The Most Common Mistake Startup Employees Make When Negotiating A New Job Offer

By Oren Barzilai

An Airbnb employee joined the company in 2016 as an engineer. The value of their employee stock options package while joining the company was a little over $56,000. The value at the IPO’s closing price was approximately $3.85 million. If the employee would have negotiated their package by only a 10 percent increase, their package, upon the IPO, would be worth approximately $4.23 million — a $380,000 increase.

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Employee stock options are a complicated matter. I have been in the startup sphere for more than 15 years and have seen numerous colleagues and my own employees negotiating $500 salary increases, while not negotiating their employee stock options, which can result in a life-changing event.

Startup employees are the real startup builders. They are the real force that drives the startup forward. One of the best ways for them to enjoy the fruits of their labor and get what they truly deserve lies in startup employee stock options packages.

EquityBee is the startup employee stock options funding solution who has funded the exercising of hundreds of startup employees stock option packages. The case studies below were developed using data collected from a small sample of recent IPOs. Some employees who exercised their employee stock options became millionaires (or almost millionaires) during recent IPOs.

So why don’t startup employees pay more attention to the importance of their options package upon joining a company?

Case studies

• A Palantir employee joined in 2010. The value of their employee stock options package while joining the company was a little more than $60,000. The value at the IPO’s closing price was about $1.15 million. If the employee would have negotiated their package by only a 10 percent increase, their package, upon the IPO, would be worth $1.26 million — a $110,000 increase.
• A DoorDash employee joined in 2018. The value of their employee stock options package while joining the company was a little more than $100,000. The value at the IPO’s closing price was about $1.1 million. If the employee would have negotiated their package by only a 10 percent increase, their package, upon the IPO, would be worth $1.2 million, or a $100,000 increase.
• A Sumo Logic employee joined in 2014 as a senior manager. The value of their employee stock options package while joining the company was a little more than $50,000. The value at the IPO’s closing price was about $850,000. If the employee would have negotiated their package by only a 10 percent increase, their package, upon the IPO, would be worth $940,000 — a $90,000 increase.

Employee stock options are opaque and can be complicated. It is very hard to understand what is being offered, and it’s not straightforward to compare between two competing offers, as it may feel like comparing apples to pears.

But for those employees who join a company at a very early stage without knowing whether the startup they joined may one day IPO or have a successful exit, negotiating their stock options may be worthwhile (in the same way you negotiate your salary), because they already chose to invest their working time in that company. For the lucky ones who joined early with a startup that may IPO one day, the stock options package can become a life-changing tool.

A startup employee’s yearly salary is a lot easier to grasp and is much more tangible. But the negotiation of an employee stock options package may result in a few yearly wages making their way to your bank account on one bright day.

Oren Barzilai is the CEO and co-founder of EquityBee, the startup employee stock options funding solution that connects startup employees who need funding to exercise their stock options with investors seeking ways to invest in private companies. A serial entrepreneur, he previously founded Tapingo, which was acquired by GrubHub in 2018 for $150 million.

Illustration: Li-Anne Dias.