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Ask HN: more money now or more percentage later?

3 points by jollaris ↗ HN
I have recently been offered two equity options, of which have different advantages and disadvantages. One option offers more equity but a smaller salary (by 10k) and the other is a half percent more but higher salary. From past experiences and empirical research, which option is more appealing?

4 comments

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_b8r0
YMMV but you need to weight up your current and near term needs versus long term payoff, including the likelihood of exit within your preferred timeframe.

If you genuinely believe that you will exit within a reasonable timeframe because of the company's value and ability to sell at the time, consider the equity.

If you need the cash for day to day, or you have any doubts about whether or not you're going to exit on time (or indeed if at all) then take the cash.

Personally in your situation given it's half a percent and a 10k a year difference, unless that half percent gives you a substantial change in shareholder status (e.g. 50 vs 50.5%) I'd take the cash. It's unlikely that half a percent is going to make more than 10k a year's worth of difference over your company's lifetime, compared to that extra 10k early on.

carbocation
> It's unlikely that half a percent is going to make more than 10k a year's worth of difference over your company's lifetime, compared to that extra 10k early on.

It is possible that you are right. But it is also possible that this person is working at a near-IPO company or something well funded. In that case, the 0.5% would be much more meaningful. In the end, I suspect that the most likely scenario is that insiders consider the expected value of the 0.5% to be almost exactly equivalent to $10k/year after accounting for risks.

In that case, I would personally consider how much of a relative difference would that 0.5% make (e.g., going from 0.75% to 1.25% might be more meaningful than going from 23% to 23.5%) vs how much of a difference would that $10k make. Presumably people who have thought about this consider them to be equivalent from the company's perspective, but only the asker knows which one is more useful to him/her. If he/she has doubts about the company's exit (as you suggest), taking the money makes sense. If he/she is confident and can delay the payoff, it may be worth it. Hooray, gambling.

exline
Take the cash. I've been burned in the past holding onto options/stock that turned out to be worthless. Having options is only worth value if there is a successful exit which are rare. I was involved in an exit, that was pretty good for the founders (7 digit purchase price), but worthless for just about every employee. I think I walked away with $600.

The valuation of each company should also be figured into equation. It really only matters when there is an exit, but it would effect your payout. Have the founders/owners had a successful exit before? Are they going to raise capital, thus diluting your ownership in the future? Given these questions and my past experience, I'd take the job that is more interesting to you. If both are equal, then take the higher salary.

nandemo
Suppose you took the higher salary and also had the right to buy 10k worth of shares in your company each year (let's put aside the practical complications of this for a moment).

Would you buy the shares? Or would you rather...

a) save the money

b) paying back whatever debt you have

c) buy a car with cash instead of getting into debt

d) invest in the stock market

e) other