Are stock options worth anything at a startup?

Often, these options are worth as much if not more than the base salary offered, and so evaluating competing offers on a financial basis can get pretty complex. Typically, candidates will consider the value of the options at the most recent price for its shares, but there are big problems with this approach.

Should I negotiate for stock options?

Always negotiate your base salary before you discuss other types of benefits, like stock options. That’s because companies typically have a framework for stock options that they offer to employees at certain levels in the company. When negotiating stock options, ask if the company has a standard scale.

How do you ask for stock options in a startup?

Here’s what smart people ask about their stock options:

1. Ask how much equity you’re being offered on a fully-diluted basis.
2. Ask how long the company’s “option pool” will last and how much more cash the company is likely to raise, so you know whether and when your ownership might get diluted.

How do you assign stock options to employees in a startup?

The percentage method of assigning startup stock options Assigning stock options based on percentage is relatively simple. You say “You, employee, own X\% of this company.” So, if we throw some numbers in there, you could give an employee 1\% of your company.

What is a stock option plan and how does it work?

A Stock Option Plan gives the company the flexibility to award stock options to employees, officers, directors, advisors, and consultants, allowing these people to buy stock in the company when they exercise the option. Stock Option Plans permit employees to share in the company’s success without requiring a startup business to spend precious cash.

How do I get additional stock options?

Once you are an employee, there are 3 ways to get additional stock options. 1) Biannual refresh. Every 2 years, we grant you 25\% of what a new hire would receive in your role at that time. So if new hires at your level/function are getting 4,000 options as of your 2 year anniversary, you would get a refresh grant of 1,000 options.

What happens to stock options when a company is acquired?

Until the company creates a public market for its stock or is acquired, the options will not be the equivalent of cash benefits. And, if the company does not grow bigger and its stock does not become more valuable, the options may ultimately prove worthless.