What should I ask about these options? I assume they are worth nothing until (if) the company goes public? Obviously I'll want to judge the relative value so I'll want to know things like outstanding shares (or whatever percentage my offering represents), etc. Any suggestions?
The company doesn't necessarily have to go public. They can also be worth money if the company is acquired.
Also keep in mind that even if the company does eventually go public, your shares can essentially be wiped out by a round of pre-IPO funding that gives the company a low valuation.
You could ask:
- what is the size of the employee pool?
- how many classes are outstanding?
- was the last round up or down?
- what is the mechanism to exercise your options?
- can you exercise whenever you want?
I've had stock options at two different jobs. If you are not getting a significant ownership stake, but rather just a portion of options as incentive to come work there, I would value them at $0. If you get the same salary and benefits, but no stock options at another company and you like the other company better, I'd go to the other company.
I say this because there are so many legal changes that seem to take value from you that you might as well not consider the options in your debate.
That being said, the most important question I'd want to know is what incentive does the company have to going public or getting bought? If the company is majority owned by investors, the stock options are likely to be worth something if you wait long enough. You are essentially following someone else's bet. If the company is owned by 2 or 3 individuals who want to make lots of money, they may or may not decide to sell or go public.