How Negotiating Your Stock Options Can Change Your Financial Future

How Negotiating Your Stock Options
Can Change Your Financial Future?

 

When it comes to negotiating job offers, most people think about landing a higher salary or more vacation days. But the majority of people don’t think about negotiating their stock options. In fact, according to a recent Twitter poll, 65% of people said they’ve accepted an offer without even understanding how their stock options work.

A moderately higher salary and more time off might make your life easier in the short term, which is important. But negotiating your stock options, even by a little bit, can have a drastic impact on your future and long-term financial stability. At EquityBee, we pulled data from real tech startup employees to illustrate how much of a difference negotiating stock options can make.

What we learned brought into sharp focus the difference that every small change truly makes. In fact, even a minor 5% raise might be worth $200k in the long term when the company goes public.

 

 

 

The following examples are true (anonymized)
cases that make this tangible:

 

An Airbnb employee joined in 2016. The value of their employee stock options package at time of offer was a little over $56k. The value at the IPO’s closing day was $3.85M. If the employee would have negotiated their package by a 10% increase; it would have increased by $380k (enough to buy a house!) for a total worth of $4.23M. A small 1% increase would still have upped the value by $38k, enough to pay for all four years of college at an in-state university.

A Doordash employee joined the company in 2018. The value of their stock options package was about $9k at signing. By the closing day of the company’s IPO, it was worth $1.1M. If they had negotiated their package by 10%; their package would have been worth $1.2M, a $100k increase. A modest 2% increase would add $20k, enough to buy a large boat. 

A Sumo Logic employee joined in 2014, and the value of their employee stock options package was just over $50k. At the IPO’s closing, it was worth $850k. A 10% increase would have increased the worth by $90k for a total of $940k. If the employee had negotiated by a smaller 3%, they would have still increased the value by $27k, enough to buy a new car.

By not negotiating your stock options, even by a marginal 1%, you’re potentially leaving money on the table that could come in handy down the line. There are a lot of reasons you might not negotiate your stock options: you could be nervous, or you might be overwhelmed by all the jargon. 

These are barriers to negotiating that you can, and should, overcome. Read up on evaluating and negotiating employee stock options on our blog, find tactics for negotiating on the internet, and make a plan for what you’ll say. Feel free to sit down with HR and have them talk you through your stock option package, explaining what everything means and how it works. That’s a completely valid request.

 

EquityBee helps employees get the money they need to exercise their stock options by connecting them to investors who want to invest in their companies. We do this by executing SOFAs (Simple Options Financing Agreements). Entering into this agreement with an investor will allow him or her a percentage claim to a liquidation event, with no guarantee of such an event, and is subject to the terms of your company options agreement. Securities offered through North Capital Private Securities Corporation, member FINRA/SIPC.

Leave a Reply

Your email address will not be published. Required fields are marked *