important It’s important to ask questions when you get an offer that includes any kind of equity. In addition to helping you learn the facts about the equity offer, the process of discussing these details can help you get a sense of the company’s transparency and responsiveness. Here are a few questions you should consider asking, especially if you’re evaluating an offer from a startup or another private company:
What did the last round value the company at? (That is, what is the preferred share price times the total outstanding shares?)
What is the most recent 409A valuation? When was it done, and will it be done again soon?
This information will help you consider the benefits and drawbacks of possible exercise scenarios.
important If you’re considering working for a startup, there are further questions to ask in order to assess the state of the company’s business and its plans. Before or when you’re getting an offer is the right time to do this. Startups are understandably careful about sharing financial information, so you may not get full answers to all of these, but you should at least ask:
How much money has the company raised (including in how many rounds, and when)?
What did the last round value the company at?
What is the aggregate liquidation preference on top of the preferred stock? (This will tell you how much the company needs to sell for before the common stock—your equity—is worth something in an exit.)
Will the company likely raise more capital soon?
How long will the company’s current funding last? (This will likely be given at the current burn rate, or how quickly a company is spending its funding, so will likely not include calculations for things like future employee salaries.)
What is the hiring plan? (How many people over what time frame?)
What is the revenue now, if any? What are the revenue goals/projections?
Where do you see this company in 1 year and 5 years, in terms of revenue, number of employees, and market position?
Compensation data is highly situational. What an employee receives in equity, cash, and benefits depends on the role they’re filling, the sector they work in, where they and the company are located, and the possible value that specific individual may bring to the company.
Any compensation data out there is hard to come by. Companies often pay for this data from vendors, but it’s usually not available to candidates.
For startups, a variety of data is easier to come by. We give some overview here of early-stage Silicon Valley tech startups; many of these numbers are not representative of companies of different kinds across the country: