Another strange job offer (equity in business on offer)
Discussion
M511 said:
I received another odd job offer today, not quite the same as this one, but close!
At least in this instance I know whats on offer, but its less than I am on now, however there is equity in the business on offer. Has anyone ever been offered equity in a business? what's the best way to negotiate this offer? and is it worth it?
That depends.At least in this instance I know whats on offer, but its less than I am on now, however there is equity in the business on offer. Has anyone ever been offered equity in a business? what's the best way to negotiate this offer? and is it worth it?
Taking equity is a good thing - but what sort of equity is it? Is it 'options' for example? Options that can only be exercised whilst you are an employee? At what price? Are they growth options with a hurdle?
If it is not options and shares, then you would be taxed on the grant.
What is the company worth? Have you run their accounts off to take a look?
There are so many variables.
M511 said:
I haven't spoken with the recruiter yet because I didn't want to walk into that question blindly.
Not sure what type of equity it is yet
Seems like a start up company so may be risky in terms of company worth.
Well there's not much risk if you are being given shares.... the only risk, I guess, is that you'd be trading a lower salary. So it's 'sweat equity'.Not sure what type of equity it is yet
Seems like a start up company so may be risky in terms of company worth.
You have to make a judgement call on whether the business might be worth something in a few years time.
Shares or options?
ecs said:
They do this in a lot of tech jobs. It can be a good thing, but it's usually a bad thing because they're paying you a lower cash salary and supplementing it with Disney dollars which you can't access and are quite likely to be worthless.
Wot he said, standard in startup. To make the investor cash last longer by reducing salaries.Most companies won't be google and make their early employees millionaires. The stock may rise, or the company may close in a few years after it runs out of cash.
Weight it up and see if right for you, and if you believe in the product and company and think it can succeed.
M511 said:
Seems like a start up company so may be risky in terms of company worth.
Right, well then, be very very careful.Equity should be earned or purchased; never given.
Things to ask / watch out for:
1. If it's a small start up, it's most likely that you will end up with a liability equal to the equity level so if you get 10% and it goes tits up, you 'may' be liable for 10% of total liabilities. You need to establish how precisely they are defining equity.
2. How much control / input will you have in the management of the company?
3. Is it financially worth it? Is the cash value of the equity representative of a proper valuation of the company?
4. What protection will you have? It's the easiest thing in the world to be generous with percentages but very different when those percentages represent actual money. Imagine the scenario...two years in and the owners get approached by a buyer. They then see that you, having done nothing other than your work, stands to get a big payout which they object to. They then put in share calls asking shareholders to invest in the company. You can't afford to make these payments or choose not to. Your equity then reduces. This is repeated until you have effectively no equity whatsoever at which point the company is sold. No equity. No payout and no job.
It's not a binary issue; there are many connotations and the opportunity may well be worth going for but in my experience, a small company offering equity in lieu of salary - even partially - smells of an underfunded enterprise that's not well run. It doesn't bode well.
Tricky to advise, how much equity? what is the business plan like? Will you be a director and able to influence the commercial decisions?
I have equity in the business I manage, but only a small amount as my employer is a major shareholder in the JV. in 2012 it was a strtup with no assests and no cashflow, only a pipleline emerging. Aside from me and my employer there are 3 individuals with equity. They each took £800k in dividends last year and will take £1m each this year.
For them its worth it, for me its worth it but not life changing. It all depends on a big range of variables
I have equity in the business I manage, but only a small amount as my employer is a major shareholder in the JV. in 2012 it was a strtup with no assests and no cashflow, only a pipleline emerging. Aside from me and my employer there are 3 individuals with equity. They each took £800k in dividends last year and will take £1m each this year.
For them its worth it, for me its worth it but not life changing. It all depends on a big range of variables
Just remember that 40% of new businesses fail within five years and that their options are worthless. There will be terms in the contract which will mean you'll relinquish any ownership if you leave and you'll only be able to access them if and when the company goes public (refer to the first sentence).
Don't believe the hype!
Don't believe the hype!
ecs said:
Just remember that 40% of new businesses fail within five years and that their options are worthless. There will be terms in the contract which will mean you'll relinquish any ownership if you leave and you'll only be able to access them if and when the company goes public (refer to the first sentence).
Don't believe the hype!
If the company exits, you will benefit - it doesn't need to go public. Equally, it might merge giving the recipient shares in the new entity.Don't believe the hype!
All probably unlikely.
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