Open guide to equity compensation

Which means the job offer still includes stock options, but during the job offer call we don’t talk up the future value of the stock options. We don’t create any expectation that the options will be worth anything.

Upside from a founder perspective is we end up giving away less equity than we otherwise might. Downside from a founder perspective is you need up increase cash compensation to close the gap in some cases, where you might otherwise talk up the value of options.

Main upside for the employee is they don’t need to worry too much about stock options intricacies because they don’t view them as a primary aspect of their compensation.

In my experience, almost everyone prefers cash over startup stock options. And from an employee perspective, it’s almost always the right decision to place very little value ($0) on the stock option component of your offer. The vast majority of cases stock options end up worthless.

My experience has been a little different. We had a lot of people demanding both very high cash comp and then demanding very high equity packages on top.

Giving people a sliding scale option did put some of the control back in their hands, but it also produced an analysis paralysis for some where they couldn’t decide what to pick.

> And from an employee perspective, it’s almost always the right decision to place very little value ($0) on the stock option component of your offer. The vast majority of cases stock options end up worthless.

Much of this is due to startups failing. Every random “startup” trying to pay people with options because the founders have no hope of success inflates this statistic.

However another driver of this statistic is the extremely short exercise window upon quitting. People may work somewhere for 1-3 years but the company could be 5-10 years away from acquisition. Employees have to give the company money at time of quitting to get any equity, which few want to do.

I know the common wisdom, but I also know that there are a couple local technology centered private Slack groups in my area where people will eagerly try to evaluate and possibly buy your options for local startups. They don’t buy everything, obviously, but there is demand for the few cases where contracts allow transfer of the resulting equity.