20 February 2020
A safe assumption is that your odds of becoming a millionaire by working for a private tech company are not good. The best chances for equity upside go to the earliest employees, especially if the company isn’t destined for unicorn status.
Many employees are better off going to work for a public tech company where the salaries are generous, the equity is liquid, existential risk is minimal, and work/life balance is predictable. But money isn’t everything: working for a startup can offer more excitement, greater responsibility, more avenues for creativity, and faster opportunities for career growth.
Employees need to evaluate their compensation potential with clear eyes. Current trends have made it harder to obtain value from startup equity; as Steve Blank eloquently explains, stock options aren’t a good deal for employees anymore.
When considering a startup job, employees should be prepared for three things:
The equity grant is where you can unlock the most value from a startup job. But equity is specific to each company, making it hard to determine how many stock options you deserve. Even if a company tells you the percent ownership your grant represents (most won’t), how can you determine if that’s the right amount for your role and the current stage of the company?
Vested’s equity fairness calculator is now broadly available. Find your company, enter a job title and option award – we’ll tell you if we think it’s fair based on our view of the industry. We posted about how that works and why it’s important yesterday.
Your future value is directly tied to the value of your company. Don’t miss the forest for the trees, stay objective about how your company is growing and be prepared to make your own exit. Vested tracks the valuation, fundraising, and potential exit scenarios for a growing list of companies.
Some outcomes you have no influence over: your company may go public, get acquired, or go out of business. Each scenario will dictate what happens to your stock options. But some scenarios are up to you:
Your company may offer you a chance to sell shares back to the company, or to new investors (structured secondary).
You may have the opportunity to sell pre-IPO on one of 20+ marketplaces or to one of the 12M+ accredited investors in the US (unstructured secondary).
There may be interest from investors to give you risk-free financing to exercise your options (they get a take of the eventual upside, but you owe nothing if your company goes under).
It can be a lot to keep track of, but Vested can help with each step. We’ve expanded both our fairness calculator, and our stock option finance/sell tool to a larger pool of companies.
If you’re interested in financing the exercise of stock options, or selling them, add your equity details on Vested and let us know. We’ll match you with opportunities as we find them. Of course, your data remains anonymous to our partners, until you request that we connect you.