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I’m being offered a position at a startup as an early hire. Does this deal sound good?

(this post is a feed post from my comments on reddit)

r/startups

focus on if the salary is worthwhile and if the work is good and will help you with your next step.

the equity only becomes a factor upon a liquidity event such as a merger, sale or IPO, so you need to consider if any of those outcomes are likely. then you need to consider how much additional funding rounds there will be, 2% dilutes quickly as more and bigger players come in.

next you also need to think about the debt investors who get paid first, then the preferred stock investors – only after these two groups are paid in full, does anyone else get paid.

and preferred stock guys get additional upsides, like they could build in a clause that means irrespective of the outcome they get paid 2x their principal investment before anyone else gets paid. – its very real that a founder can be left with (exageration) nothing as a result.

now, even after all that, companies can play dirty tricks.

i’m sharing my own first had trauma now –

in my first company i had 5% – 1 year earn out on merger, i got to 9 months and ended up quitting because the environment was toxic, as a result, i got zero. the buying company was deliberately making life unbearable so employees would quit and leave their shares on the table. only the founder and 1 employee got their shares paid up.

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in another company, i had 3%, first, the founder negotiated a merger were all of our equity which we had fully vested (except hers) was converted into share options of the new company, meaning we had to re-vest everything that we had already earned. then because the share options arent shares, once we earned them, we would have to pay for them to own them… then i was laid off, i ended up with less than a fraction of my originals equity, in the form of share options that i didt buy, meaning, again, i got zilch.

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moral of the story, unless theres a clear exit on the horizon and you have some knowledge and influence on the cap table, treat equity as nice to have ‘maybe-bonus’ if you have no loyalties to the company and do see a long term life there, take bigger salary or bonus instead.

I’m being offered a position at a startup as an early hire. Does this deal sound good?
byu/lildaemon instartups

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