hi Team. I'd like to understand your experience with pre ipo RSU packages. as I cannot know how much they are worth, what is your experience here?
How to value Pre IPO stock options
19
Pachacuti
Politicker
10
They call me Daddy, Sales Daddy
My experience is that that pre-ipo options are rarely worth the paper they are printed on.
braintank
Politicker
4
Enterprise Account Executive
The real answer
CuriousFox
WR Officer
1
🦊
hashtag preach
NoToBANT
Catalyst
4
Senior Account Executive
They are completely Useless.
I’ve only ever met ONE person ever, who made any money from stock working at a start up.
It’s sad, but it’s even, often the case, that founders themselves make no money or very little money when their own company IPOs or gets sold
I’ve only ever met ONE person ever, who made any money from stock working at a start up.
It’s sad, but it’s even, often the case, that founders themselves make no money or very little money when their own company IPOs or gets sold
Sunbunny31
Arsonist
4
Sr Sales Executive 🐰
Raises hand. I did. Wasn’t earth shattering, but we got acquired rather than going public, so I got paid out for my holdings.
Revenue_Rambo
Politicker
4
Bad MFer
Check the company’s valuation against fundraising rounds. Investors are going to be first to be paid out. What you need to be looking for are “down rounds” where valuation dipped. In those cases the company shelled out larger numbers of shares for equal or lower value. When this happens you as an employee are pretty much screwed.
3
Founding BDR
Wouldn’t factor them into your comp plan whatsoever as they’re usually worthless.
SgtAE
WR Officer
3
AE
you can't. I thought my shares would be worth like 3-5 grand, walked away with a nice 30k
strike price was 17.80, sold for like 50 something
i did not go in expecting to win on them tbh
strike price was 17.80, sold for like 50 something
i did not go in expecting to win on them tbh
Heisenbum
Big Shot
1
Senior Account Executive
Did the company IPO or get acquired?
SgtAE
WR Officer
2
AE
IPO man, was GitLab. Was a real fun ride, company sent us all big swag boxes with northface gear, stickers etc. Team seemed generally happy all around
Heisenbum
Big Shot
0
Senior Account Executive
Im jealous, Ive worked at two companies, including my current one where we thought that was in the near future but it never happened.
SgtAE
WR Officer
2
AE
Honestly lighting strike moment. I joined 10 .months out from ipo. The hiring manager was like yeah we're gonna ipo same old story like the others etc. On my first week big slack message from the CRO all hands in deck IPO in September, overnight entire company messaging changed from open source community backed tool to enterprise focused market leading tool . Timed it perfectly because options and shares diluted Hella quick after that
braintank
Politicker
2
Enterprise Account Executive
They have a strike price and fair market value, just ask
Justatitle
Tycoon
2
Account Executive
Strike price, from there, all that matters is if they go public and if you stay with the org to see that through.
schwight_drute
Catalyst
2
SaaS Sales
You need to know the strike price they were issued to you at, as well as the valuation/investors involved.
Valuation of shares has to be considered against the current valuation of the company, so Series A stock (eg. valued at $25m) is significantly greater than that of say a later staged company (eg valued at $1-2bn) so although a Series D may offer $120k…
In this scenario, the valuation is 40-80x higher, which is what the stock’s valuation is based on, and so the potential for the Series D stock is a fraction of the Series A stock.
Valuation of shares has to be considered against the current valuation of the company, so Series A stock (eg. valued at $25m) is significantly greater than that of say a later staged company (eg valued at $1-2bn) so although a Series D may offer $120k…
In this scenario, the valuation is 40-80x higher, which is what the stock’s valuation is based on, and so the potential for the Series D stock is a fraction of the Series A stock.
poweredbycaffeine
WR Lieutenant
2
☕️
The strike price is what you’ll pay to purchase the option, and will be the baseline to calculate gains based on the price per share at IPO or acquisition. That said, they are worth $0 if nothing happens.
SgtAE
WR Officer
1
AE
also just to add here, it is EXCEPTIONALLY hard to sell the shares if you are still working at the company, there's blackout periods during the IPO, during every earnings call, there's like 2-3 week windows you can sell but it's complicated af. I ended up selling mine once I quit because I was free from the bureaucracy and could sell how i please
pirate
Big Shot
0
Account Executive
You can keep an eye on at what price most IPOs end, most are like 20 ish dollars
braintank
Politicker
5
Enterprise Account Executive
That's not how IPOs work
unclespacejam
Politicker
3
ur dad’s brother
Lmfao
pirate
Big Shot
1
Account Executive
oh 😂
CuriousFox
WR Officer
3
🦊
lMYFUCIINASSOFF #THANKYOUVERYMUCH
TheDude
Politicker
0
Partnerships Lead
Do you have the cap sheet? How much has the company raised so far (if any) and at what value? Were there any covenants to the funding?
Without seeing your contract, worst and most likely case is PE cash out once they've made 3x their initial investment and your units go to zero due to said covenants. Totally depends on valuation when you go public
Do you get to keep these if you quit?
Note: this is not financial advice.
Without seeing your contract, worst and most likely case is PE cash out once they've made 3x their initial investment and your units go to zero due to said covenants. Totally depends on valuation when you go public
Do you get to keep these if you quit?
Note: this is not financial advice.
SoftCoreWareAsAService
Executive
0
Sales Manager
They hold no value unless someone is buying. M&A or Public Market.
JustGonnaSendIt
Politicker
0
Burn Towns, Get Money
They are monopoly money until there is a liquidity event.
I have had great success with Pre-IPO ISO's, but they are a very high risk investment.
RSU's are less risky as you don't have to front cash to get the shares.
Count them as nothing until they are something. Of course the founders / owners / investors will try to convince you otherwise.
I have had great success with Pre-IPO ISO's, but they are a very high risk investment.
RSU's are less risky as you don't have to front cash to get the shares.
Count them as nothing until they are something. Of course the founders / owners / investors will try to convince you otherwise.
DataCorrupter
Politicker
0
Account Executive
Understand/ask how many shares are outstanding (total shares issued by the company). Take your shares and the shares outstanding and divide, giving you a percentage (1,000 RSUs of 100,000 outstanding shares is 1%, for example).
Take that percentage and make some educated guesses, like how much your company may get acquired for. A 50m acquisition may net you 500k (1%), a 500m acquisition may net you 5m, and so on.
But don't get too excited, these are purely hypothetical until it becomes real life. As others have said, more often than not it's worth nothing because companies fail or get bought out for pennies. In those cases, you get nothing. This is how I get a sense of value for my RSUs, IF everything goes right, can it help me buy a car, buy a house, retire?
Take that percentage and make some educated guesses, like how much your company may get acquired for. A 50m acquisition may net you 500k (1%), a 500m acquisition may net you 5m, and so on.
But don't get too excited, these are purely hypothetical until it becomes real life. As others have said, more often than not it's worth nothing because companies fail or get bought out for pennies. In those cases, you get nothing. This is how I get a sense of value for my RSUs, IF everything goes right, can it help me buy a car, buy a house, retire?
countingmyinterest
Politicker
0
Account Executive
$0. Actually negative cause you have to pay to exercise them
MyAnonymousName
Opinionated
0
Sales Leader
Do not factor them into your comp plan unless you are a VP+ and get 50k+ shares.
I just made money for the first time in 4 attempts with a decent acquisition and it was $10k after 3 years.
I mean I will take it but hardly worth much thought when negotiating.
I just made money for the first time in 4 attempts with a decent acquisition and it was $10k after 3 years.
I mean I will take it but hardly worth much thought when negotiating.
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