Startup A:
* Series B: ~50m
* ~20K more base
* ~20K less stock options
* No signing bonus
* Free lunch
* High premium for family health insurance ~300/paycheck
Startup B:
* Series C: ~200m
* ~20K less base
* ~20K more stock options (will be offered options at Series B strike price)
* ~10K signing bonus
* No free lunch
* Low premium for family health insurance ~80/paycheck
Thank you so much!
Anonymous-for-a-reason
I would look at team, is the work interesting, location/office and cash.
Your comments on B seem confusing to me. Options are typically granted with a strike price of whatever the 409A assessment of the fair market value is at the time of the grant. So if they already raised a C round, the ship has sailed on the "Series B" strike price. Anybody who tells you otherwise is probably either lying or misinformed.
So, what you're getting with Company B is more options with a higher strike price. Keep in mind that the strike price is what you pay to purchase the stock that you may then sell at market price. There are also taxes due at exercise. Your net profit from options issued this late in the company's journey, after a liquidity event, is likely to be small because the strike price is so high and the company has already achieved much of its growth prior to your grant.
For instance, if the company IPOs at $15 and your strike price is $7, figuring the fully loaded taxes to be around 40%, you will only make ($15-$7)*0.6=$4.80 per share. To get a more realistic expected value, you should also assign some probability your company will never have a liquidity event or will but under unfavorable circumstances that render your options worthless (e.g. after a down round of financing). The market value of your options during the liquidity event needs to be several times your strike price for it to become a very interesting amount of money.
I recently went through an IPO with my company. The options I vested over four years are about $60k in the money. I count myself lucky that I'm seeing any money at all from them, but really I would have been better off to jump ship a long time ago to a BigCo with RSUs that offer a more certain return.
If you really like Company B, tell them the going rate seems to be what A offered as base. With their recent funding, there's a good chance they'll bump you up if it seems like you're going to go with the other company.
It seems clear to me that OP weighted all other factors relevant to him and decided they were equal.
Of course, this isn't a question you should probably be asking the internet. My values are not yours. If you end up losing out on $20 million because you followed my advice, then you will hate me forever. So do what you want.
In my experience this was completely untrue. Stable companies are stable for a reason. They've figured out their path to profit and churn on making deliverables. It doesn't matter so much on size, per se, but it does matter that the profit has stabilized. And you're much more likely to find that in larger companies, frankly, because they're large for a reason.
In a small company, typically, the path to sustained profit is unknown and variable. Today you're the founder's best friend because you can crank out ruby code like there's no tomorrow. And then tomorrow shows up and you're out, because some influencer that the founder listens to told him that Node.JS is the future is Ruby on Rails is old hat.
But, there are several other factors that may contribute more to your happiness:
- Who will you report to in each company? How many levels under the CEO/CTO? Politics can suck the life out of you and make you not want to work even when you are making more.
- How many hours of work per week is really expected? Is it corporate 9-5 or startup 9-5 (aka 9-9). Only way to get that info is from people working there.
- How many days of vacation do you get? Is it a loose 'open vacation' policy or do you actually get a fixed number of days that you can take off? Preferably it's the latter.
- What percentage of the company do your stock options make up? Do you know the number of shares outstanding, liquidation preferences, etc.
- What kind of work will you do? Does the domain and the stack interest you? Does this help you reach your career goals?
Hope this helps, good luck!
EDIT: Formatting.
Other than that, A looks more promising.
1. Is one of these jobs easier on your personal life? i.e. taking care of kids, significant other, etc?
2. Is one of these jobs more interesting to you? Personal growth for the future?
3. Have you ever had stock options from other jobs amount to anything tangible and I mean really tangible, more than 6 figures?
4. Are you ok working for less base salary and if the stock options never amount to anything you will be ok with that?
I prefer a pay-check to plan my future not a hyped up promise most companies pitch when they mention their options package. I told a company recently that their options meant absolutely nothing to me. Neither did their free lunch or Friday night company dinners at some "new and exciting" restaurant. They replied most staff there was working for more options than salary. It became clear to me then why they were having motivation and teamwork struggles.
First things first: if you're being offered a position at a startup-b-level now, you're likely to qualify for working there in the future too.
More concrete things: 20k$ more on base salary and free lunch are real world perks.
You'll make up for the 10k$ signing bonus in the first six months alone anyway.
1 - How much will you respect your boss?
2 - Will they give you time?
The answers to that will determine how much you learn.
Forget the options for a minute. Let's say you plan on being there for 2 yrs.
20k - (280*12) -5 = 11640
Option A = $11640 before taxes. ~$7000 after taxes.
is $7000 after taxes going to matter to you? If you don't have those, would you be fine? If it matters then option A is looking better.
Now look at the business fundamentals, you know these companies better, how long have they been in business. How much did they both raise in A & B rounds? B2B or B2C? B2B always, what's the number of customers they currently have? How's traction? Who are the competition in the industry? Who are the founders and C suites? How many employees, what's on glassdoor & blind? What's their tech stack? Any well known folks in the industry working there? This is a full day work of research, put it all together and see who looks likely to make it to the finish line?
If A is more likely to succeed, easy, go with A. If B is more likely, then does that extra $7000 from A really matter? If not, go with B. If it matters, can you work some side gigs? 20hrs a month at $50 will get you the same $7000 at the end of the year? If you can work some side gigs, then B. If you can't work side gigs and need that $7000, can you downsize and give up some things? Nope? Then option A.
Aside, what does "$20k more stock options" mean? $20k more in strike? The strike value is how much the stock has to be worth before the options are worth anything. And if they're issuing you in the money (i.e. Series B strike price) options, then you're going to have a nasty tax bill.
$10k signing bonuses are tie breakers after you answer the real questions.
Freudian? ;-)
I would take the cash, how many years do you want to stay at the next place? The math is pretty easy.
I personally choose based on who I want to work with, how I think I’ll grow professionally and is the company doing something I want to be involved in.
Could you shed some light on the two companies/focus areas?
Some posters have made good points that on paper Company A’s equity should be worth more to you, but either way you need a liquidation event for you to make money off the equity (unless either offers a tinder or palantir item where you can sell a % of your shares every 12-18 months to the company).
I’d choose whatever company’s mission/work seems more appealing to you. If you have a family, I’d likely choose the one with the higher base salary as $20k isn’t a small sum wlhen it comes to the cost of raising a family. For someone who is just on their own, it’s easier at times to accept a higher risk threshold and opt for more equity if the company’s path to a liquidation event seems more relevant.
Honestly speaking, I’d have to imagine that considering those offers that Company B wouldn’t match or come close to the base salary of Company A. $20k is a drop in the bucket for what I’m assuming is a technical hire as your work should easily cover that difference.
The details of the offer won't matter one bit without good leadership. So think carefully about how the interviews went, and choose the better team.
- Work environment. This involves who you will be working with and how they work together? Do they use Scrum? Have you talked to anyone that you will be working closely with?
- Growth Potential. Which one is more challenging? Which environment is more suitable for you to grow?
- Go deep in where the company stand. Competitors, market fit/advantage, etc.
- Ignore the number of stock options. Ask for outstanding shares or get the percentage.
- How's the founder?
All being said, don't be afraid to negotiate! Company take so much time to write an offer. No company will decline you just by negotiating. Least thing they will do is to tell you straight up that this is their best offer. If you like B more than A, tell them you will sign if they match the base with the other.
I care more about my quality of life now that I'm a bit older, you might not have the same considerations now but things do change.
That being said as other commenters babe stared I’d care most about my team, the domain, the impact I would have in the org and the impact the role would have on my career.
Re-compare everything afterwards. $10k signing bonus is not a biggie compare to consistent +$20k base. Bigger premium for health insurance may mean bigger benefits - but make sure to dig that.
Free lunch saves you $10/day - multiply it by 200 - and here's another $2k after taxes or $3k before taxes.
Also - regardless of everything - which place feels more fun to work at?
Startups that make it big are rare and like winning the lottery.
Don’t. Just don’t work for subpar salary. Assume your stocks are worthless, assume you’ll burn out in an year or two (most do). Will you still be content? Then do it. Don’t bank on the lottery.
I have a family and kids. I am the single income earner in the family.
* Both have opportunities to grow into management although with A it feels much more possible due to their size
* Both give unlimited vacation
* Both are located fairly close to each other so commute will be the same
* Both pay for bus passes
* Both have 401K but no matching, yet
* Startup A is much smaller 11-50
* Startup B is 300+
Both startups are B2B. Startup A started as B2C but are expanding to include B2B (more focus and that's I'll be coming in place).
Hopefully, I don't reveal too much by saying this:
Startup B is YC backed.
My experience as a Brit working in the US is also that health insurance with higher employee contribution is often also (bizarrely) more expensive and worse quality in other ways, so there are additional non-financial (or not just financial) factors to consider. But the OP hasn't given enough detail to evaluate.
I'm old and jaded, but salary should be your primary metric. Stock options are worthless. I took a 50% cut at PagerDuty (YC10) for 2% of the stock options, they're now worth $1bn+ and screwed me pretty hard, the day after my father died. They didn't even offer any severance pay until I pointed out how much damage I could do to their reputation, then they gave me a week. Start-ups, especially run by new founders, don't know how to treat people humanely. Thanks guys. Since then my attitude is, "Fuck you, pay me". You will not win the start-up lottery. If they don't offer an 83(b) election, you could end up in the red if they do exist. This happened frequently in 2001, it even lead to several infamous suicides.[1]
Are you 200% sure you will last the 3/6 month signing-bonus waiting period? If not you could end up with a liability greater than the value of the bonus. I had this when when a start-up outsourced ops to LoudCloud. They contested our unemployment claim and I spent $3k in legal fees fighting them, in the middle of the start-up recession.
Start-ups will not invest in you as an employee, and will drop you without a second thought. Expect to spend all of your free time learning new skills just so you don't get fired.
[1] https://www.siliconinvestor.com/readmsg.aspx?msgid=17123680
(edited for spacing, and to add the anecdote about severance pay)
Cash is king, startups will want you to feel "family" but you'll never be one. In the unlikely event equity is worth anything, converting it to cold hard cash is not always straight forward. In other words - take the money.
People rarely seem to understand this. A successful exit doesn't necessarily mean employees will get paid. A friend experienced this when Google bought the start-up he had been at for 2 years. Employees had to wait a year for an earn-out period. They had to re-interview for their positions, and fired if they didn't meet Google's impossibly high standards.
(edited to clean-up a grammatical error)
So he took 2% options at a 50% pay cut, but then got fired and that screwed him out of the 2% options before he could vest.
Welcome to the valley.
If they were children, why were they running a company? Why would anyone join a company run by children?
Edit to add: That link describes in fairly precise detail the nature of the person's death. If you think that isn't something you want to read, give it a miss.