| The intention of the process you outlined is good, but the process itself is flawed and highlights the pitfalls of trying to value equity at early-stage startups. First, very few startups can accurately tell you "If we're acquired for $50MM, your options would be worth $Y." Heck, for fun, ask a founder of a typical angel or venture-backed startup how many shares it has outstanding fully-diluted. If tons of startups struggle to describe what their capital structure looks like today, why should prospective employees rely on them to make estimates based on what their capital structure will look like months or years from now? Dilution, liquidation preferences, the option pool, acceleration terms. There's so much that can't be predicted or controlled, so asking a company to come up with exit scenarios for specific employees is like asking a blind man to read tea leaves. > The other way to do this is just to value equity at $0. At most early-stage startups, this is the correct approach to dealing with equity. There are very good reasons most vested employee options are never exercised. This doesn't mean that the OP shouldn't ask for some equity, but focusing negotiations around basis points of equity and trying to assign a future dollar amount to equity is generally a bad idea for the average employee because it opens the door for treating equity as a 1:1 (or close to 1:1) substitute for salary, which at early-stage startups it is not. If an early-stage startup wants to offset your cash salary with equity, try this: ask for $50 to $100 worth of equity for every $1 of salary offset. How the company responds will likely tell you a lot more about its future than if you ask what it guesses 1 option will be worth 4 years from now. |
You take that number from their last valuation?