How do I determine the value of low cash payment, stock shares, and crypto-currency as compensation?

Question

I am a junior developer (pretty much fresh out of school) and just received an offer from a friend of a friend who runs a startup (which is about a year old). I don't really understand the terms of the offer because they deal with cryptocurrency (they're a startup that works with cryptocurrency) and shares. I was hoping someone here could explain the terms to me:

From the email :

Cash: 500
Shares: 1000
gFire (Cryptocurrency): 100000

Cash and Shares would be issued alternately in increments of 250 contingent on completing milestones.

This project must be done within 6 weeks with an additional 2 weeks for testing and revision. We are open to negotiation, however if you are fine with this we would draft up a formal contract for you to sign.

I don't know how shares or cryptocurrency works, and $500 for the full 8 weeks seems really low so I wonder if the shares/cryptocurrency make up for the low pay or if he meant it was $500 paid biweekly or something.

EDIT:

What I am confused on.

1. Cash: Is that $500 overall for the 6 weeks or does he mean that it is $500 each week or biweekly?
2. Shares: 1000 shares out of what total number of shares? What percentage of the company is this?
3. How much money is that amount of cryptocurrency worth in real dollars?

Answer 1

This is not a job offer. This is an eight-week project. $500, for eight weeks of work? 320 hours (if 40 hours a week) means $1.56 an hour. C'mon, now. Really?

I did a Google search for "gFire cryptocurrency". Nothing. Maybe this is something the company is creating to try and distribute. You might have better luck selling sand at the beach.

As for the shares... shares in a company with no value == no value. Run away, fast!

Answer 2

If the offer were presented to me I would see it as:

Upon completion of 6 milestones over the next 6 weeks you will be paid alternately 250 in cash, 250 stocks, with the extra milestone being paid in stock.

In addition the completion of the project you will recieve 100k gFire BitCoins.

Chances are those gFire coins are currently really low value(I would expect the 100k to be around $100 just a guess though). That does not mean that they will always be meaningless, nor does it mean they will ever have value. And even if they have a high value right now that does not mean that they will still have that value when they are disbursed to you, or that you will even be able to sell them in 2 months when you would receive them.

If this is something you are considering make sure you get it all in a written contract, that your shares would survive any bankruptcy proceedings, and include non transferable ownership share of the product being developed. A bad practice I have seen and suffered from is complete the project, company sells the rights to the project to a side company for nothing, declare bankruptcy with the original company that the devs have shares in, profit from all the work they did on the potential of the shares.

People do get rich and profit from these sorts of opportunities... but most of them are busts. And the majority of the ones that succeed are not the retire at 25 type of success more like making a couple hundred thousand. So get a lawyer to review everything if you go forward, assume you are never going to get a dime and are just doing it for the experience, and the lottery ticket that are the shares.

Answer 3

Without knowing the currency type. USD, EURO and so on. The offer seams very low and a little strange. There is no reason to pay in crypto-currency and it is very volatile.

If you don't know exactly what crypto-currency is, think of Bitcoin. It is not actual money that you can hold but it can be trade for real cash. I would avoid it however as its is not traceable and really should not be a form of payment from any company.

As for the shares, that could mean anything from pinnies a share to a lot more. You really need to research the company and find out how much the stocks are worth before accepting an offer like this.

This kind of offer is risky at best. I think you need to take a traditional role (like a 9 to 5) and down the road you will have a better grasp on contract work like this offer.

Answer 4

A couple of things about this type of compensation stand out to me, and are worth pointing out:

Cash and Shares would be issued alternately in increments of 250 contingent on completing milestones.

When I read this, it sounds like they're saying you might be paid during one period with Cash, and the next period with Shares, and only if you've met certain mile-stones. Does this mean if you don't meet your milestones, you're not getting paid?

I wonder if the shares/cryptocurrency make up for the low pay?

This depends on the value of the cryptocurrency and shares.

Let me give you something to think about - Say at one point you own 1,000,000 shares of this company, and maybe even 1,000,000 units of the crypto currency.

Regardless of their 'value', for you to realize that value, you must sell those shares, and sell that crypto currency and/or trade it for the currency of your choosing.

If you can't off-load all 1,000,000 shares / currency units, the amount you can't sell therefore has no value.

I like to generalize something's value as "Whatever someone's willing to pay for it, at any given point in time."

If you can't sell those shares / currency right now, they have no current value, but if they're new, there's the prospect that they might have value in the future. It's up to you whether or not you're willing to take this risk in trusting that the value of these items will increase over time.

Answer 5

Great answers so far but I want to add my thoughts to it.

The stocks are worthless unless they have some value to your understanding or can actually be traded right away, you must really believe in a startup in order to accept stock values as payments, even then you're just gambling.

I've once done a contracting job where I received 50% pay and 50% in the worth in stocks but that's because I was happy with the 50% pay at that time and the company was of a type that I'd like to buy stocks anyway but I'd never have done it had I not understood what I was essentially investing in.

I'd definitely not accept a currency that hasn't proven itself or I don't understand. Stick to cash & only accept stocks that you understand. Accepting a virtual currency will definitely be okay in the future and there's not that much of a risk in accepting seasoned currencies like bitcoin but you want to ask yourself what kind of a business is handling their money in that manner, that's rare for today's market.

As previously pointed out by others, this is a contracting offer. Make sure you're authorized by your current employer to do the job. Some contracts will forbid you to work for others, even contracting. You obviously don't have to worry about that if you don't have a job but this is not a job offer as it says right now.