First, I would recommend you spend some time to figure out the probability of exit, and the valuation upon exit (including effect of dilution), and do that based on your own analysis rather than just their sky-high optimism.
For example, say your base is $100K (at 100% market). The company has:
10% chance of exit at 50M in 2 years
20% chance of exit at 50M in 4 years with 2X dilution
10% chance of exit at 25M in 4 years with 2X dilution
25% chance of exit at 25M in 4 years with 4X dilution
35% chance of folding or exit at a valuation meaningless for common stock holders
Is it good or bad? It depends on your perspective on risk/reward/experience. It is not an immensely attractive offer based on these numbers -- in fact, I would say an okay (not necessary great) offer from one of the hot startups or solid name brand companies is superior to this offer -- but I just made them up so you have to go through your own exercise and logic.
One thing you want to think about is that getting into the right company is far more important than being hired as a founding engineer. I think you'd do yourself a favor in making a detailed evaluation of whether this company could strike gold in comparison to the top ones out there. Is it ground-breaking? Or me-too in a competitive landscape but acquirable? Keep in mind that by joining this startup, you'd be making some commitment that comes with opportunity cost (of working for something even better), so I would say spending more time thinking whether this is a first-tier startup, or more of a second-tier. It is okay to join a second-tier, but demand more.
Comments
First, I would recommend you spend some time to figure out the probability of exit, and the valuation upon exit (including effect of dilution), and do that based on your own analysis rather than just their sky-high optimism.
For example, say your base is $100K (at 100% market). The company has:
10% chance of exit at 50M in 2 years
20% chance of exit at 50M in 4 years with 2X dilution
10% chance of exit at 25M in 4 years with 2X dilution
25% chance of exit at 25M in 4 years with 4X dilution
35% chance of folding or exit at a valuation meaningless for common stock holders
Assuming 3% at 40%, 80%, 100%, 100%
Case #1: = 1.5M + 40K + 80K + 100K + 100K = 1820K
Case #2: = 0.75M + 40K + 80K + 100K + 100K = 1070K
Case #3: = 0.375M + 40K + 80K + 80K + 80K = 655K
Case #4: = 0.185M + 40K + 80K + 60K + 60K = 425K
Case #5: = 40K + 80K + 60K + 60K = 240K
Average = 652K or 163K/yr (63% over base)
Is it good or bad? It depends on your perspective on risk/reward/experience. It is not an immensely attractive offer based on these numbers -- in fact, I would say an okay (not necessary great) offer from one of the hot startups or solid name brand companies is superior to this offer -- but I just made them up so you have to go through your own exercise and logic.
One thing you want to think about is that getting into the right company is far more important than being hired as a founding engineer. I think you'd do yourself a favor in making a detailed evaluation of whether this company could strike gold in comparison to the top ones out there. Is it ground-breaking? Or me-too in a competitive landscape but acquirable? Keep in mind that by joining this startup, you'd be making some commitment that comes with opportunity cost (of working for something even better), so I would say spending more time thinking whether this is a first-tier startup, or more of a second-tier. It is okay to join a second-tier, but demand more.