Esops strike price?
Hi all, I recently received an offer from a startup. They have included esops in that but the strike price will be the current price. Is that a common practice? I though the esops granted have a strike price of 0 or very close to that. If i take them at current price then I only make money from the next upwards valuation only. Need your advice Viners!
ericcartmanchan
Stealth
7 months ago
@Itachi777 take the job if you can moonlight on the side to make up for the comp. Moonlighting isn't bad, instead the future. With leaner teams being the norm and no-code, marketing automations, ai copywriting etc all the cash crunched startups will just need a smart thinking Person to do the job part time. Freelancing will be the future. Prepare for it while still ina job.
Itachi777
Stealth
7 months ago
I agree with you about moonlighting. If a company does not stick to just 1npaying customer, they should not expect employees to also stick to just one paying customer/company . But this job is 6 days working. So I might not get enough time
Ask for a discount on the current strike price. And get that in writing. While the founder might not be able to give you the ESOPs at no cost - he might be open for offering a discount..:)
Qwerty2398
Stealth
7 months ago
Don't take it. That ESOP at current price will possibly never see any money. There is no visibility over then terms with the current investors.
Any company that generously give esops is worth shit
Itachi777
Stealth
7 months ago
I mentioned the same to the HR. I want a certain amount of fixed pay. If they want to give 0 esops, that is also fine with me. But fixed part is not coming down
ericcartmanchan
Stealth
7 months ago
Strike price not being close to nothing or 1 dollar per share at most is - not so good ESOP policy.
Also what's the period after leaving the org can you could exercise the options? This is a key factor and good policy has the period more than 5 years.
You can take the call on how much ESOP to negotiate based on your understanding of business, market, competition and conviction on leadership to hit that long lottery of IPO event.
P.s. at the last scaleup I worked at, had colleagues converting their retention bonus to 4x value in ESOP and regretting the decision a year later. In retrospect, the inputs I mentioned above was a good evaluation to decide (irrespective of outcome that we will never know).
Itachi777
Stealth
7 months ago
I get your point. I had a call with the founder today and he was trying to convince me to give up more of my fixed part in turn for esops. This is after they are already offering 10% less fixed pay then what I had in my previous job( currently in between jobs and doing external consulting). This is a series A startup btw. I am only interested in the role (strategy and ops) and personally would prefer an all cash deal. Esops very very rarely materialise into something valuable
ericcartmanchan
Stealth
7 months ago
So this is just standard negotiation and you know where you stand.
Personally would only take more esops if I have greater influence role/scope wise to show for in the worst case.
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Not common but not unheard of. The best companies typically have strike prices close to zero. Unless you feel the company's valuation will go to the moon, it's not worth it.
Strike price is the money you pay to convert your stock options to actual stocks.
It should be minimum as possible
