stupidusername
stupidusername
Stealth

How does equity works for founding engineer?

I got a offer where i will get the equity. Does people really make money when company get sold considering in my case if i get 1% equity.

Also how does it work? Suppose when we start valuation of the company is 1 cr so my part will be 1L. Now in the next round suppose the valuation is 10cr then does it increase my equity to 10L or it dilute my % of equity?

Suppose if the company is sold at 100cr, do i really get 1 cr? Kindly let me know how it works and really people make money or not if it get sold.

14mo ago
AITookMyJob
AITookMyJob
Startup14mo

It depends. What is your YOE and base compensation? I've been in a similar situation and can provide some inputs.

stupidusername
stupidusername
Stealth14mo

I have 9+ years of experience as fullstack developer. They will be providing 24lpa salary which i feel less so want to know what is ideal equity i should ask for. Let me know your thoughts

AITookMyJob
AITookMyJob
Startup14mo

For 9+ YOE and 24 LPA, you should atleast get 1.5% equity IMO. 1% is the standard but your experience is significant and comp is way below market for fullstack.

Also, 1% just doesn't translate to 1cr out of 100cr. Your equity (and even the founders equity) will be diluted in subsequent rounds of funding. So it will become 0.75 then 0.5 then 0.25 etc. But valuation should increase at a higher rate than rate of dilution for you to make big bucks.

Namkeen
Namkeen
Stealth14mo

Don’t go for ESOP. 99.9% chance, startup fail or don’t reach to Series D where actually buyback happens and that would take at least next 5 years. At 8 YoE, I’d suggest play safe and ask for more base salary.

stupidusername
stupidusername
Stealth14mo

Got it thanks

Swanwhite
Swanwhite
Freshworks14mo

If you are planning to startup in the future, you may risk joining a startup. Otherwise, you will be better off joining a big company which pays as per the market.

dlfcybercity
dlfcybercity
Stealth14mo

ofcourse dude you own 1% of the company but not sure the liquidation terms

stupidusername
stupidusername
Stealth14mo

Yes, i want to know about liquidity terms mainly and also if people really make money or its just another way to fool employees

SomeSloth43
SomeSloth43
Athenahealth14mo

Please check if you have got ESOPs or actual sweat equity.

Whenever they raise next , typically there could be 20% dilution.

Also this will be real only if there's a buyback or IPO - long journey :p

stupidusername
stupidusername
Stealth14mo

Its sweat equity only. when dilution will happen do they payout the money or adjust with the equity to match up the price?

They have sold their previous startup so kind of bullish on the sell part instead of buyback or ipo

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