not common stock like employees.

1.4 Understand options are not grants. Be clear on the financial requirements for exercising options both in terms of capital investment and tax liability. Assess these against your current and probable future cash assets.

1.5 Know your tolerance for investment risk. Would you invest your cash savings in the company in an equal amount to whatever cash value you assign to the options. And remember that they are options with a vesting period and only have future value and then only if exercised and sold into a market.

2.0 Use "safe harbor" valuation

2.1 It is worth $0.