In part 1, we covered some questions you should ask about your offer. In this second part, we’ll cover some things you should ask about the company.
The Offer (see Part 1)
The Company (answers below)
Investors call this runway.
If you’re making an essential contribution to the business, you should have a job as long as the company has runway.
Whether you’re essential depends on what the business needs today; e.g. assistants, recruiters, and salesman might not be essential if the company hasn’t finished building a product yet.
Let’s say the company’s post-money valuation in the last round was $10M. If the company is acquired for $100M, the acquisition value of your options should increase roughly 10x, assuming the company didn’t incur any dilution after the last round.
If the acquisition price isn’t greater than the investor’s preferences, the common stockholders won’t see a penny when the company is sold.
So don’t join a company with $100M in preferences unless you expect the business to sell for a lot more than $100M.
Besides the CEO, the board has the greatest opportunity to increase or destroy the value of the company’s shares.
The answer will also tell you whether the investors dominate the board.
The CEO and the board can easily destroy the value of your options through incompetence and/or greed. You need to ask yourself: