Joining a "middle" stage co where you are offered expensive options is the worst, since you've missed out on the early upside and you take on a ton of risk due to cost of exercising.
Joining a startup that's overwhelmed with demand for its product - particularly if you can see the usefulness of this product yourself - is usually a good move even at 0.1%. Joining a startup that's still iterating on the product (and maybe has a couple customers but just lost a big one and they have to work really hard to sign the next one) may be a bad move even at 10%, because there's a good chance that equity will be worthless.
The article doesn't really mention it, but a great question to ask any potential employer is "What are your biggest problems right now?" Scaling is a great problem to have, because it indicates lots of demand and has solutions that are relatively well-known in the industry. Customer service is a pretty good one - it shows that the company has customers who care enough to want service, and if the CEO is willing to admit this is a problem it'll probably get fixed. Hiring, code quality, internationalization, testing, service outages, brain-dead tech stack, anything that's specific to the problem domain itself - these are also pretty decent problems to have as long as the CEO is attentive to them. Unhappy customers or staff turnover is a caution - you should dig into this further to see why they're leaving, and if it looks like the problem is solvable. Same with financing - many hot companies run low on cash at various points, and you only need to make sure the company isn't going to die, but if the company loses more money than it makes on each transaction that's a huge red flag. The biggest problems (particularly for an engineer) are anything to do with sales, marketing, partnerships, or "growing the business", because the root cause of this is often that customers don't really want what you're making, and nothing short of a major pivot fixes that.
As a side bonus, asking this question is often a big positive signal for the hiring manager, because it shows you're serious about solving problems rather than just collecting a paycheck.
Joining a BigCo can give $1 million (above startup salary) in 5 years with a very high probability.
The original grant plus all the refreshers would have originally amounted to ~$8M (I was within the first 3 employees), but joining early means that at each and every single round you'll be massively diluted (20%+, and there are many of those from a seed round up to a series D/E), and this is without counting the liquidation preference (which in my case was a good 1X non-participating) and other stuff (e.g. emitting new shares for the newly hired fancy CEO that will help us sell the company, refreshers will have a higher cost basis, ...).
If you join early, expect your relative slice of the pie to shrink by roughly an order of magnitude. In the best case.
nothing is "very very risky" unless you are taking your entire salary in equity. if you are making a competitive base I think you'll survive any misstep choosing the wrong early stage co in the long run.
Another startup offered me 0.1% and a mediocre salary. I had to put the phone on mute while I laughed.
(The startup that offered me the 0.1% didn't have either of these qualities.)
If there’s one thing I’ve learned after two decades in the industry it’s if you care about earning good money, you can either 1) gamble on the 0.01% chance that you picked the right startup or 2) get on to the Senior Executive track as early as possible. Then it doesn’t matter what company you join because they all pay their executives f-you money.
(I, in my infinite wisdom, traded it down to 25 bps for 15 k$/yr more in salary. Whoops)
Can you narrow 1000 companies down to 20 that have a better than average chance of success? Sure you can! And you should, and you shouldn’t treat the options as worthless.
All it would take i think is for companies to start offering larger stakes to employees, with the other two factors remaining the same, and the math might make it worthwhile. But they won’t do it.
> RSUs [...] evaporate if you leave or are fired from the company. You can not purchase them like stock options.
RSUs do not evaporate. Vested RSUs are yours outright. You cannot purchase them because they are already "purchased".
> So you have to stick around until the company becomes public.
In both cases, the RSU or the stock underlying an option, it is equally worthless until there is a liquidity event.
> Oh they also expire in five years
Companies don't even offer RSUs until they are close to being public. Once you reach a certain threshold of stockholders, you have to report financials. Since this is typically undesirable for private companies, they don't want to jump the gun on issuing RSUs instead of options. If the 5 years does pass without IPO, companies re-issue new grants. (Please: name one company that has actually expired RSUs and what happened)
OTOH most stock option grants expire in 90 days upon termination. This is a real expiry, and actual money out of your pocket (and tax liability) to exercies them, and usually a difficult decision. There are some places doing 10-year expiry but those are still the exception.
> The odds of stock options working out is low, but for RSU's they are much, much lower.
It's the opposite. For a private company, RSUs are much much closer to money in the bank than are options.
Typically companies that offer RSUs have achieved scale (your Ubers and Stripes of the world), so yes the upside is lower, but the "pros" are that it's more obvious to you what the value of the grants are and you don't have any cost to exercise them like with options. These companies know that because they are less liquid vs public cos that candidates are right to discount them, which is why they usually offer more than what you'd otherwise receive from a Google or FB.
When they vest, you either get (1) actual shares, (2) the cash equivalent (I think that option may only be available for publicly traded stock), or (3) at your option, retain the RSU for conversion at a later date.
Unconverted deferred vested RSUs might expire (and vested stock options definitely expire), but—unlike options—there’s almost never a reason not to convert an RSU (deferring for later conversion may make sense, but it's essentially always better to convert before expiration.)
At any rate, it is fairly common to get RSUs in a late-stage private company. Uber was giving out RSUs 4 years ago, I believe, and has reportedly filed for a confidential IPO as of last month.