> Then you should offer them (imo) $750k in options vesting over 3 years. That's in now money, as in that should be whatever the investors in your last round paid for that same stock.
Except those investors got preferred stock whereas you are getting common stock which has less value. Thus, they are offering you the option to pay 750k for stock that is actually worth more like 600k losing you money. Now those options do have some value because of the expiration time and the fact that the price can rise but option pricing is complicated.
I highly recommend everyone considering startups to read up on the options greeks and go look at prices for deep out of the money (OTM) calls on public companies because that is effectively what startups are offering you and you can see what the public markets value options like that as.
Yeah, but their investment is a lump sum, while you can get out at any time. I do get what you mean, I'm just setting a sort of baseline standard, that you're off by 15% on way or the other doesn't really matter, it's about that you're getting an offer that's in the ballpark of being fair.
I don't think that the option greeks are very relevant, especially not in public companies as they have very different dynamics.
Except those investors got preferred stock whereas you are getting common stock which has less value. Thus, they are offering you the option to pay 750k for stock that is actually worth more like 600k losing you money. Now those options do have some value because of the expiration time and the fact that the price can rise but option pricing is complicated.
I highly recommend everyone considering startups to read up on the options greeks and go look at prices for deep out of the money (OTM) calls on public companies because that is effectively what startups are offering you and you can see what the public markets value options like that as.