Were you offered stock options in lieu of cash?

If you're joining a startup, you will be offered equity with rosy predictions of future profitability, and you will be asked to give up some percentage of your market value based on high expectations for Facebook or Google levels of success. Rare is the company that hasn't told my consulting clients that they are the "google of . . .  [big data, pharmaceuticals, bio-tech, genomics or, increasingly rarely, social media]." 

Listen, I would never counsel risk aversion, just risk caution. This might, indeed, be your only chance to get in on the ground floor of something big. Just understand that equity does not equal cash.

I’ve linked here a very simple explanation of the value of pre-IPO and pre-acquisition stock options. It’s not meant to be comprehensive but rather a starting point for your due diligence investigations.

Here is a slide deck I put together on this topic:

Negotiating equity in start ups from Victoria Pynchon

Opinions, of course, vary, and will depend upon how realistic are a startup's projections of going public or sale to third parties. I like this answer from Quora, particularly in a market that is currently shy of overvaluing startups, resulting in increasingly lengthy pre-IPO operations. Here's the money quote from Quora:

"Valu[ing] pre-IPO stock options [is] either quite challenging or quite easy."

I like to make it easy. For the purposes of compensation, I consider the value of employee stock options in a pre-IPO company to be $0. Why? Because of the long chain of uncertainty involved with options on (probably common) shares of a private company. 

Treat equity for what it is. A lottery ticket in a constantly changing business environment, littered with the corpses of glittering startup opportunities.

Before we go: In June, we're gifting an hour-long consultation to a woman who earns less than $50k per year. Thank you to everyone who has submitted either their own name or another person's name to this month drawing. This is the last week to do so for June. As with previous months, we will randomly pick a name toward the end of the month and email everyone who responds to us.