In interviewing for some companies that are private, I’ve gotten some that include stock options as a benefit. How would that be beneficial if the company is not publicly traded? I’m no trader but would like to know for when I’m weighing different opportunities.

I think that matters, if this company (although private) has plans to become publicly traded, or get acquired by a publicly traded company.

Equity can be very complicated, but here’s a resource you can dive into to understand how it works and how to determine value: https://www.holloway.com/g/equity-compensation/

Some things to think about:

  1. Ask them what the # of outstanding shares are, this will help you determine your % in the company
  2. Ask if they have an exit strategy or how they think about the company growth and value in the short and long term. This will help you understand the timeline for if/when there may be an exit (there may never be as a heads up so that is always a possibility)
  3. Make sure you understand the strike price (how much it would cost to purchase the options once vested) and the potential valuation (you can also ask about this – many startups have models that they use to determine their valuation based off of current funding, business models, growth plans, etc)
  4. Ask your network how they feel about the company’s product. Get a sense for the market, what’s out there, how the company you’re interviewing with compares. If they seem to have a lot of backing, it’s a unique product, and the growth plan seems solid your equity may be worth something big in the future. Also keep in mind that many startups fail :slight_smile:

The good news is that typically (not always) you do not need to decide to buy your options until you leave the company, which typically they give you 90 days to decide on (sometimes shorter, sometimes longer). So you do not need to decide to purchase your options until that point typically.

Hope this helps!

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Also – I realized I didn’t directly answer your question – in terms of it being beneficial to you now, it’s not. In terms of it being beneficial to you years down the road, it can be VERY lucrative (or a bust). So equity isn’t something to completely ignore in your offer, but at the same time if you are in financial duress/have immediate compensation needs you may want to pivot towards asking for more salary. Also, some early stage companies offer a tradeoff in salary and equity…so if you’ve already tried to negotiate on one or the other and they won’t budge, you could ask if you can trade off one for the other.

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Thank you for your responses! For this particular company (Epic), they advertise never wanting to go public so as to stay independent. They are also already a huge company. From this my thought is that buying stock is a way for employees to stay literally invested in the continued growth of the company. I also misphrased it as stock options when I meant that there are stock buying opportunities later on. Does my thought sound accurate?

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Have the same question as above @Adam. If there are no known plans for the company to go public, does that mean that eventually you may end up with nothing at all? Or can I still sell it back?

For companies that are pretty clear that they don’t want to go public, the next likely avenue for an exit is an acquisition, where another company would buy Epic (and therefore your shares). Other less likely but possible options:

  • Epic could buy your shares back from you at a higher price (typically done before an exit scenario like an IPO or acquisition)
  • You could sell your shares to another person/investor (requires approval from the company which they probably wouldn’t do)

But yes in general if a company is pretty firm on not going public, it’s best to ask your recruiter what, if any potential plans there are for an exit (or for you to see the value in the shares). They may have other insight into future plans for the company.

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