- total outstanding fully diluted shares to know the total shares available
You can ask this, but has anyone actually had success getting an answer to these questions? Every time I've asked questions like these (which are generally considered sensitive financial information) I've gotten laughed at.
Trustworthy people assume other people are trustworthy.
Backstabbers assume other people backstab.
Don’t misunderstand me, there’s a difficult conversation about stock. A few shares doesn’t give a person a say in how the company is run. It doesn’t make a person a principal. Doesn’t make them a “partner”.
Worker bees are still worker bees with shares. Trustworthy people offer shares because it might make you rich.
If someone laughs, they don’t think you deserve to be rich.
That's a red flag that the company you are talking to isn't serious.
Speaking firsthand, Glowforge will always share fully diluted options and the last 409a valuation. What we do is not uncommon, and IMHO is the only ethical course of action.
Note, however, that options are granted by the board, and until they approve the grant, the 409a and hence the strike price may change. For example, if the company got a buyout offer between your conversation and the board action, the board would likely have to order a new 409a before granting.
Good luck!
In my experience laughter may be overstating it a bit, but the question is brushed off with an "it's confidential" and you are made to feel slightly stupid for asking. And these weren't fly-by-night operations either, but well-respected startups that went on to do very well.
Great filter question because it's very easy to just walk away from them without any further consideration.
Haven't been offered (or asked for) some of the other ones mentioned, like size of employee-specific pool.
Comp at startups are generally a sliding scale of cash to equity. A typical offer will ask you to slide it one way or another.
To judge stock, ask for,
- 409a valuation to know the current strike price of the shares
- total outstanding fully diluted shares to know the total shares available
- size of the employee option pool (eg, 10-15pct)
- possibility of an 83(b) election
- ISO vs NSO - what kind uf options are they?
- re ups, and anti dilution clauses?
- triggering events (eg what happens when the company gets bought?)
The more you know the better you judge the value. If folks are cagey in giving details, definitely push back and ask why.
Next, consider that the company’s progress is all that determines your shares net worth.
- how much do you believe in this team, space and product?
- and ask yourself - are you able to completely push this into a “lost cause financially” bucket in 5y? or do you need the cash? i’d advise being comfortable with the former :)
lastly, look at how much value you bring to the table to determine how much you get. if you’re engineer 1 with two non tech cofounders - you’d be worth much more than engineer 10. In that case, look at some of the blog posts online (esp by folks like Leo Polovets) on some ways to think about these numbers.
good luck!
(1) https://github.com/jlevy/og-equity-compensation