Stock option for a new dot com company, how much should one get ?

Hi, I have a question, does anyone know the percentage one should ask for, when the company you are working for offers you some stock option?

Would 10-20% be too much or too little ? Or is there a formula we can calculate with ?

Thanks in advance

 

Are you asking what percentage of your total income you should ask for in stock options?

 

I am not sure, but an offer was made to share part of the profit made if the company was sold of to another company for loads of money. So I was wondering what is the percentage one should ask for.

 

Well I think the percentage you should ask for would be completely relative to your involvment with the company... How much did you put into building that company, getting it where it is today? How much time and/or money did you put into it? How much did everyone else? Maybe try to think about everyone's share in building the company, and then go from there.

 

Thanks for the tips man, totally new at this.

 

Even in a small company, you would get less than 1% of the shares. Directors get 1%-10%, depending on the size of the company.

 

It totally depends on the size and status of the company when you join it. If you're very early (ie. one of the original 5) you should get a very large chunk (probably at least 5%).

If you are coming-in later after things are set-up and running, it's less risky and you'll get a lesser amount. I'd consider 1-2% to be good from what I've heard. As an interesting aside, a friend of mind skipped an opportunity to join a company that was willing to give him a 1% stake because he had kids in college and didn't want to take the risk. In less than 2 years, the company was sold for $750,000,000. Thus, considering the $7.5M he missed-out on, he says that he kicks himself in the ass every morning that alarm clock goes off. He's now at a startup in San Diego, hoping for a second chance.

Anyway, if the company is much larger and established, you'll probably be lucky to get 10,000 shares or so per grant, with maybe 2-3X that upon hire as an incentive to join.

Mike
www.micsaund.com

 

I'm a former officer of a public company and there is no rule. Sharing a part of the profit is different than stock options - so not exactly sure what you are talking about? If the company isn't publically traded, a small percentage can have very limited value and liquidity. Even in a public company, the shares might not be registered which means you have restrictions on selling them. In a private company, you could be in a situation where you would get paid whatever the controling interest felt like paying you. Salary payouts can also assure that the company never makes a profit. I would take a much smaller portion of the gross sale than a larger percentage of the profit. Many things can be done accounting wise to show very little or no profit.

It also depends on your role in the company. Being a key employee is a lot different than a regular worker. In either case, I would let them make the offer and then you can decide if it is acceptable to you. The less vital you are to the operation of the business, the more likely they will tell you to take a hike if you request more.

Sometimes offers to "share profits" are nothing more than a carrot to get someone to accept a low salary from a company that has limited funds. If that is the case, make you sure are realistic about the chances of the company being sold for a large profit. Sometimes small startups prove successful, but the odds are very much against that happening.