Optionally minded

January 6, 2016 1:32 PM

I just received an offer for a tech job at a SF-based startup, with stock options. I saw this great Ask, which contains links to some valuable information on questions to ask. But I'm wondering: how many of those questions SHOULD a company be able to answer before I accept an offer?

So I am the recipient of an offer for a testing job at a startup. It has been many moons since I've had an offer that included stock options. The company has just received Series A funding so is not yet publicly traded.

One of the answers to the Ask linked in mine lists some questions that a company should be able to answer. (Thanks Nelson!)

MY question is: are those questions fair game BEFORE I accept the offer? I imagine they would be but I don't want to push too hard or decline the offer based on my solitary expectations.

Assume that all other aspects of the offer are to my liking. I take the approach that options are gravy on the meat and potatoes of my comp/benefits package. However, I would be leaving a job at a much better established company to take this one. I will NOT be relocating.

posted by Sheydem-tants to Work & Money (10 answers total)

Best answer: The questions are fair game, although (unfortunately) not all companies will be straightforward about answering them. Here is a post by Julia Evans of Stripe from a few days ago about how to understand the stock options part of an offer, and which questions to ask, which is worth reading and talks about these issues.
posted by enn at 1:37 PM on January 6, 2016 [2 favorites]

By all means ask the questions if your decision on whether to accept the offer will be affected by the answers.

Some of the answers will change over time, like the one about what % of the company the options represent. (You can assume it won't be a significant % anyway unless you are an executive.)
posted by fingersandtoes at 1:37 PM on January 6, 2016

Best answer: Don't be like me. Check Glassdoor.com for employee reviews of the company. I once worked at a nameless startup which I did not know had a long history of firing perfectly good people just before they got to the one year vesting cliff. This is known as being "cliffed". That way they kept their stock to themselves and would then extend the same used carrot to the next sucker.
posted by w0mbat at 1:38 PM on January 6, 2016 [5 favorites]

(By the way, know that there are timing issues which can prevent your being able to do a "sell to cover" which is the only way you can exercise your options without actually spending money first. A friend of mine is in a situation where their startup IPO'd, but then laid off my friend. She has options at a decent strike price, so theoretically they could still make some profit, but because the company is still in a lockup period, she can't sell, only exercise. So she'd have to pay to exercise the options, and then hold the stock and hope it goes up; she'd also have to pay taxes on the theoretical profit - even if the value of the stock, by the time she was able to sell it, had gone down, and showed no profit at all. People have been financially ruined this way.) Options are tricky.
posted by fingersandtoes at 1:45 PM on January 6, 2016 [1 favorite]

Since they're offering options as part of your compensation and incentive, they should give you the information you need to understand those options. Otherwise they're just saying "we'll give you 73 of some unit of value."

Personally, if a company was reluctant to answer that stuff—if I felt like I needed to "push hard" to get these basic financial parameters—I wouldn't want to work with them. I've worked for two startups, and the CEOs of both were happy to explain the finances and tell me all about the options and valuations and vesting.
posted by mbrock at 1:55 PM on January 6, 2016

Options are worthless, or at least worthless so often that they might as well be 100% worthless. Work from that perspective when negotiating and you can't go wrong.
posted by Itaxpica at 1:59 PM on January 6, 2016 [6 favorites]

Options are worthless, or at least worthless so often that they might as well be 100% worthless.

If you really believe that, you should not go work at a startup. Options bought my friend his house in Los Gatos.
posted by w0mbat at 3:10 PM on January 6, 2016

Best answer: You should go work at a startup because you like a fast paced work environment or you want to learn a ton. You should not go for the money. Restricted stock grants at a big public company will beat options at a startup 99.999% of the time. This has been written about extensively, and I've seen it play out again and again in both my own life and the lives of my friends (feel free to memail me if you want more details).

If you must try to value your options at greater than 0, the post in enn's answer is a good one.
posted by Itaxpica at 3:49 PM on January 6, 2016 [1 favorite]

Why wouldn't you be able to ask about options before you accept the job? Aren't they offering you them as part of your compensation? Not telling you about the vesting schedule etc. would be like saying "We'll pay you whatever's behind door number two."

Anyway, I agree with the gist of the linked AskMe and what folks are saying here. Stock options are effectively worthless. If it's a difference of $30k between salaries but the lower one gives you stock options, that's a bad deal -- the options are very unlikely to be worth $30k. You're better off taking the extra cash income and investing it in a IRA and sitting on it for 40 years.
posted by deathpanels at 10:28 PM on January 6, 2016 [1 favorite]

Options are worthless, or at least worthless so often that they might as well be 100% worthless.

If you really believe that, you should not go work at a startup. Options bought my friend his house in Los Gatos.


Some guy won the Powerball a weeks ago as well. Does that mean we should all dump our life savings in into the lottery?
posted by sideshow at 10:28 AM on January 7, 2016