Equity stake in a startup?
The details of the equity share currently are not provided and employees were advised that those details would be provided after a few months relocation but the point is the decision of relocation is kinda based on the details of the equity share?
What type of legal standard equity share agreement should an employee request in above the scenario? Plus what type of equity employee share makes sense here in the above scenario e.g. common stock? Any guidance here would be much appreciated. Need to arrive at a re-location decision soon.
3 attorney answers
That is truly impossible for an outsider to know. There are factors but those would all depend ultimately on the current value of the company and its expected future and the degree to which the securities have protection against dilution by the issuance of other and subsequent securities. In short, without providing you with details before you decide to move you are buying a "pig in a poke" .....
First, no one on Avvo has enough information to tell you how much equity is appropriate (and there is no objective standard for the same, in any event).
Second, management's "we will give you details later" approach is, at best, inconsiderate and should bear on your decision accordingly.
However, that approach does lead, nicely, to my final point, one that I make to anyone who is considering joining a startup:
- Assume that any shares (or options) that you receive will have zero value.
- Accordingly, you should accept the position only if you will be satisfied with the work you will be doing and the salary and benefits you will receive, irrespective of equity.
Answers and exchanges on Avvo do not constitute legal advice and do not establish an attorney-client relationship.
First, a grant of equity is always somewhat a roll of the dice. No one can be certain how the company will do. I suggest that you start by assessing the pros and cons of moving to the Bay Area. Are there enough plusses in making that move independent of the equity, that you would consider doing it. Unless the equity is enough to make your eyes pop out, if the move is unattractive, don't make it just for the equity. Could you miss out and suddenly being wealthy? Sure. But you could also see the company fail and suddenly find yourself jobless.
As to the amount of equity, that depends typically on your position, the length of service, the number of executives, the number of other employees, to name a few. Have a look at whether you would get stock appreciation rights (SARs) or common stock or options on common stock. As an incentive for the move, I would hope the grant would be common stock.