It’s very common for start and scale ups to offer share/ stock options (equity) as part of a compensation package. But there’s a lot of misunderstanding around how options work and how you should think about their value.
Here’s a quick summary:
- Make sure you can manage on your salary alone.
- See future upside as a low probability event, so a nice surprise. They may not be worth anything in the long run, and even then you may not be able to get any benefit.
- Work out what they are going to be worth in different scenarios, e.g. an exit at £10m, £200m and £1bn. Your employer should help. If the value is likely to be low then it’s best to ignore them.
- If you’re deciding between job offers, compare the value of the offers and consider your risk appetite. Are you OK with the potential upside of a start up? Or do you want/need more certainty?