HACKER Q&A
📣 el_benhameen

What questions do you ask when evaluating an offer with options?


I’m trying to understand how to evaluate offers that include options grants, which I’ve never done before. I’m starting to get a handle on what pieces of data are useful in evaluating their value, but I don’t know what’s common and tactful to ask and what’s generally off-limits. I assume shares outstanding is a pretty common question, but I’m not sure about e.g. info on liquidation preference, purchase price, funding round values, etc. So: what questions do you ask a startup when evaluating their offers?

  👤 soheil Accepted Answer ✓
1. What is the strike price? (the price you need to pay to purchase your shares)

2. What is the latest valuation of the company? (the price the company is worth now and how many times you expect this number to be multiplied at IPO time is roughly equivalent to how many times your shares will increase in value)

3. If they tell you anything about preferred shares worth, ignore that. Your shares are common stock and not nearly worth as much as preferred. Yours are also first to be forfeited in event of a liquidation. That's ok but just know the difference.

4. Is their exit strategy is to sell or IPO? (you almost always will prefer IPO)

5. When is an optimistic IPO date when you can sell your shares? (there is alsot a lock out period, usually 6 months to 1 year)

👤 brudgers
The rule of thumb for an early stage company is $0.

To me, the read is to determine if the founders are the sort of people who see making you rich as a form of success at best or are at least ok with making you rich.

That’s what matters in the outlying case where the options wind up having significant value.