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What is the best option?
I have been asked to work in a high position as co-founder of a startup for 5% equity and $40k salary - this requires over 40 hours of work(hard grind) etc as any position like this would. It has also received funding of $200,000.
I have also been offered a job $75k salary, 40 hours a week with perks etc.
What is the best option? and why?
The equity could be worth anywhere from 0 to billions. So there's no way to know if it will be worth the $35k you're missing out on. So it all depends on how much of a risk you're willing to take.
You could put a current value on the equity depending on the funding agreement. Was if for a % of equity? Then just translate that to your 5% share and see if it's at least starting out in a good spot. But where it goes from there is anyone's guess.
You sort of have to go with your gut on this one. Startups tend to fail, but the ones that make it big can get really, really big.
If you can afford to take the lower salary and you think the startup has a potential exit strategy (IPO, sale) that will make your 5% stake worth a lot of money, then sure, go for it.
Don't think of your 5% stake as "worth" $10k, though. The value of your stake is based only on the price that someone else is willing to pay for your shares. If you think you will contribute to their eventual success where that stake is worth a lot of money, then perhaps it is worth the risk.
The company must be valued by some means.
For instance take the revenue-growth-percentage, divide by 10, and multiply by the revenue. For example 30% revenue growth values the company at 3 times revenue. Or 0% revenue growth says take the salary.
