Options are a complex topic, this article gets a lot wrong.
1. The base offer. Many startups pay competitive or close to competitive salaries + equity.
2. The value of the options depends on your ability to pick the right startup and you believe that you can make a difference to the company. I have a friend who picked the right startup 4 times in a row.
3. Stock options are typically priced at 25% of the last round. The reason this is possible via 409a valuations has to do with the differences between common stock and preferred.
4. Issues with investors right impacting the value of your stock options are more problematic with later stage startups. Warning signs are companies that raised a lot of capital but didn't live up to their expectations. Those companies will often be under pressure to accept terms in later stage financing that could destroy founder and stock option pool upside.
5. Venture Deals by Brad Feld is a great read to understand different investment terms.
6. Yes you get more equity if you create your own company. Doing so is extremely risky, stressful and hard though. I'd guess that even with the extra equity, on average, you'll make more money working for one of the big companies.
7. So in a nutshell, starting companies, joining early stage companies. It really depends on your ability to pick the right company and perhaps more importantly your ability to make a difference.
I don't think I have ever seen a startup offer a competitive salary/equity package here in the Bay Area for a software engineer. I have found that the best I could do is trade compensation for a good work-life balance since salary is not competitive and stock is so volatile for a startup, whereas at big companies salary often is much more in line with the market and stock has actual liquid value.
> Options are a complex topic, this article gets a lot wrong.
...so what did this article get wrong?
> The base offer.
For high level engineers the disparity between what Facebook/Google will pay you and what you'd make at startups can get pretty high. In my personal experience the salaries aren't actually competitive unless you start personally valuing the equity at a significant level. It seems Dan has the same experience.
> The value of the options depends on your ability to pick the right startup
I think his article does a better job of answering the question "how do you value the options provided by the startup assuming X level of success" than you do here. "I have a friend who picked the right startup 4 times in a row" doesn't really help people figure out if they've picked the right startup. "It's possible! People have made money on the stock market!" << This is not reason to play the stock market.
> Stock options are typically priced at 25% of the last round.
I'm assuming you're talking about the section where he calls valuations bogus. Your statement here doesn't invalidate the writing: "First, the valuation is updated relatively infrequently" << this remains true. And the round valuation is still a complex number that's mostly investor speculation and not representative of what your shares will net you -- which is the argument here -- that you might be better off offering cash than some hard to quantify thing.
> So in a nutshell, starting companies, joining early stage companies. It really depends on your ability to pick the right company and perhaps more importantly your ability to make a difference.
2. If you're that good at picking startups, become a VC.
3. Common shares are priced less than preferred because they're worth less than preferred.
4. Startups at every stage give liquidation preferences. Startups under pressure will give more significant preferences, sure, but they're relevant to basically every startup.
1. The base offer. Many startups pay competitive or close to competitive salaries + equity. 2. The value of the options depends on your ability to pick the right startup and you believe that you can make a difference to the company. I have a friend who picked the right startup 4 times in a row. 3. Stock options are typically priced at 25% of the last round. The reason this is possible via 409a valuations has to do with the differences between common stock and preferred. 4. Issues with investors right impacting the value of your stock options are more problematic with later stage startups. Warning signs are companies that raised a lot of capital but didn't live up to their expectations. Those companies will often be under pressure to accept terms in later stage financing that could destroy founder and stock option pool upside. 5. Venture Deals by Brad Feld is a great read to understand different investment terms. 6. Yes you get more equity if you create your own company. Doing so is extremely risky, stressful and hard though. I'd guess that even with the extra equity, on average, you'll make more money working for one of the big companies. 7. So in a nutshell, starting companies, joining early stage companies. It really depends on your ability to pick the right company and perhaps more importantly your ability to make a difference.
Well that, and a bit of luck :)