SlideShare ist ein Scribd-Unternehmen logo
1 von 10
Downloaden Sie, um offline zu lesen
Negotiating Equity with a Start-Up
Understanding Your Investment
Shouldyouacceptasalarythatis
lessthenyourmarketvaluein
exchangeforequity?
 Understand that you are INVESTING the sum of
money you are giving up in cash compensation
 Ask yourself whether the value of the equity is likely to
exceed your yearly investment
Hypothetical
 You are making $200K/year today
 The start-up offers you $100K/year + discretionary 10%
bonus + $100K in equity
 The $100K in equity will be paid over a four-year period
after you have been employed for one year (a “one year
cliff”)
 Over those five years of your employment, you will
receive $20K in equity per year
 Does the company expect the value of the equity to
double by year two, triple by year four?
 Then you will have exchanged $100,000 in compensation
every year in exchange for $40K/year by year two and
$60K/year by year four.
 You have still not made up for your $500K investment
Willyouhitthejackpot?
 In 2019, the failure rate of startups was around 90%.
 21.5% of startups fail in the first year, 30% in the
second year, 50% in the fifth year, and 70% in their
10th year.
Butamajorinvestment
companyinvested$10
millioninthisstartup
 SoftBank reportedly invested $18.5 billion in WeWork
 The jackpot?
 WeWork posted a net loss of $1.2 billion in the third
quarter of 2019 and posted “only” a net loss of $517
million in a year later.
 WeWork laid off 6,000 employees at year-end 2019
Howthestart-upvalues
itsequity
 The company hires an independent appraiser to
provide a 409A valuation that represents the market
value of all shares of the company’s equity.
 When the company tells you the value of your stock
options, it is generally referring to that valuation.
 That valuation is not the value of the stock options to
you.
 When your options “vest” (usually after your first year of
employment) you can purchase the option at the strike
price.
 If the “strike price” is $10/share and the trading value at
the time the company is acquired or “goes public” is
$15/share, the value of the option to you is only $5/share,
not $15/share.
 Your options only have value when they are worth more
than the strike price.
Canyoucashinoptions
andselltheequitywhen
theoptions vest?
 You can exercise your options after they vest, i.e., you
can buy the vested portion of your equity
 But there is no market for the sale of the equity you
acquire unless:
 The company has been acquired;
 The company has “gone public” and its shares are now
trading on a stock exchange;
 The company has agreed to buy the shares back from you
at their then fair market value when you exit the
company before acquisition or IPO; or,
 You can find an outside purchaser
 Most such investors tend to buy stock in Series C companies
or later and that have strong revenues (more than $30M
per year).
 In addition to finding a willing buyer, you will have to seek
the company’s approval to sell pre-IPO or pre-acquisition
shares
Willthevalueofmy
equitybedilutedin
futurefundingrounds?
 Unless you have a non-dilution clause in your stock
option contract, the value of your stock may well be
lessened when the company raises additional round of
venture capital
 Of course, additional rounds of venture capital should
also raise the fair market value of your shares
 The difference can be minimal or devastating (see The
Social Network)
Aretheretax
consequences
 Yes! But you’ll need to ask your accountant
 The consequences vary whether your option is
classified as NSO (non-qualified stock options) or ISO
(incentive stock options)
Questions?

Weitere ähnliche Inhalte

Was ist angesagt?

Tax Efficent Investing
Tax Efficent InvestingTax Efficent Investing
Tax Efficent InvestingLawrence Cole
 
Stock options & early exercise 101
Stock options & early exercise 101Stock options & early exercise 101
Stock options & early exercise 101Lever Inc.
 
Startup Equity Standards - A Guide for Employees
Startup Equity Standards - A Guide for EmployeesStartup Equity Standards - A Guide for Employees
Startup Equity Standards - A Guide for EmployeesMary Russell
 
Stock Options: An Introduction
Stock Options: An IntroductionStock Options: An Introduction
Stock Options: An Introductionalexlod
 
How to Start Dividend Investing
How to Start Dividend InvestingHow to Start Dividend Investing
How to Start Dividend InvestingLisa Siva
 
Lesson 11 definitation of terms in relation to stocks
Lesson 11   definitation of terms in relation to stocksLesson 11   definitation of terms in relation to stocks
Lesson 11 definitation of terms in relation to stocksMLG College of Learning, Inc
 
Setting the Deal Athens #01 March 2015 - Terms Explained
Setting the Deal Athens #01 March 2015 - Terms ExplainedSetting the Deal Athens #01 March 2015 - Terms Explained
Setting the Deal Athens #01 March 2015 - Terms ExplainedSetting the Deal Athens
 
Exchange ratio and synergy
Exchange ratio and synergyExchange ratio and synergy
Exchange ratio and synergyAnjaliSingh748
 
ABC-Zs of TaxCharityTM-31oct2015
ABC-Zs of TaxCharityTM-31oct2015ABC-Zs of TaxCharityTM-31oct2015
ABC-Zs of TaxCharityTM-31oct2015Hans Goetze
 
Setting the Deal Athens #01 March 2015 Booklet
Setting the Deal Athens #01 March 2015 BookletSetting the Deal Athens #01 March 2015 Booklet
Setting the Deal Athens #01 March 2015 BookletSetting the Deal Athens
 
ABCs defense of capital tax charity 22sep2013
ABCs defense of capital tax charity 22sep2013ABCs defense of capital tax charity 22sep2013
ABCs defense of capital tax charity 22sep2013Hans Goetze
 
Lesson 11 definitation of terms in relation to stocks
Lesson 11   definitation of terms in relation to stocksLesson 11   definitation of terms in relation to stocks
Lesson 11 definitation of terms in relation to stocksMLG College of Learning, Inc
 

Was ist angesagt? (20)

Why People Buy Stock
Why People Buy StockWhy People Buy Stock
Why People Buy Stock
 
Dividend Yield Ratio
Dividend Yield RatioDividend Yield Ratio
Dividend Yield Ratio
 
Tax Efficent Investing
Tax Efficent InvestingTax Efficent Investing
Tax Efficent Investing
 
Dividend yield ratio
Dividend yield ratioDividend yield ratio
Dividend yield ratio
 
Stock options & early exercise 101
Stock options & early exercise 101Stock options & early exercise 101
Stock options & early exercise 101
 
Startup Equity Standards - A Guide for Employees
Startup Equity Standards - A Guide for EmployeesStartup Equity Standards - A Guide for Employees
Startup Equity Standards - A Guide for Employees
 
Stock Options: An Introduction
Stock Options: An IntroductionStock Options: An Introduction
Stock Options: An Introduction
 
How to Start Dividend Investing
How to Start Dividend InvestingHow to Start Dividend Investing
How to Start Dividend Investing
 
Investar USA
Investar USAInvestar USA
Investar USA
 
Unit 3 vocab
Unit 3 vocabUnit 3 vocab
Unit 3 vocab
 
Lesson 11 definitation of terms in relation to stocks
Lesson 11   definitation of terms in relation to stocksLesson 11   definitation of terms in relation to stocks
Lesson 11 definitation of terms in relation to stocks
 
Save
SaveSave
Save
 
Setting the Deal Athens #01 March 2015 - Terms Explained
Setting the Deal Athens #01 March 2015 - Terms ExplainedSetting the Deal Athens #01 March 2015 - Terms Explained
Setting the Deal Athens #01 March 2015 - Terms Explained
 
Exchange ratio and synergy
Exchange ratio and synergyExchange ratio and synergy
Exchange ratio and synergy
 
ABC-Zs of TaxCharityTM-31oct2015
ABC-Zs of TaxCharityTM-31oct2015ABC-Zs of TaxCharityTM-31oct2015
ABC-Zs of TaxCharityTM-31oct2015
 
Setting the Deal Athens #01 March 2015 Booklet
Setting the Deal Athens #01 March 2015 BookletSetting the Deal Athens #01 March 2015 Booklet
Setting the Deal Athens #01 March 2015 Booklet
 
Bonus share
 Bonus share Bonus share
Bonus share
 
ABCs defense of capital tax charity 22sep2013
ABCs defense of capital tax charity 22sep2013ABCs defense of capital tax charity 22sep2013
ABCs defense of capital tax charity 22sep2013
 
Lesson 11 definitation of terms in relation to stocks
Lesson 11   definitation of terms in relation to stocksLesson 11   definitation of terms in relation to stocks
Lesson 11 definitation of terms in relation to stocks
 
Bonus shares
Bonus sharesBonus shares
Bonus shares
 

Ähnlich wie Negotiating equity in start ups

Share Buybacks - What You Need To Know
Share Buybacks - What You Need To KnowShare Buybacks - What You Need To Know
Share Buybacks - What You Need To KnowSure Dividend
 
Asset classes, Investment principles (3).pptx
Asset classes, Investment principles (3).pptxAsset classes, Investment principles (3).pptx
Asset classes, Investment principles (3).pptxpallavihasandasani
 
The Importance Of Investing In Stocks
The Importance Of Investing In StocksThe Importance Of Investing In Stocks
The Importance Of Investing In StocksKimberly Williams
 
Portfolio Management Quize1
Portfolio Management Quize1Portfolio Management Quize1
Portfolio Management Quize1Erika Morris
 
valuation of Goodwill and Share
valuation of Goodwill and Sharevaluation of Goodwill and Share
valuation of Goodwill and ShareAvinash Chavan
 
Valuation of goodwill & shares with solution of problems
Valuation of goodwill & shares with solution of problemsValuation of goodwill & shares with solution of problems
Valuation of goodwill & shares with solution of problemsafukhan
 
The Payment Of Dividends And The Issue Of Shares
The Payment Of Dividends And The Issue Of SharesThe Payment Of Dividends And The Issue Of Shares
The Payment Of Dividends And The Issue Of SharesJennifer Wood
 
How to issue shares
How to issue sharesHow to issue shares
How to issue sharesVIJAY KAMBOJ
 
Guide To Understanding The Stock Market
Guide To Understanding The Stock MarketGuide To Understanding The Stock Market
Guide To Understanding The Stock MarketLakesia Wright
 
Financial accounting project of issue of shares
Financial accounting project of issue of sharesFinancial accounting project of issue of shares
Financial accounting project of issue of sharesDeepali Mhatre
 
The Impact Of A Share Repurchase Program For A Fictional...
The Impact Of A Share Repurchase Program For A Fictional...The Impact Of A Share Repurchase Program For A Fictional...
The Impact Of A Share Repurchase Program For A Fictional...Kristi Anderson
 
Bfm howti pickfund_old
Bfm howti pickfund_oldBfm howti pickfund_old
Bfm howti pickfund_oldbfmresearch
 
share and debentures
share and debenturesshare and debentures
share and debenturesakanksha91
 
share and debentures
share and debenturesshare and debentures
share and debenturesakanksha91
 
Apple Stock Price
Apple Stock PriceApple Stock Price
Apple Stock PriceConnie Ripp
 

Ähnlich wie Negotiating equity in start ups (20)

Share Buybacks - What You Need To Know
Share Buybacks - What You Need To KnowShare Buybacks - What You Need To Know
Share Buybacks - What You Need To Know
 
Investing basics
Investing basicsInvesting basics
Investing basics
 
Asset classes, Investment principles (3).pptx
Asset classes, Investment principles (3).pptxAsset classes, Investment principles (3).pptx
Asset classes, Investment principles (3).pptx
 
The Importance Of Investing In Stocks
The Importance Of Investing In StocksThe Importance Of Investing In Stocks
The Importance Of Investing In Stocks
 
Portfolio Management Quize1
Portfolio Management Quize1Portfolio Management Quize1
Portfolio Management Quize1
 
Pay Out Dividends Essay
Pay Out Dividends EssayPay Out Dividends Essay
Pay Out Dividends Essay
 
valuation of Goodwill
valuation of Goodwillvaluation of Goodwill
valuation of Goodwill
 
valuation of Goodwill and Share
valuation of Goodwill and Sharevaluation of Goodwill and Share
valuation of Goodwill and Share
 
Valuation of goodwill & shares with solution of problems
Valuation of goodwill & shares with solution of problemsValuation of goodwill & shares with solution of problems
Valuation of goodwill & shares with solution of problems
 
The Payment Of Dividends And The Issue Of Shares
The Payment Of Dividends And The Issue Of SharesThe Payment Of Dividends And The Issue Of Shares
The Payment Of Dividends And The Issue Of Shares
 
Stock Dividend
Stock DividendStock Dividend
Stock Dividend
 
How to issue shares
How to issue sharesHow to issue shares
How to issue shares
 
Guide To Understanding The Stock Market
Guide To Understanding The Stock MarketGuide To Understanding The Stock Market
Guide To Understanding The Stock Market
 
Financial accounting project of issue of shares
Financial accounting project of issue of sharesFinancial accounting project of issue of shares
Financial accounting project of issue of shares
 
The Impact Of A Share Repurchase Program For A Fictional...
The Impact Of A Share Repurchase Program For A Fictional...The Impact Of A Share Repurchase Program For A Fictional...
The Impact Of A Share Repurchase Program For A Fictional...
 
Bfm howti pickfund_old
Bfm howti pickfund_oldBfm howti pickfund_old
Bfm howti pickfund_old
 
Dividend Decision
Dividend DecisionDividend Decision
Dividend Decision
 
share and debentures
share and debenturesshare and debentures
share and debentures
 
share and debentures
share and debenturesshare and debentures
share and debentures
 
Apple Stock Price
Apple Stock PriceApple Stock Price
Apple Stock Price
 

Mehr von Victoria Pynchon

Your Brilliant Career for U.C. Davis School of Law Presentation
Your Brilliant Career for U.C. Davis School of Law PresentationYour Brilliant Career for U.C. Davis School of Law Presentation
Your Brilliant Career for U.C. Davis School of Law PresentationVictoria Pynchon
 
Mediators' List Servs and the Rating Game
Mediators' List Servs and the Rating GameMediators' List Servs and the Rating Game
Mediators' List Servs and the Rating GameVictoria Pynchon
 
How to Terminate Employees without Fear of Litigation
How to Terminate Employees without Fear of LitigationHow to Terminate Employees without Fear of Litigation
How to Terminate Employees without Fear of LitigationVictoria Pynchon
 
Negotiating and Branding Your Professional Organizing Business
Negotiating and Branding Your Professional Organizing BusinessNegotiating and Branding Your Professional Organizing Business
Negotiating and Branding Your Professional Organizing BusinessVictoria Pynchon
 
The Bias That's Bugging Your Business
The Bias That's Bugging Your BusinessThe Bias That's Bugging Your Business
The Bias That's Bugging Your BusinessVictoria Pynchon
 
Don't blame the player, blame the game; Get what you want NOW!
Don't blame the player, blame the game; Get what you want NOW!Don't blame the player, blame the game; Get what you want NOW!
Don't blame the player, blame the game; Get what you want NOW!Victoria Pynchon
 
Conversations Leading to Agreement
Conversations Leading to AgreementConversations Leading to Agreement
Conversations Leading to AgreementVictoria Pynchon
 
Dispute Resolution for Troubled Organizations
Dispute Resolution for Troubled OrganizationsDispute Resolution for Troubled Organizations
Dispute Resolution for Troubled OrganizationsVictoria Pynchon
 
Reframing Law Librarian Careers and Re-anchoring Promotion and Pay
Reframing Law Librarian Careers and Re-anchoring Promotion and PayReframing Law Librarian Careers and Re-anchoring Promotion and Pay
Reframing Law Librarian Careers and Re-anchoring Promotion and PayVictoria Pynchon
 
Project Lily Pad: Sponsorship for Women Lawyers
Project Lily Pad: Sponsorship for Women LawyersProject Lily Pad: Sponsorship for Women Lawyers
Project Lily Pad: Sponsorship for Women LawyersVictoria Pynchon
 
FAWL Negotiating with Alice in Wonderland
FAWL Negotiating with Alice in WonderlandFAWL Negotiating with Alice in Wonderland
FAWL Negotiating with Alice in WonderlandVictoria Pynchon
 
Mediating and Negotiating Gender
Mediating and Negotiating GenderMediating and Negotiating Gender
Mediating and Negotiating GenderVictoria Pynchon
 
ALA Presentation Negotiating Beyond Gender
ALA Presentation Negotiating Beyond GenderALA Presentation Negotiating Beyond Gender
ALA Presentation Negotiating Beyond GenderVictoria Pynchon
 
DRI Women Lawyers' Success Negotiation Seminar Part Three
DRI Women Lawyers' Success Negotiation Seminar Part ThreeDRI Women Lawyers' Success Negotiation Seminar Part Three
DRI Women Lawyers' Success Negotiation Seminar Part ThreeVictoria Pynchon
 
DRI Sharing Success Seminar Negotiation Part Two
DRI Sharing Success Seminar Negotiation Part TwoDRI Sharing Success Seminar Negotiation Part Two
DRI Sharing Success Seminar Negotiation Part TwoVictoria Pynchon
 
DRI Women Lawyers' Seminar Negotiation Training
DRI Women Lawyers' Seminar Negotiation TrainingDRI Women Lawyers' Seminar Negotiation Training
DRI Women Lawyers' Seminar Negotiation TrainingVictoria Pynchon
 

Mehr von Victoria Pynchon (20)

Your Brilliant Career for U.C. Davis School of Law Presentation
Your Brilliant Career for U.C. Davis School of Law PresentationYour Brilliant Career for U.C. Davis School of Law Presentation
Your Brilliant Career for U.C. Davis School of Law Presentation
 
Mediators' List Servs and the Rating Game
Mediators' List Servs and the Rating GameMediators' List Servs and the Rating Game
Mediators' List Servs and the Rating Game
 
Listservs of injustice
Listservs of injusticeListservs of injustice
Listservs of injustice
 
WITI NEGOTIATION WEBINAR
WITI NEGOTIATION WEBINARWITI NEGOTIATION WEBINAR
WITI NEGOTIATION WEBINAR
 
How to Terminate Employees without Fear of Litigation
How to Terminate Employees without Fear of LitigationHow to Terminate Employees without Fear of Litigation
How to Terminate Employees without Fear of Litigation
 
Negotiating and Branding Your Professional Organizing Business
Negotiating and Branding Your Professional Organizing BusinessNegotiating and Branding Your Professional Organizing Business
Negotiating and Branding Your Professional Organizing Business
 
The Bias That's Bugging Your Business
The Bias That's Bugging Your BusinessThe Bias That's Bugging Your Business
The Bias That's Bugging Your Business
 
Don't blame the player, blame the game; Get what you want NOW!
Don't blame the player, blame the game; Get what you want NOW!Don't blame the player, blame the game; Get what you want NOW!
Don't blame the player, blame the game; Get what you want NOW!
 
Conversations Leading to Agreement
Conversations Leading to AgreementConversations Leading to Agreement
Conversations Leading to Agreement
 
Dispute Resolution for Troubled Organizations
Dispute Resolution for Troubled OrganizationsDispute Resolution for Troubled Organizations
Dispute Resolution for Troubled Organizations
 
Self promotion
Self promotionSelf promotion
Self promotion
 
Reframing Law Librarian Careers and Re-anchoring Promotion and Pay
Reframing Law Librarian Careers and Re-anchoring Promotion and PayReframing Law Librarian Careers and Re-anchoring Promotion and Pay
Reframing Law Librarian Careers and Re-anchoring Promotion and Pay
 
Project Lily Pad: Sponsorship for Women Lawyers
Project Lily Pad: Sponsorship for Women LawyersProject Lily Pad: Sponsorship for Women Lawyers
Project Lily Pad: Sponsorship for Women Lawyers
 
FAWL Negotiating with Alice in Wonderland
FAWL Negotiating with Alice in WonderlandFAWL Negotiating with Alice in Wonderland
FAWL Negotiating with Alice in Wonderland
 
Kraft Negotiation Seminar
Kraft Negotiation SeminarKraft Negotiation Seminar
Kraft Negotiation Seminar
 
Mediating and Negotiating Gender
Mediating and Negotiating GenderMediating and Negotiating Gender
Mediating and Negotiating Gender
 
ALA Presentation Negotiating Beyond Gender
ALA Presentation Negotiating Beyond GenderALA Presentation Negotiating Beyond Gender
ALA Presentation Negotiating Beyond Gender
 
DRI Women Lawyers' Success Negotiation Seminar Part Three
DRI Women Lawyers' Success Negotiation Seminar Part ThreeDRI Women Lawyers' Success Negotiation Seminar Part Three
DRI Women Lawyers' Success Negotiation Seminar Part Three
 
DRI Sharing Success Seminar Negotiation Part Two
DRI Sharing Success Seminar Negotiation Part TwoDRI Sharing Success Seminar Negotiation Part Two
DRI Sharing Success Seminar Negotiation Part Two
 
DRI Women Lawyers' Seminar Negotiation Training
DRI Women Lawyers' Seminar Negotiation TrainingDRI Women Lawyers' Seminar Negotiation Training
DRI Women Lawyers' Seminar Negotiation Training
 

Kürzlich hochgeladen

Women_In_Automation_Introduction Session Presentation_2024.pptx
Women_In_Automation_Introduction Session Presentation_2024.pptxWomen_In_Automation_Introduction Session Presentation_2024.pptx
Women_In_Automation_Introduction Session Presentation_2024.pptxAndreeaTom
 
Blockchain_TezosDeveloperCommunitySNSCE.pdf
Blockchain_TezosDeveloperCommunitySNSCE.pdfBlockchain_TezosDeveloperCommunitySNSCE.pdf
Blockchain_TezosDeveloperCommunitySNSCE.pdfVISHNURAJSSNSCEAD
 
Audhina Nur Afifah Resume & Portofolio_2024.pdf
Audhina Nur Afifah Resume & Portofolio_2024.pdfAudhina Nur Afifah Resume & Portofolio_2024.pdf
Audhina Nur Afifah Resume & Portofolio_2024.pdfaudhinafh1
 
Personal Branding Exploration for Career
Personal Branding Exploration for CareerPersonal Branding Exploration for Career
Personal Branding Exploration for Careerwhiteheadnakiyyah
 
127. Reviewer Certificate in BP International
127. Reviewer Certificate in BP International127. Reviewer Certificate in BP International
127. Reviewer Certificate in BP InternationalManu Mitra
 
Chapter-1 IATA, UFTAA, ICAO, FAA, CAA, ATAB, Conventions
Chapter-1 IATA, UFTAA, ICAO, FAA, CAA, ATAB, ConventionsChapter-1 IATA, UFTAA, ICAO, FAA, CAA, ATAB, Conventions
Chapter-1 IATA, UFTAA, ICAO, FAA, CAA, ATAB, ConventionsMd Shaifullar Rabbi
 
kids gpaddfghtggvgghhhuuuuuhhhgggggy.pptx
kids gpaddfghtggvgghhhuuuuuhhhgggggy.pptxkids gpaddfghtggvgghhhuuuuuhhhgggggy.pptx
kids gpaddfghtggvgghhhuuuuuhhhgggggy.pptxJagrutiSononee
 
Nashon Holloway - Media/Press Kit - Priv
Nashon Holloway - Media/Press Kit - PrivNashon Holloway - Media/Press Kit - Priv
Nashon Holloway - Media/Press Kit - PrivNashonHolloway
 
Thisismycivics101Presentationforicstars.
Thisismycivics101Presentationforicstars.Thisismycivics101Presentationforicstars.
Thisismycivics101Presentationforicstars.mellis7
 
Crucial Conversation Certification India
Crucial Conversation Certification IndiaCrucial Conversation Certification India
Crucial Conversation Certification IndiaCrucial Skills
 
Globally, corrosion expenses reach $2.5 trillion yearly
Globally, corrosion expenses reach $2.5 trillion yearlyGlobally, corrosion expenses reach $2.5 trillion yearly
Globally, corrosion expenses reach $2.5 trillion yearlyReddy Kancharla
 
ASDFSDFASDFASDFASDFOUIASHDFOIASUD FOIJSADO;IFJOISADJF
ASDFSDFASDFASDFASDFOUIASHDFOIASUD FOIJSADO;IFJOISADJFASDFSDFASDFASDFASDFOUIASHDFOIASUD FOIJSADO;IFJOISADJF
ASDFSDFASDFASDFASDFOUIASHDFOIASUD FOIJSADO;IFJOISADJFJulia Kaye
 
asdfasdiofujasloidfoia nslkflsdkaf jljffs
asdfasdiofujasloidfoia nslkflsdkaf jljffsasdfasdiofujasloidfoia nslkflsdkaf jljffs
asdfasdiofujasloidfoia nslkflsdkaf jljffsJulia Kaye
 
STORY OF SUSAN & JUDY - CEREBRAL PALSY.pptx
STORY OF SUSAN & JUDY - CEREBRAL PALSY.pptxSTORY OF SUSAN & JUDY - CEREBRAL PALSY.pptx
STORY OF SUSAN & JUDY - CEREBRAL PALSY.pptxsheenam bansal
 
ALISHA SHAKYA - Decade of Short Selected WORK PORTFOLIO
ALISHA SHAKYA - Decade of Short Selected WORK PORTFOLIOALISHA SHAKYA - Decade of Short Selected WORK PORTFOLIO
ALISHA SHAKYA - Decade of Short Selected WORK PORTFOLIOAlishaShakya7
 
Full Sail projects and portfolio. edits after feedback
Full Sail projects and portfolio. edits after feedbackFull Sail projects and portfolio. edits after feedback
Full Sail projects and portfolio. edits after feedbacknkdiehl
 
FAHAD HASSAN NOOR || UCP Business School Data Analytics Head Recommended | MB...
FAHAD HASSAN NOOR || UCP Business School Data Analytics Head Recommended | MB...FAHAD HASSAN NOOR || UCP Business School Data Analytics Head Recommended | MB...
FAHAD HASSAN NOOR || UCP Business School Data Analytics Head Recommended | MB...FaHaD .H. NooR
 
reStartEvents March 28th TS/SCI & Above Employer Directory.pdf
reStartEvents March 28th TS/SCI & Above Employer Directory.pdfreStartEvents March 28th TS/SCI & Above Employer Directory.pdf
reStartEvents March 28th TS/SCI & Above Employer Directory.pdfKen Fuller
 
10 Things That Will Shape the Future of Education.pdf
10 Things That Will Shape the Future of Education.pdf10 Things That Will Shape the Future of Education.pdf
10 Things That Will Shape the Future of Education.pdfEducationView
 
Chapter-4 Introduction to Global Distributions System and Computerized Reserv...
Chapter-4 Introduction to Global Distributions System and Computerized Reserv...Chapter-4 Introduction to Global Distributions System and Computerized Reserv...
Chapter-4 Introduction to Global Distributions System and Computerized Reserv...Md Shaifullar Rabbi
 

Kürzlich hochgeladen (20)

Women_In_Automation_Introduction Session Presentation_2024.pptx
Women_In_Automation_Introduction Session Presentation_2024.pptxWomen_In_Automation_Introduction Session Presentation_2024.pptx
Women_In_Automation_Introduction Session Presentation_2024.pptx
 
Blockchain_TezosDeveloperCommunitySNSCE.pdf
Blockchain_TezosDeveloperCommunitySNSCE.pdfBlockchain_TezosDeveloperCommunitySNSCE.pdf
Blockchain_TezosDeveloperCommunitySNSCE.pdf
 
Audhina Nur Afifah Resume & Portofolio_2024.pdf
Audhina Nur Afifah Resume & Portofolio_2024.pdfAudhina Nur Afifah Resume & Portofolio_2024.pdf
Audhina Nur Afifah Resume & Portofolio_2024.pdf
 
Personal Branding Exploration for Career
Personal Branding Exploration for CareerPersonal Branding Exploration for Career
Personal Branding Exploration for Career
 
127. Reviewer Certificate in BP International
127. Reviewer Certificate in BP International127. Reviewer Certificate in BP International
127. Reviewer Certificate in BP International
 
Chapter-1 IATA, UFTAA, ICAO, FAA, CAA, ATAB, Conventions
Chapter-1 IATA, UFTAA, ICAO, FAA, CAA, ATAB, ConventionsChapter-1 IATA, UFTAA, ICAO, FAA, CAA, ATAB, Conventions
Chapter-1 IATA, UFTAA, ICAO, FAA, CAA, ATAB, Conventions
 
kids gpaddfghtggvgghhhuuuuuhhhgggggy.pptx
kids gpaddfghtggvgghhhuuuuuhhhgggggy.pptxkids gpaddfghtggvgghhhuuuuuhhhgggggy.pptx
kids gpaddfghtggvgghhhuuuuuhhhgggggy.pptx
 
Nashon Holloway - Media/Press Kit - Priv
Nashon Holloway - Media/Press Kit - PrivNashon Holloway - Media/Press Kit - Priv
Nashon Holloway - Media/Press Kit - Priv
 
Thisismycivics101Presentationforicstars.
Thisismycivics101Presentationforicstars.Thisismycivics101Presentationforicstars.
Thisismycivics101Presentationforicstars.
 
Crucial Conversation Certification India
Crucial Conversation Certification IndiaCrucial Conversation Certification India
Crucial Conversation Certification India
 
Globally, corrosion expenses reach $2.5 trillion yearly
Globally, corrosion expenses reach $2.5 trillion yearlyGlobally, corrosion expenses reach $2.5 trillion yearly
Globally, corrosion expenses reach $2.5 trillion yearly
 
ASDFSDFASDFASDFASDFOUIASHDFOIASUD FOIJSADO;IFJOISADJF
ASDFSDFASDFASDFASDFOUIASHDFOIASUD FOIJSADO;IFJOISADJFASDFSDFASDFASDFASDFOUIASHDFOIASUD FOIJSADO;IFJOISADJF
ASDFSDFASDFASDFASDFOUIASHDFOIASUD FOIJSADO;IFJOISADJF
 
asdfasdiofujasloidfoia nslkflsdkaf jljffs
asdfasdiofujasloidfoia nslkflsdkaf jljffsasdfasdiofujasloidfoia nslkflsdkaf jljffs
asdfasdiofujasloidfoia nslkflsdkaf jljffs
 
STORY OF SUSAN & JUDY - CEREBRAL PALSY.pptx
STORY OF SUSAN & JUDY - CEREBRAL PALSY.pptxSTORY OF SUSAN & JUDY - CEREBRAL PALSY.pptx
STORY OF SUSAN & JUDY - CEREBRAL PALSY.pptx
 
ALISHA SHAKYA - Decade of Short Selected WORK PORTFOLIO
ALISHA SHAKYA - Decade of Short Selected WORK PORTFOLIOALISHA SHAKYA - Decade of Short Selected WORK PORTFOLIO
ALISHA SHAKYA - Decade of Short Selected WORK PORTFOLIO
 
Full Sail projects and portfolio. edits after feedback
Full Sail projects and portfolio. edits after feedbackFull Sail projects and portfolio. edits after feedback
Full Sail projects and portfolio. edits after feedback
 
FAHAD HASSAN NOOR || UCP Business School Data Analytics Head Recommended | MB...
FAHAD HASSAN NOOR || UCP Business School Data Analytics Head Recommended | MB...FAHAD HASSAN NOOR || UCP Business School Data Analytics Head Recommended | MB...
FAHAD HASSAN NOOR || UCP Business School Data Analytics Head Recommended | MB...
 
reStartEvents March 28th TS/SCI & Above Employer Directory.pdf
reStartEvents March 28th TS/SCI & Above Employer Directory.pdfreStartEvents March 28th TS/SCI & Above Employer Directory.pdf
reStartEvents March 28th TS/SCI & Above Employer Directory.pdf
 
10 Things That Will Shape the Future of Education.pdf
10 Things That Will Shape the Future of Education.pdf10 Things That Will Shape the Future of Education.pdf
10 Things That Will Shape the Future of Education.pdf
 
Chapter-4 Introduction to Global Distributions System and Computerized Reserv...
Chapter-4 Introduction to Global Distributions System and Computerized Reserv...Chapter-4 Introduction to Global Distributions System and Computerized Reserv...
Chapter-4 Introduction to Global Distributions System and Computerized Reserv...
 

Negotiating equity in start ups

  • 1. Negotiating Equity with a Start-Up Understanding Your Investment
  • 2. Shouldyouacceptasalarythatis lessthenyourmarketvaluein exchangeforequity?  Understand that you are INVESTING the sum of money you are giving up in cash compensation  Ask yourself whether the value of the equity is likely to exceed your yearly investment
  • 3. Hypothetical  You are making $200K/year today  The start-up offers you $100K/year + discretionary 10% bonus + $100K in equity  The $100K in equity will be paid over a four-year period after you have been employed for one year (a “one year cliff”)  Over those five years of your employment, you will receive $20K in equity per year  Does the company expect the value of the equity to double by year two, triple by year four?  Then you will have exchanged $100,000 in compensation every year in exchange for $40K/year by year two and $60K/year by year four.  You have still not made up for your $500K investment
  • 4. Willyouhitthejackpot?  In 2019, the failure rate of startups was around 90%.  21.5% of startups fail in the first year, 30% in the second year, 50% in the fifth year, and 70% in their 10th year.
  • 5. Butamajorinvestment companyinvested$10 millioninthisstartup  SoftBank reportedly invested $18.5 billion in WeWork  The jackpot?  WeWork posted a net loss of $1.2 billion in the third quarter of 2019 and posted “only” a net loss of $517 million in a year later.  WeWork laid off 6,000 employees at year-end 2019
  • 6. Howthestart-upvalues itsequity  The company hires an independent appraiser to provide a 409A valuation that represents the market value of all shares of the company’s equity.  When the company tells you the value of your stock options, it is generally referring to that valuation.  That valuation is not the value of the stock options to you.  When your options “vest” (usually after your first year of employment) you can purchase the option at the strike price.  If the “strike price” is $10/share and the trading value at the time the company is acquired or “goes public” is $15/share, the value of the option to you is only $5/share, not $15/share.  Your options only have value when they are worth more than the strike price.
  • 7. Canyoucashinoptions andselltheequitywhen theoptions vest?  You can exercise your options after they vest, i.e., you can buy the vested portion of your equity  But there is no market for the sale of the equity you acquire unless:  The company has been acquired;  The company has “gone public” and its shares are now trading on a stock exchange;  The company has agreed to buy the shares back from you at their then fair market value when you exit the company before acquisition or IPO; or,  You can find an outside purchaser  Most such investors tend to buy stock in Series C companies or later and that have strong revenues (more than $30M per year).  In addition to finding a willing buyer, you will have to seek the company’s approval to sell pre-IPO or pre-acquisition shares
  • 8. Willthevalueofmy equitybedilutedin futurefundingrounds?  Unless you have a non-dilution clause in your stock option contract, the value of your stock may well be lessened when the company raises additional round of venture capital  Of course, additional rounds of venture capital should also raise the fair market value of your shares  The difference can be minimal or devastating (see The Social Network)
  • 9. Aretheretax consequences  Yes! But you’ll need to ask your accountant  The consequences vary whether your option is classified as NSO (non-qualified stock options) or ISO (incentive stock options)