Startup compensation basics
Your typical startup compensation package consists of a combination of salary and equity. While it’s easy to understand cash salary, the equity portion can be difficult to assess, particularly for someone new to tech or startups. Startup equity often comes in the form of a stock options grant, a fixed number of shares that the employee will be able to buy (also called “exercise”) at a pre-determined price (the “strike price”) after meeting certain vesting conditions.
Standard offer letters don’t tell the whole story
At a minimum, employees need the number of shares already issued (i.e. the “fully diluted shares”) to compute the percentage of the company they can eventually own once they exercise their options. Early-stage startups that don’t provide that number are at best negligent, at worst misleading. Without this number, it’s nearly impossible to evaluate your stake in the company (10,000 options out of 1M shares is a greater stake offer than 10,000 options out of 100M shares).
Startup Equity Calculator
Note: this is a generic version of the calculator and in no way reflects data specific to Front.
Edit the fields to add your own offer numbers and company information (i.e. # of stock options, fully diluted shares, etc.). You can also play with the dilution and exit values to get a better understanding of how various scenarios would affect the value of your package.
We hope this tool helps candidates make better informed decisions (and gives them a glimpse of the they can expect to see at Front ). !