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stocks and startups
World as Myth
a breezy way to annoy serious peopleRegistered User regular
a breezy way to annoy serious peopleRegistered User regular
I've just started working as a designer for a startup on an insane timeline -- their last designer vanished to fiji a month before they planned to beta launch and now I have about four weeks to design a vast majority of an extremely complex site. they understand that this is a stressful environment and have offered me a couple of bonuses if we meet this deadline: cash is a big part of it, but they've also offered me a chunk of stock in the company.
they've already told me what the stock is worth (not much), but they've also told me what it's "projected" to be worth in five years (a fuckton). I've already accepted the bonus offer, so if I can meet the deadline, then the stock is mine. (big if.)
my big question is -- what the hell are these projections based on, and how accurate are they? I know zilch about stocks. I realize it's only actually if we get purchased that I'll see any return on them, but is there any reasonable way I can find out on what metrics this estimate is based? should I be busting my ass 80 hours a week on this or is the projection process mostly bullshit?
they've already told me what the stock is worth (not much), but they've also told me what it's "projected" to be worth in five years (a fuckton). I've already accepted the bonus offer, so if I can meet the deadline, then the stock is mine. (big if.)
my big question is -- what the hell are these projections based on, and how accurate are they? I know zilch about stocks. I realize it's only actually if we get purchased that I'll see any return on them, but is there any reasonable way I can find out on what metrics this estimate is based? should I be busting my ass 80 hours a week on this or is the projection process mostly bullshit?
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Take it for what it is, a gamble. You should be busting your ass because they will hate you for fucking them if you can't finish in time.
I assume the bonus options are either A) $texas in cash or
So the prudent thing would be to take the stocks and consider the $kansas bonus to be enough of an incentive to bust ass.
e: Oh, you already took the stocks... there go those ass implants...
What's more, stock generally follows typical patterns that are similar to currency -- if you issue (print) extra, you devalue the rest of it. If you sell your stock to someone else, they have it and you don't, but you were paid the current price.
So you're getting stock from somewhere -- either the owners, the company (unissued stock), or they're printing more. Issuing more will devalue it, of course, but otherwise you can assume that it is at the same price as it is currently.
The short of it is that you should value the stock at the current price, and assume that it will go up. If you are promised 100 shares of stock at $2/share, you should think that you're getting $200 cash. The fact that the price could change is irrelevant to the deal. If it's a good deal at the current price, then it's a good deal.
Honestly, the projection is probably mostly bullshit, but that doesn't mean that the stock isn't or won't be valuable. How long has the company been around? How much is their stock worth now? How much has it been worth in the past? Is this major big-time project likely to pay off in the long run?
To be honest, when you're talking about working in the tech industry, this is how you get rich. You get in on the beginnings of a small company, get some stock/stock options, and if they hit it big, you maybe walk away a millionaire. If they don't, you just walk away with your paycheck, and there's nothing wrong with that.
Personally, I'd say it's worth busting your ass for.
In other words, work for your salary like everyone else. Think of the stock options as a potentially nice payoff down the line, but nothing more than that - potenetial. That money could very well disappear entirely. As long as you don't behave as if it is "already yours" or already at a set value (i.e., you don't spend it before you have it), then you'll be fine.
Since this is a start-up, I'm going to assume that it's a privately-held company. In which case, you'll probably see the stock value jump up significantly if - IF - the company goes public. And you could possibly make even more if - IF - the company gets bought out by a larger company. So selling at either of those two junctures would probably be your best bet, followed by re-investment in a more diversified portfolio.
This happens more than you think (it's essentially the business model for any tech startup), but is by no means a guarantee. New business fail something like 90% of the time.
So yeah, long story short - work for your pay, and live off of your pay. Ignore the options until it becomes time to sell, if ever.
Are the private or public company? If public, it'd be easier to research them for yourself.
Also, like other said; what are they giving you? Stock? Stock options? Make sure you know the limitations, some companies won't let you sale for 5 years or need to wait till their vested, etc.
What other employment options do you have? Are they paying and treating you well?
I won't put much faith in the stocks, but if they are there take them. If you want to gamble, then take them over cash. If you don't want the risk; take the cash.
From the companies point of view, it's a lot cheaper for them to give you stock then to give you cash.
As to valuations, there are a bunch of valuation models out there for equities like CAPM, APT, etc... but as someone who has worked at private equity fund as analyst I can honestly say the most important questions for VCs are is it a good business idea and who are management? Why hasn't someone done it before?
Tangent: I remember reading the prospectus for the Lord of the Rings musical and thinking, yes this would be the most lucrative investment ever according to your projections, that is if anyone wanted to watch this 3 hour+ abortion. It really came to down to "do you know anyone who would watch this pile of shit?" and no one could answer that and the people who did invest in it lost their capital.
anyway, to clarify: I have already accepted the offer. there was no choice between cash or stocks; it was a lots of cash + lots of stock opportunity, so that wasn't an issue.
the reason I said I'm trying to figure out whether to bust my ass on this is that they've officially said they can't afford for me to work more than 40 hours a week. and I'm starting to seriously doubt that 40 hours a week is going to be enough to make this deadline. so I have to decide whether I should be working unpaid overtime on it or not, when I'm already commuting 3-4 hours roundtrip three times a week to be here.
the offer states "25,000 shares of stock to be vested going forward", whatever that means. it's not a publicly traded company yet, and there are no angel investors -- it's been funded entirely by friends and family, and only now are they making presentations to affiliates. somebody's been blowing sunshine up their asses because this is a highly optimistic group of people. I'm no stranger to startups; I've worked with three or four of them before who had huge problems getting angels to invest and eventually went under, but that isn't a problem here. their chief financial advisor is the former CFO of drupal, and he's totally gung-ho for it.
I'm wholly curious about the projection process, I'm not even worried about selling the stocks right now or anything like that. just wondering if anybody knew any statistics around projected company values vs. reality 5 years later or whatever.
Seeing as how they aren't public yet but are offering you stock, you might want to actually hire a financial adviser slash lawyer to make sure you won't get fucked if/when they do an IPO.
Projections are usually higher than reality because people buy on projections and sell on the reality.
we also talk about other random shit and clown upon each other
If you think about it, though, the chances of your company issuing an IPO where it hits $10/share or more are waaaaaayyyyyyyy better than the chances of you winning the lottery, and that would be a shitload of money. It also sounds like you're pretty confident in the company, so if it were me, I'd almost certainly go for it, especially if they're tossing in a cash bonus along with that.
Any chance you can get some of the work done while you're commuting? Like, pulling out the laptop on the ferry or whatever?
haha, ok, well if you don't finish in time because you didn't bust your ass working on this, then I'm looking forward to hearing how it goes when you say to your boss "oh jeez, I thought this was a bonus assignment. You mean this was actually important??"
we also talk about other random shit and clown upon each other
There's also the fact that people who are convinced they're going to make crazy money don't tend to vanish to Fiji.
You seem to have a good idea how nasty the work schedule is going to be, and you've listened to the people at the company give you the 'Koolaid Pitch'. If you think the job is possible and you can embrace the pain of startup schedules/lack of personal life for the next month, this could be an interesting professional experience with a big potential upside. If it doesn't seem possible, just be prepared for some very unrealistic expectations.
yeah, I figure it's a no-brainer. it's cash any way you slice it, plus maybe a little surprise a few years from now. I'm gathering from these replies that there's really no science to these projections and I should just treat it as a very stressfully-acquired scratch-off ticket.
and sadly, no -- there's no ferry involved, it's just up in edmonds. a short drive, but a hella long bus commute from the CD. and the king county metro system has for some reason yet to implement the wifi-on-buses feature.
it's actually all design work, which is a little tough with a touchpad and a turbulent bus. I wish.
Have you ever had a job before? Do you have any idea how these things work? If they wanted her to do something that was completely reasonable and easy to achieve, they'd tell her to do it. They pay her to work there, so they would just say "hey, you, yeah do this thing by this date."
But in this situation, there are a million roadblocks that could occur, everyone on the team needs to be working in perfect sync, and absolutely nothing major can go wrong for them to meet this deadline. They can't require it of them, because they know if would be ridiculous. But they're hopeful, so they want to give the employees something to be more hopeful about as well, so they offer a bonus.
In short, you're an idiot. Also, why are you just hanging around H/A going into threads that cover a topic you clearly no absolutely nothing about, with your aim purely to act like as big a dick as possible?
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Well, that's cute, but considering I work doing advertising and occasional web design...
Ya see, when a company is paid by a client to do something, generally they need to get it done by a certain date, or else they never work with you again, and depending on the contract, don't pay you. The client doesn't care if there are roadblocks because your company was the one that accepted the job and said they could do it in time. The work has now been passed to the OP, who needs to get it done, or else the company takes a hit. That is the reason it is important to finish work by it's deadline.
And not to be rude, but excuses don't really mean a whole lot for this sort of thing. Perhaps you've had more experience where you said you'd deliver something by a difficult date and then everything was fine when you didn't?
Stay on topic.
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