A bit of background: The two founders are guys I used to work with before our previous employer (a SaaS company) was aquired back in 2010. One of the founders was a senior sales exec and the other was director of IT. They have a senior Software Engineer currently developing their beta product (a SaaS offering). They also have a strong support network backing them, mostly comprised of seasoned industry execs. I've seen their product and it is solid and I believe it has a lot of potential. Right now they are seeking funding and are realistically about 3-4 months away from securing capital (VC and/or Angel). They've just finished a round of "friends and family" funding wich has raised about $150k.
I've been presented and offer of employment with two different compensation packages. What do you guys think would be the best option?
EDIT: I'm just waiting for a response from them concerning amount of outstanding shares, vesting shcedual and strike price.
Salary Compensation Stock Options Stocks
I don't have much experience in this, but the second option looks a lot better to me. The only downside is the lower salary until they get funded, but frankly, if they don't get funded it will be hard to keep paying you the higher salary anyway. So if you believe in the product, why would you take the safer way, which doesn't seem to be that much more attractive anyway?
But it is definitely weird to negotiate over stock options without knowing the options pool.
Another factor to keep in mind - you'll be working closely with this team. Which option do THEY want you to take? I presume option 2, to best align your interests with the company's (keep cash burn low until revenue floods in). From the beginning if you act like an owner, they'll likely treat you like an owner, and in my experience with a handful of companies that is a win for all parties - especially on key hires/positions.
Love to say choose one over the other, but the information you do not know is the most important to choosing.
Having said that, if the potential reward is significant and you can survive on 50k. Take the 50k: you get an extra week vacation :)
I like the 2nd offer more. Another thing I'd like to say, they are offering you 65K a half of the funds they raised for their start-up and other investment still hanging in the air? Good job, you must be one skilled fella.
At $15K per year difference between salaries in the two offers, that's $1250 / month. So you are exchanging $1250 per month for 5000 shares per month. What's the strike price they're offering? Breakeven is $0.25; above this is a good deal, below this is not. (Not accounting for the extra week off.)