$VALUE_OF_EQUITY_GRANT * 0 = 0$

seriously. value it at 0

I don't agree you should assume equity as worthless. Especially for larger vc funded startups. But equity can get complicated, and it's possible for a company to have an exit and for you to lose money. But the majority of early stage start ups will fail.

Though the $120k offer seems much better. Could you negotiate equity or improve salary? 100k*.07 means they are giving you the option to buy 7k worth of equity a year. You are giving up 60k a year in lost salary to do that. So your equity would need to about 10x before you make up the lost salary.

So, even in the optimistic case, your option package isn't that great. Your company is offering a pretty low cash comp, and unsurprisingly, they're also offering a low option comp. A good company would offer more to someone even with zero years of experience (assuming you're a software engineer). And this is an optimistic evaluation where you really believe in the startup. Your comp is low, ask for a bigger raise or just switch jobs unless you really like it there.

If those options are ISOs, then their exercise price is almost certainly going to be equal to the 409A valuation, which means they're worth $0 upfront[1] and gain value as the company grows more valuable. Since you only make money if the company's value goes up, it's almost impossible to accurately assign a value to it.

[1] I use "worth" loosely here. More accurately they have intrinsic value of $0 upfront (maybe a bit more because the company has grown since the last 409A), and some hard-to-determine time value. see: https://en.wikipedia.org/wiki/Option_(finance)#Basic_decompo...

I don't think this is generally the case; typically the 409A valuation is using accounting rules that are different from how you would personally judge the value of the stock, and the founders are trying to minimize the 409A valuation, so typically 409A valuations are much lower than people would buy the stock from you if there were a market for it. But you have to make your own judgment of how much you think the stock is worth.

But essentially, my point is that even with quite optimistic assumptions, the OP is not getting a good deal, and I think we clearly agree on that, it's just a question of "how bad" a deal the OP is getting.

No its a harmfully naive analysis, your "calculations" put the common shares at 10x their stated FMV.

I'd run. If the numbers there are correct, neither management nor investors really have any confidence in the company. As an employee you shouldn't either, particularly for that far under market in cash comp, and if somebody is willing to double your cash compensation, take it.

That is not the valuation of the company, not all shares outstanding are common, some are preferred which are going to have a substantially higher FMV for an early stage.

I don't know what a "normal" multiple/mark-up preferred would normally have at this stage, obviously it varies on terms. 55M shares outstanding this early would not be the sign of a "healthy" cap table unless they didn't start with the standard 10M outstanding.

The parent comment is also correct. We've experienced a down round due to the pandemic.

which is expressed in the preferred share's being valued at 13x the common shares

No.

1) Value them like a lottery ticket. Now what? They are worth nothing or something. You won't know until they are actually drawn in 4 years. Waiting is fun, right? You're happy to wait for your bonus?

2) Do you enjoy working there? Right now they are chains binding you to the business. Is that an issue? If you get bored and it becomes just a pay check, can you start a suitable side hustle so you stay awake?

3) They're worth nothing at all. The business goes bust in two years. What opportunity cost did you pay? What other actual paying positions did you pass up?

4) Is the business sane enough to last another 5 years? 6 years? Other than your salary, would you actually invest in the business if you could on the market? Are its fundamentals valid? Does it actually produce cash flow? It seems like it is progressing. You worm for them. Are they progressing in your perception? Could you convince me to invest? What would you say?

Echoing the $0 valuation comment, which you should heed: $60k guaranteed per year is astronomically difficult to match with illiquid equity. You need only search for "equity" here on HN to read the multitude of warnings against overvaluing (read: valuing at all) your equity.

The fact that you stayed for four years at 60k means they probably think even less of him by now.

For what it’s worth OP, some startup swore they were going public about 8 years ago to me at a billion dollar valuation. It came with a six figure salary and options, this was 8 years ago. Long story short, the company never went public and certainly isn’t valued at a billion dollars by any measure. But they are still around.

Make sure you understand preferential shares (VCs get paid first, so company needs a big win for you to get anything), and understand how much you are likely to be diluted over time. Also make sure you understand the benefit of cash now to invest in a home or in funds. My equity is locked up and it truely truely sucks.

The other thing to do is ask for $120k, plus options on top of that. You can’t lose by asking if you have another job lined up. But be prepared to walk, and don’t threaten them with your other job, as I have read multiple times that isn’t a good idea (read advice from clued up people, not me).

Two articles to help you think about it like a VC:

https://avc.com/2021/11/seed-rounds-at-100mm-post-money/

https://techcrunch.com/2017/06/01/the-meeting-that-showed-me...

> We raised totally about $10M > My cash comp is around $60k.

Why are they only paying you 60k if they have 10M in the bank? Get a raise.

For perspective, I make more than you (in cash) as a community manager / content-marketing person at a pre-A startup.

At least I really hope that's the case, because an 8 year vesting schedule is idiotic.

So, can we assume some portion of the options was granted more than a year ago, and has vested already?

Your compensation is quite low, I would suggest negotiating now for a higher (market rate) salary and them making you whole after their next raise.

This whole situation has tax implications that could turn out badly for you in some scenarios, so you may need the money from that extra income to deal with that.

Went public, stock tanked. I'll be lucky if I make 100k off those shares, which isn't terrible, but point is anything could happen.

Do you think your startup will make hundreds of millions in a few years? It'll take them 6-12 months after that milestone to actually go public, too.

Startups are high risk, especially if you have all your eggs in 1 basket. Whether it's reasonable to take the risk depends on data points that only you can ascertain.

The hard part is being honest with yourself. If you've invested 4 years into this job, you surely have emotional attachments to it that transcend economics. Feelings of loyalty are good and normal. One key question to ask is how much loyalty do the founders feel to you? Would it be hard for them to replace you? Do they treat you with respect and camaraderie or like a machine that produces algorithms? Are they competent, inspiring people that you learn from, or "idea guys" who are good at pitching but not much else? If you were the CEO, would you hire them?

Just a few of the questions I would ask myself in your shoes.

But as an insider, you have the ability to uniquely gauge whether this is an "average" startup, or one where truly thoughtful, innovative, honest, humble people are working hard for a dream that, from your vantage point, has a good chance of panning out, even modestly.

I will say that your $60k compensation isn't a good sign, though. It signals that the engineers they've hired either (1) are great engineers and they really, really believe in the future of the company, or (2) aren't that great. You can probably gauge which is the case for yourself, but across all low-paying startups, (1) would be a very rare case, and (2) would be far more likely.

The road to hell is paved with good intentions, as they say, but that road is build with some really solid engineering (it being so hot there and all), and we only really hear about the successful exits which reeks of survivor bias. The well run companies just fade away in our collective consciousness. I can name Uber and Lyft off the top of my head, no problem, but their defunct competitors? I'd have to look them up to name more than... Flywheel, I think it was?