Re:Employee Equity Is Broken – Here's Our Fix
by sskates on Friday December 04, 2015 @12:55PM
(#10677848)
From the perspective of an employee, I completely agree this is the correct method of getting an idea of what equity is worth. I've had exactly 0 new hires ask me all those questions. Maybe 10% have asked me how many shares outstanding we have. The number of people with the experience to ask the right questions is really low, even for senior hires we've made with 10+ years of experience in startups. I think the onus is on startups to start proactively sharing this information with new hires- not just employees.
There are three kinds of cases where I've seen this information being hard to get:
1. Equity isn't a major part of compensation, and salaries are market-competitive. The employer says, in essence, "equity is not an important part of your compensation; let's concentrate on making sure you're happy with the salary and bonuses".
2. It's a relatively large company that is constantly hiring people, and they have a strong BATNA.
3. They simply don't know the answer, and the person hiring you isn't in a position to work with you to generate the answer (that work being "make three wild guesses at where revenue will be in 5 years, do a little research on what multiples companies are acquired for in their space, and figure out how much runway they have now"). If you know the % of the company you're getting, the dollars invested, and what the liquidation preferences are, you can come up with a somewhat decent guess here on your own.
If you're a key hire and equity is a significant part of your compensation, you should be able to get this information.
If equity is a significant part of your compensation, then, no matter what, you should be able to get:
* The number of basis points you're getting in the company
* The dollars invested in the company so far
* The company's revenue target for the year
* How much runway the company has at current headcount
If you can't get all of these, value equity at zero.