Startup Equity Transparency

01 May, 2022

When I first moved to Colorado, I started working at a startup of about 50 people. I was unemployed and didn't have many career options at the age of 23. I was offered an entry-level sales role with a 40k salary ¹ (30 guaranteed/10 commission) and 1,000 options (4 year vesting schedule/ 1 year cliff). A couple of years later, the company was acquired by a much larger company for 120M. The startup had about 100 employees at the time of acquisition. I walked away with a juicy 5,000 which turned into about 3,000 after taxes. Rumor had it the Founder/CEO walked away with 10M.

I'm not resentful about the outcome because I know most startups fail and we were fortunate to have a successful exit. I'm grateful for the opportunity to break into tech/saas and I made some lifelong friends. The acquisition also opened up great opportunities to advance and earn more in my career. But I have always kept that result in my mind when considering new startup opportunities... and it's a major reason I haven't returned.

Frequently you see job postings at pre-IPO companies with less competitive salaries and a "perk" of equity. And I'm sure some see dollar signs and think about giants like Facebook and Google where early employees made out well. The reality for most is very different. While we know 90% (or more) of startups fail, the truth is of the other 10% that have successful exits, the payouts for those involved can vary drastically. Experiencing this first-hand has made me question: "Is one person in the company worth 100x another?"

Sure the founder created something from nothing and they took on a lot of risk in the process, but are they really 100x more valuable (or in my case more, 2000x).

My advice to anyone who wants to work at a startup or is evaluating a current offer is to ask for equity transparency. It's unlikely they will give you a detailed breakdown, but at the very least they should provide the numbers so that you can do your own calculations. Here are some resources I've found to help:

• Ask for the most recent 409A
• Options Calculator (source)
• Offer Options Calculator

Wouldn't it be nice to see something like this:

Would that affect your decision?

#career #equity #startups