How to do you value equity when leaving a big company for a startup?

I am leaving a large fast moving company and have restricted stock units (RSU’s). I am talking to a startup (closed  Series A) and would have a very small equity stake. I am trying to figure out how to value the equity (salary is the same).

  • You don’t. Startups are a crapshoot. They can fly or die. Your existing company’s stock isn’t probably going to change much. You just need to act on gut.

    My friend waited to join LinkedIn specifically because of a situation like this and now although he’s doing well is kicking himself in the butt.

  • A startup that has already closed an A round is generally not going to grant you much by way of equity. Certainly less than 1%, more than likely less than .025%, and possibly even half of that.

    Are they going to sell for $100 million dollars? Odds aren’t good. But if it does, then you’d be pocketing $250K (of course, assuming there is no B or C or D rounds that dilute you by 15-30% each time).

    So what is the value of the RSU’s you’re leaving behind? What is the stability factor? Assuming it would take 3-5 years for an exit from the startup, could you earn anything close to $250K in bonuses? Also, that job is a bird in the hand, possibly stable. Do you have a boss looking out for you that will continue to develop you and help you get promotions? Who will be your mentor at the new place?

    These are all the questions you need to consider.

    Generally speaking, you leave people to go work with other people that you believe more in. Or you want to be in a completely different industry or work on completely different challenges.

    If you had a cousin that had just started a new company, and he/she had invented something that would soon be printing money left and right, and you were going to be getting 5% and a real leadership role… everything is different. In this case, you’re just going to be along for the ride and the upside needs to be taken very lightly versus all of the other factors.

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