Ask HN: Stock options as a contractor? | Hacker News Reader

Ask HN: Stock options as a contractor?

5 pointsmonkey265 comments

Hey there,

I guy I once co-founded a company with (which we firesold for a big of profit) has approached me to help with a new startup he is doing, but instead of self bootstrapping like we did last time, he's got some solid venture capital lined up. Under no circumstances do I ever want to work as an employee for this guy again, however he wants me more in a consulting role to make sure the correct technologies are used from the get-go and some quick prototypes (something I'm good at at this domain).

As the backing seems solid, I'm pretty positive I can get a good rate on the consulting, but as this guy also seems to have an ass full of horseshoes, I'm wondering if consultants/contractors are ever offered options in a fresh startup? I'm just trying to flesh out my knowledge before we finalize my rate.

Thanks.

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Yes, they are offered stock options, and it turns out to be of zero worth, much more so than even usual employee options (which are rarely worth anything themselves).

Employees have to be thrown some crumbs so they don't quit en mass and go to the competitor. But who'll watch out for you? At the next equity restructuring (which happens with every investment, loan or liquidity event), your equity will be chipped down, and it will be worth exactly 0 by the time the company is worth anything, if it ever is.

Either take actual shares at a huge discount (though, depending on how far along this guy is with, might be a tax problem for you - unless you plan to put it on your tax return at fair value, you need to speak with a CPA first), or actual cash money.

And, to echo tarr11 below: First, figure out your market rate first; that will give you an idea of the opportunity cost, without which you can't evaluate any offer.

An ass full of horseshoes? What does that mean?

Finalize your rate first at market. Then, if you want to take his horseshoes, you'll have a cash value for them at least.

You've never had a horse shoe stuck up your ass? Me neither. It means you're lucky.

Don't take equity from someone you would not be willing to work for. It is not worth anything. The only thing worth considering (and it is still not a good idea) is convertible debt where you have the option to cash out on the next financing.

Ass full of horseshoes = Lucky, right?

If a startup is giving away equity to consultants, then it's equity not worth having. Conversely, if you are a consultant and you are impressed with a startup sufficiently enough that you want their equity, they will probably not give it to you.

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