Understand Your Comp (What You Are Worth)
People get emotional about compensation because it touches notions of fairness and self-worth.
But emotion can produce bad decisions. We see people choose a job based on a few thousand dollars, when they might burn years in the wrong role or miss out on a huge equity win.
First think about your personal situation and risk profile. Did you just leave a low salary / high equity startup that didn’t work out and now need to rebuild some savings? Can you keep your expense burn low and take a bet on options at a company you’re passionate about? And know that when you negotiate, valuing equity is a positive signal to a company because it shows you are aligned with their performance and mission.
What are your options worth?
Options are a whole different ballgame. Equity is a critical part of your compensation, but is complex and often not well understood.
How do I know what my options are worth?
JUST KNOWING THE NUMBER OF OPTIONS IS NOT ENOUGH.
You need to understand:
- Strike price
- Shares outstanding
- Valuations – find out most recent and model 3 scenarios for exits – low, medium, and “home run”
- Other terms like liquidation preferences. They can drive the nightmare stories you hear where companies get sold but employees walk away with nothing
To help you, we created a downloadable Excel sheet that guides you through the key variables and calculates the value of your options.
It’s a great tool to use before you accept an offer and keep it updated after you join.
Our calculator helps with the basic mechanics around strike prices, valuation, and vesting, but there are a number of other topics to consider, including funding rounds, dilutions, and types of shares, so here are links to resources that cover some of these topics: