> If it has been more than 5 years and the company has not become profitable, quit. Take your losses. Invest your experience and time in another company. Even better, start your own company.
What losses? I've never heard of any equity vesting plan that lasted longer than 5 years.
This is far too simple. Essentially it is only weighing the financial incentive to stay, and it insufficiently weighs the odds of the startup paying out.
Well, I would phrase it differently -- the financial incentive to stay is salary + EV[options], (where EV is expected value) which takes into account the odds of the startup paying out.
Negative if you factor in the cost to exercise them (typically you will have to when you leave). The author does only recommend exercising the options if the company is profitable, this is probably good advice. If the company is not self-sufficient consider the potential impact of a future financing with the present market. Here are two to factor in to your calculation:
- Reallocation of ownership between share classes (substantially diluting the existing common stock).
- Creation of new shares with a high senior liquidation preference.
You might see the reallocation of the pre-money value happen on a "money-in" basis. The valuation itself will obviously depend on how much the company needs the money. When it's all done the existing common stock (founders and employees) could well be worth less than 1% of the company. If you're still at the company you'll probably get new options issued but if you've left you'll just have the old ones worth approximately $0.00.
That said I would focus on whether you're having fun and doing/learning something you think is worthwhile rather than on how much your options might be worth.
By this metric employee #1 at Facebook should have bailed by now. Seriously?
Ultimately this can be boiled down to, "If you don't think your company is going anywhere, and you're not being compensated adequately, then it's probably time to look elsewhere." Which is a step closer to reality, but ignores things like the fact that you might simply like it where you work.
If everything boiled down to money, then it would be simple as simple as the author stated.
I would look at it a little differently; people join companies for many reasons, if you are deciding to leave because of money. You probably already made a few errors; choosing the company, in the hiring process by not getting the salary you deserve and during your yearly review not fighting for more.
Once you joined the company though, you will most likely be working off your balance of intrinsic desire to accomplish everything you can for the company. If at any point your motivation turns to a purely extrinsic (i.e bonuses, cashing out) it is time to leave.
It is a funny thing how different things seem when you are using intrinsic motivation vs. extrinsic motivation. The best way I can explain it is simply: You will walk through hell with seem like heaven when it you are motivated internally vs. even the simplest of task will seem like hell if you are staying to receive a bonus.
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[ 4.2 ms ] story [ 43.9 ms ] threadWhat losses? I've never heard of any equity vesting plan that lasted longer than 5 years.
- Reallocation of ownership between share classes (substantially diluting the existing common stock).
- Creation of new shares with a high senior liquidation preference.
You might see the reallocation of the pre-money value happen on a "money-in" basis. The valuation itself will obviously depend on how much the company needs the money. When it's all done the existing common stock (founders and employees) could well be worth less than 1% of the company. If you're still at the company you'll probably get new options issued but if you've left you'll just have the old ones worth approximately $0.00.
That said I would focus on whether you're having fun and doing/learning something you think is worthwhile rather than on how much your options might be worth.
Ultimately this can be boiled down to, "If you don't think your company is going anywhere, and you're not being compensated adequately, then it's probably time to look elsewhere." Which is a step closer to reality, but ignores things like the fact that you might simply like it where you work.
I would look at it a little differently; people join companies for many reasons, if you are deciding to leave because of money. You probably already made a few errors; choosing the company, in the hiring process by not getting the salary you deserve and during your yearly review not fighting for more.
Once you joined the company though, you will most likely be working off your balance of intrinsic desire to accomplish everything you can for the company. If at any point your motivation turns to a purely extrinsic (i.e bonuses, cashing out) it is time to leave.
It is a funny thing how different things seem when you are using intrinsic motivation vs. extrinsic motivation. The best way I can explain it is simply: You will walk through hell with seem like heaven when it you are motivated internally vs. even the simplest of task will seem like hell if you are staying to receive a bonus.