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When evaluating a stock option offer at privately-held start-up company, what questions re. the options plan the employer should be able to answer? What is really a private information that cannot be disclosed and what is just a trick to avoid disclosing the information that could help to evaluate the offer?

EDIT: the offer includes cliff, vesting schedule, number of options given, strike price.

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    Please explain the downvote
    – Asahi
    Apr 17, 2014 at 21:50

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You need to know the total number of shares, or the percentage of the company that your options represent, the option price or current value of the company and the vesting.

This doesn't stop you being ripped off in the future, there are so many ways of being ripped off in share options that you just factor that into the same risk that of the company suceeding.

But if the employer doesn't state what proportion the options represent, the price and the vesting then they are either stupid or crooked.

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  • Any chance that these numbers are "private" information which cannot be disclosed by the employer?
    – Asahi
    Apr 18, 2014 at 6:15
  • I understand that. What I am asking is whether there is a reason for them not to disclose (other then keep me uninformed).
    – Asahi
    Apr 18, 2014 at 18:19
  • @Asahi - not a legitimate one if you are under NDA. They would have to tell you as soon as you are hired, at which point you would just quit.
    – NobodySpecial
    Apr 18, 2014 at 18:33
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    @Asahi - No, the information would not generally be private. In general, when a company wants to issue shares they have to make a filing with the relevant corporate governing agency (and the filing will include the relevant numbers). The filing becomes a matter of public record. Your mileage may vary depending upon location, but I can't personally think of any place where this is not the case.
    – aroth
    Apr 19, 2014 at 0:20
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I would make sure you know the following when trying to understand the value of the options:

  • Total Fully Diluted shares outstanding;
  • Price of last Preferred Round;
  • Strike Price of the Options (often this will be the 409a valuation of the common stock). I would ask them if they get an independent 409a valuation;
  • The company's policy for option refresh. Some companies will refresh only when you are finished vesting, others will refresh every two years etc. Will be helpful as you think about the equity possibilities for the job.
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I was in this position recently with a startup that I had applied to work at. I enquired about the options and they were happy to offer all the info I wanted. In short they made me sign some NDA or something like that and they then send me a HUGE packet of info. It included everything I could have ever asked, it was supposedly prepared for some of the investors that held big steaks in the startup but it had all the data I was looking for none the less. Some companies may not be as transparent as this but I would avoid places that try to keep this stuff under the rug.

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  • Thanks. Where is the company located?
    – Asahi
    Apr 18, 2014 at 18:10

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