Hot answers tagged stock-options
8
Fred Wilson have written well about this here.
As with everything, it depends.
If you look at the valley companies, commonly a stock option pool of around 5-10% pre Series A is set aside, and is supposed to last during the lifetime of the company (up until M&A or IPO). Out of this, stock options reach couples of percentages, or even more with key ...
7
In all honesty, your grant sounds about like what I would expect in your situation.
It really comes down to how irreplaceable you are, and you have to make an honest assessment of that. Yes, you have been there a long time and contributed a lot, but do you have significant domain expertise that another engineer would not possess?
If the company were to ...
7
Your lawyer friend is wrong. You want to give options as early as possible, so that you can get as low a strike price as possible.
Under current 409A valuation rules in the United States, the options strike price must be based at the fair value of the company for the time they are issued.
If you issue options when the company is brand new, the fair value ...
7
If you haven't received paperwork for the options, you weren't granted them. If your offer letter says "subject to board approval," which it probably has to, then you probably don't have legal recourse.
There are a few things that might be going on here.
The board has had trouble issuing options because they have been unable to get a solid valuation for ...
6
Generally it doesn't make sense to exercise vested options in a private company whilst you are still employed by the company. You would be spending money to exercise your options but without any guarantee that there will be any future liquidity. If for the sake of argument it would cost you $1000 to exercise your options now, it would still cost you $1000 ...
6
That sounds like a really bad situation. You have to look around you and decide if this company is essentially dishonest ans runs like a scam, or if they are simply incompetent. You may be able to tell by looking at how they treat their customers for instance.
It looks like you already escalated the issue as much as you could. I assume you asked your direct ...
6
Of note: an experienced large company person may not have the correct skillset to run a startup. I know some may disagree, but it is one thing to have a staff / secretary / expense account, and quite another to have to sweep the floors before you leave the building every night (because no one else will do it).
I would take a look at the vesting - any ...
5
Ask to see the cap table. It should have a line item for stock options for early employees. That line item should provide enough room for all the employees they need to hire in the first year. A typical amount would be 15% or 20%. Ask them what their hiring plan is and how they plan to allocate the stock options. If they need to hire a lot of people to make ...
5
What class of stock are you being offered? If there is more than one class (e.g. Common and Preferred Shares), the rights, the value and the opportunity to cash out may vary significantly.
What percentage of the company does this represent? This is clearly a main driver in how much this offer could be worth.
If this stock is being issued from a pool, how ...
5
Verbal promises about your potential equity in the company mean nothing unless they are backed by a written contract.
If they want to keep you and mean what they say, they should have at least given you equity with a vesting schedule by now. The whole point of having a vesting schedule is to reduce their risk in case you walk AND to give you a concrete ...
5
Basically I would be given X shares for my work and with the current number of stock that came out to 1% of the total stock, BUT as investors come on this percentage will decrease.
Does this mean that more stock can be created?
Yes. In fact, that is precisely what happens in subsequent rounds of investment.
Could the company just create a billion ...
5
Unfortunately, "subject to board approval" is a common contingency for stock option grants. At this point, I'm not sure there is much you can do about it.
Last year I represented two founders whose small company was purchased by a large software company. A sizable portion of the payment price was in stock options, which had a board approval contingency. I ...
5
I would expect them to pay about 80k. Stock is a red herring.
First off there is a 90% chance that it is worth 0 dollars in the long run.
Second unless they are giving you stock regularly then stock is a sign on bonus not pay.
Third whatever you agree the stock to be worth, consider you won't be able to sell that stock for several years. Think of ...
5
So there's no strike price, is there a vesting schedule? It may be that you were automatically granted them without having to do anything.. if that's the case, I'd wager there are tax implications.
Regardless, usually when a company is acquired, the acquirer wants to own 100%. When it comes down to it, each of you has a (small?) claim on a chunk of the ...
4
There's no one answer. As a founder, you want to set aside the smallest possible amount for the option pool, because this option pool dilutes YOU, not the investor... and if you don't use it all, the "leftover" options benefit you AND the investor, so the investors get some "negative dilution" that they never earned.
This is all explained clearly by Nivi in ...
4
My advice is don't get overly complicated. Just don't.
This early in the game, don't nit-pick on this, don't waste too much time, and certainly don't create a maintenance nightmare. Furthermore, it's very much like a snowball; the more you entertain the idea of fine-tuning compensation, the more you have to fine-tune compensation.
Basically, I'm going to ...
4
Based on my anecdotal experience, your equity doesn't seem too far off the mark. Feels a little bit low, given how long you've been there -- but not alarmingly so. If you had started with a company at 1% and they'd gone on to do a couple of rounds of funding, you'd likely be at a similar situation.
I'd have a friendly negotiation for an additional grant ...
4
That's one of the reasons for a shareholders agreement - to determine dilution, sale of shares, buy-back clauses, etc. The person in the company with the largest number of shares generally can dictate the terms of the agreement. Often this will mean that shareholders with less than a certain percentage get no say in dilution, and have to accept the reduction ...
4
To the very best of my knowledge there is no formal definition of "Founder's stock". It is at best a shorthand which people use, and it has no precise, well-defined meaning.
I'm guessing that your consultant means a certain ownership percentage at the pre-money valuation in case you guys succeed in raising funds. So if there is an investment later on, then ...
4
This is important and very common.
First, you definitely need to ask what the number of outstanding shares is, so you can figure out what percentage of the company you own. You should know the price because it should be in a document you signed.
Second, there are no guarantees... Common stock (which you don't even own yet, since you didn't exercise your ...
4
Options should get vested over time. You should not lose them when you leave, except for the vesting schedule (which is normal).
Read this: Forming a new software startup, how do I allocate ownership fairly?
Consider where you are. You're not a founder, I gather. Are you in the second band? The third? How important is tech to this company? If it's a ...
4
Depends on the motivation of the Advisor. Some join because they may be able to use what you're making down the road (these are the best kind, in my opinion), so early access and the ability to steer product development can be incentive for them to participate in a board of advisors.
However, your question touches on the broader topic of how potential ...
4
Why did Facebook stop giving out options in 2007 and start giving out RSUs (restricted stock units)?
From abovethecrowd:
In an effort to avoid the restrictions of 409A, Facebook long ago
created an RSU structure whose shares vest on a liquidity event. As a
result, a large amount of stock (close to $1B in value) will all
“vest” on the IPO. This will result in an enormous one-time, non-cash
charge.
From my understanding of this, it means that ...
4
Do realize that "There are lots of chances that the company will be funded in 2-3 months" should really be "there is a good chance that the company will not get any funding until another year of hard work, if ever"
I'm not sure what they mean by convertible note. It's usually for investors who sign a check to the company, but instead of getting stock right ...
4
They won't really like it, but it's doable. Is it what you really want, though? An equity stake is only good if the company (i) is sold, (ii) goes public, or (iii) declares a dividend. If none of those happens, you're holding stock that you'll have a really tough time selling.
Why aren't you asking for a royalty?
4
If you're paid a competitive salary then any equity you get is a bonus.
It sounds quite simple, you are just working a job that you get paid for.
The reason people give equity is to compensate lack of salary. If the founder wants to pay you instead of giving equity, well I don't see a problem with that.
4
For perspective, consider a job offer where you'll be paid 100,000 per year, but you aren't allowed to know which currency it'll be in. GBP is pretty good, but ZWD not so much.
It would be great to know why they feel the need to keep this secret and without a really good reason, I'd consider this a red flag. You have to assume that the shares are worthless ...
3
I would suggest reading theres articles on whether a job offer is a good deal, we dont pay you to work here, we pay you so you can work here and cult creation for startups
You should speak to an accountant about what the tax implications are for your employees (it would be quite the demotivator if they have to pay a bunch of tax on stock they cant sell)! ...
3
Compstudy probably has data on this: www.compstudy.com
The Summary report for 2008 is here, 2009 is downloadable after sign-up I believe, and 2010 isn't out yet to non-paying members. Unfortunately, full granularity by funding isn't available in the summary reports. It may be available if you can manage to get access to the full data.
2008 aggregate data in ...
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