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A Beginner’s Guide to Startup Options & Equity

Filed under: Industry Info, Jobs/Employment, Offers / CounterOffers, Redfish Speaks

A Beginner’s Guide to Startup Options & Equity

By: Jon Piggins, VP Business Development 

Redfish Technology

 

A Beginner’s Guide to Startup Options & Equity

In the startup world, most offers of employment include stock “options”, essentially granting you the right to buy shares of the company’s stock in the future at a predetermined price. For example (in a best case, simplified scenario), you accept an offer to work at “XYZ Company”, stay there more than 4 years (to fully “vest” 100% of your options). The “strike price” for your options is $2/share. In year 5, XYZ Company decides to issue an “Initial Public Offering” to begin selling shares of their company to investment banks & the general public. They price their stock at $20/share and it begins trading on the open market (e. “NASDAQ”, where the price will fluctuate based on demand). You now have the right to “exercise” your options, buying them at the predetermined $2/share and then sell them at the market price of $20/share, giving you a gross profit of $18/share.

 

So now that we have a basic understanding of what an option is, we’ll look at a few more important considerations when evaluating your offer (or current position).

 

Valuation

While a company is private, it’s valuation is managed by the board of directors (via a “409A Appraisal”) usually one a year (or if there’s a significant change, like a new VC round of funding). The valuation is based on a number of factors, but is intended to be an independent/objective Fair Market Value, or “FMV” (think of a house appraisal). Each round of valuation, in principal, represents an increase in the value of each share in the company. So, each increase in value also means that the cost per share in that company goes up. Meaning, if you started employment at XYZ Company when they were valued at $5 Million and your “strike price” was $2/share and now the company is valued at $10 Million and new hire would now have to pay $4/share for the same option. Hence, the benefit of “early equity”…getting in while the cost to exercise (“purchase”) your options is low (as it allows for more potential profit margin).

 

Calculations
In simple terms, you can come up with a rough value for your shares by using the following equations (and a company should be able to provide you with this information once you get to the offer stage).

 

% of “ownership”, how much your potential shares represent of all the company’s outstanding shares:
# of shares/options, divided by “total number of shares outstanding” = % of equity you’d have in the company. (eg. your # of shares/options of 50,000, divided by the total number of outstanding shares for the company of 10,000,000 = 0.005 or .5% equity in the company).

 

Value (on paper) of your shares/options:
# of shares/options x current FMV strike price – # of shares/options x your strike price = your current spread or profit margin. (eg. 10,000 shares at the last Board of Director’s FMV of $10/share – your 10,000 shares/options x your strike price of $5/share = $50,000 in a “paper” gross profit).

 

 

Vesting Schedule

This is simply the rate at which you gain the ability to purchase your options/shares. Industry standard is 4 years, the 1st year vesting (25%) after one year of employment and the remaining 75% vesting each month at a rate of 1/48 over the remaining 3yrs. After 4 years, you now own the right to exercise (“buy”) all of your options.

 

 

Liquidity Preference

Venture Capitalists & other investors get paid 1st. So, if a company has taken $40 million in funding and it decides to go public, no one else but the investors get paid until the proceeds exceed the $40M+ mark. Important to note (from an equity standpoint) when looking at a company that’s taken on a lot of funding & doesn’t have good traction, as there’s a good chance you’ll probably never realize any benefit from your options.

 

 

Summary

This is meant to be a very high level “Options 101” review of the topic. There are a multitude of factors that can come into play; dilution of shares/equity, different classes of stock, company acquisition, Restricted Stock Units (“RSU’s) vs. Options…but our hope is that a basic understanding of what options are & how you can calculate a rough valuation of a company and what your options represent in “ownership” of that company, you’ll be able to better evaluate your next (or current) opportunity. We’d be happy to answer any questions or do a deeper dive on these (or other) topics, so contact us if we can be of service!

Redfish Taps into the Ancient Traditions & Power of the Gong

Filed under: Stimulating Ideas

Redfish Taps into the Ancient Traditions & Power of the Gong

 

 

Since the depths of time, the gong has been known as an instrument of transformational power. Redfish taps into the powerful multi-dimensional ripples of sound generated by the gong to send positive energy out to our clients & candidates each time we make a new placement. Here, Walker Cross gongs for a Bay Area based FinTech client who just hired one of our candidates for a Channel Sales role. Good vibes going out to all! #goodvibes, #positivity, #recruiting

5 Tips for a Successful Lunch Interview

Filed under: Candidate / Job Seeker, Job Search, News, Redfish Speaks

5 Tips for a Successful Lunch Interview

By: Jon Piggins, Director of Business Development @ Redfish Technology

 

In today’s busy world where time is at a premium, we’re seeing more of our clients scheduling lunch interviews with our candidates (everyone has to eat, right?). In addition to convenience, holding an interview out in public offers a unique opportunity to gain insight you just don’t get in a conference room or office setting. Here are 5 tips to help you prepare for the next time you’re invited to meet with a prospective employer over lunch.

 

1. Be courteous to everyone (hearing “please” & “thank you” never gets old)

This is where the value of a public setting for your interview comes into play. Your potential employer will be evaluating the answers you provide to their questions just as they would in the office, but they’ll also be looking for cues to indicate how you might be a personality & cultural fit for their team. They’ll be watching for manners, not the “finishing school” type, but to see if you are self-aware & polite in a general sense. A lunch interview provides a less controlled environment, so they’ll be looking to see how you deal with mistakes (eg. you’re delivered something different from what you ordered) and if you show a level of common kindness & respect. Formal interviews & technical exercises do a good job of vetting skill and ability, but human interaction provides insight into a person’s “EQ” (Emotional Intelligence).

 

2. Make smart small talk

Lunch interviews are more casual than those held in a traditional office setting, so they will be more conversational by nature. Never lose sight of the fact that you are indeed in a business setting, not a social event. Keep your topics neutral & positive, don’t bring up things like politics or religion and focus on upbeat subject matter, like new construction you noticed in the area or volunteer work you’re involved with.

 

3. Come prepared

Yes, you’re interviewing in a more relaxed setting, but it’s still an important opportunity for you to reinforce your capabilities & value. You should still be prepared to answer the standard interview questions you’d get in a regular interview. Bring copies of your resume & any relevant work samples, as well as a professional notepad binder & a pen to take notes. As with any interview, you’ll want to send the hiring manager a meaningful thank you email, as well as a handwritten letter.

 

4. Plan ahead, do your research, arrive early, order strategically

Interviewing can be stressful enough…do yourself a favor and research the restaurant ahead of time so that you’re not compounding your anxiety by trying to figure things out at the last minute. Know the restaurant’s exact location & plan your transportation/logistics accordingly (arrive 10 minutes ahead of time). Eat a little bit an hour or so before your interview. Look up the restaurant online to see how the restaurant is organized (noisy, busy, dark) and how people are dressed. Check out the menu & pick a few “safe” options to order (avoid messy, spicy, greasy food). Don’t complain about your food, or send it back (you might be eating at the hiring manager’s favorite restaurant). Do refuse (and don’t request) any alcohol with your meal.

 

5. Know who you’ll be meeting with

Get the names & titles of all the people you’ll be meeting with. Google them & take a look at their Linkedin profile & their social media presence (most likely, they’ll be doing the same for you). If you’ve never met before, seeing their profile picture will make it easier to recognize them at the restaurant, plus Linkedin will reveal connections you have in common. Doing some research will also help you to come up with prepared topics of conversation, including shared interests (see #2).

 

At Redfish, our mission is to build long-term productive partnerships with both candidates and companies. We pride ourselves on offering progressive service to our client partners without leaving honesty, integrity, excellence or performance behind. We aim to spark innovation, breed efficiency, and fuel market dominance by providing talent who can help take your company and product to the next level.

Our philosophy is simple: build long-term relationships by providing top-quality service and confidentiality, leveraging our expertise and resources, and having fun!

5 Reasons Why You Should Work with a Recruiter if you don’t have an Internal HR Team

Filed under: News

5 Reasons Why You Should Work with a Recruiter if you don’t have an Internal HR Team

By: Leah O’Flynn, Chief Revenue Officer

Redfish Technology

 

As we know, hiring is typically the highest priority for startup companies. More specifically, VCs can make funding contingent on certain milestones which typically include a hiring goal. This can be quite the challenge because everyone is already at bandwidth. This is where we are most successful because we offer a value. Here are a few specific reasons:

 

1.) An experienced recruiter will implement process to ensure that the hiring process is streamlined. This should include a weekly call to recap on candidate pipeline, provide a framework for the search and create milestones to make sure that hire is done in a timely manner.

 

2.) Scheduling – we all know that this can be a huge pain. A recruiter will coordinate with the team, send out itineraries and be precise in scheduling calls. A recruiter will make sure one or 2 emails will lead to a confirmed call/on-site versus a constant back and forth.

 

3.) Offer stage is a critical time. A solid recruiter will deliver concise messages and offer solutions. For example, we are able to say ‘some of our clients have done this when this has happened in the past’. The conversation can become unclear between hiring manager and candidate. You want to make sure a recruiter can manage expectations and give it to you straight understanding both sides. Essentially act as a translator in what can be an awkward conversation for some. For example, your expertise may not be negotiation because you are an engineer by trade.

 

4.) In order to hire well, you need access to tools. Most of these tools are expensive. A recruiter should have access to AI software, job postings, job boards and a relevant rolodex. At some point, your company will have the budget to on-board some of these tools but not at the beginning.

 

5.) Screening resumes can be a huge time suck. A good recruiter will provide you between 2 or 3 resumes a week. Of those, at least a 1/3 should pass the bar. The goal is to have a recruiter that saves you a ton of time and ultimately acts as an extension of your business by conducting the first round phone interview.

5 Great Benefits & Perks to Attract and Retain Employees

Filed under: Best Practices, Hiring Strategies, Offers / CounterOffers, Redfish Speaks, Talent Acquisition

5 Great Benefits & Perks to Attract and Retain Employees

By: Jon Piggins

Director of Business Development, Redfish Technology

 

In today’s tight labor market, competition for top talent continues to heat up. We’ve seen some of our clients increase their hiring rates by offering benefits & perks beyond what’s now becoming standard, things like; unlimited vacation, “make your own hours”, 100% paid health/dental/vision coverage. Here are some of the best perks we’ve seen recently.

 

Vacation reimbursement: “Unlimited” vacation is great…if you use it. Turns out that many employees are so busy that they never wind up taking advantage of the benefit and the company winds up with stressed out, tired workers. One company we work with decided to solve the problem by creating “vacation reimbursement”, $3,000/yr per employee, can’t take it as cash & have to use it each year or you lose it.

 

Student loan paydowns: With 44.7 million borrowers owing more than $1.5 Trillion in student loans, the U.S. is drowning in school loans. Not just a financial burden, student loan debt can be stressful & limiting. We’ve had a few clients begin to offer monthly contributions to their employee’s loan payments, either by subsidizing the amount they had to pay or by matching payments (up to a limit) therefore helping to pay off the loan(s) sooner (sometime 7-10 years sooner).

 

529 accounts for employee’s children: Think of a 529 account like a “Roth IRA” for college. Contributions are invested & when it’s time to pay for college (tuition, room & board, books…) the money can be withdrawn without penalty or taxation. It’s a nice additional way to help employees beyond the traditional health savings & retirement plans most companies offer.

 

New baby fund: Have a baby, get $4,000. That’s what Bay Area based client of ours decided to start doing (diapers are expensive!). Seriously though, as wonderful as having a child can be, it’s expensive & stressful. Getting a nice chunk of change & a good break for maternity/paternity leave is a great perk for your workers.

 

Housecleaning & Laundry Services: Put in a 60 hour work week & then have to deal with cleaning chores and laundry…no thanks. We have a longtime client in LA who provides weekly laundry and twice monthly house cleaning services for their approx. 100 employees. Simply bring in your clothes in a big nylon bag on Monday, it gets picked up at the office & comes back on Wednesday cleaned and folded.

 

The great thing about these benefits is that they’re done in good spirit…yes they’re self-serving for a company in helping to attract & retain talent and increase productivity, but they’re also considerate towards employees with the goal of reducing their stress & burden and helping to make their lives a little easier.

5 Reasons Why Backdoor References Aren’t Always Helpful

Filed under: Best Practices, Redfish Speaks

5 Reasons Why Backdoor References Aren’t Always Helpful

By Leah O’Flynn, Chief Revenue Officer

Redfish Technology

 

At first glance backdoor references can seem strategic but there are some unintended consequences to consider in today’s marketplace. Our client’s increasingly ask for our opinion on doing them and we usually respond with what we’ve seen in the past. As a rule of thumb, be respectful of the candidate and start the relationship off with trusting that he or she can provide a solid number of folks to speak about his or her ability to do the job. Oftentimes our client’s assume it’s a good way to vet a skillset but there are more effective ways to evaluate a person other than a backdoor reference….

 

1.) In general, candidates are already pretty protective of the references that he or she offers up to a hiring manager. You run the risk of your potential hire getting put off if he or she finds out that their next manager went around their back. It makes for a rocky start to a professional relationship.

 

2.) We’ve had a situation where a manager within the candidate’s current company didn’t want to lose the employee. He gave a negative review and ended up offering the candidate a counter offer as a tactic to get ahead of the new offer & retain the employee.

 

3.) A backdoor reference can jeopardize the candidate’s current employment. Their employer was unaware that he or she was looking and is now privy to that information. A reference that would have been good is now skewed due to the circumstances.

 

4.) You reach out to someone who may have previously managed the candidate but you have no context around their working relationship or environment. It’s not a fair conversation to have with this said person. Also, that person isn’t familiar with the person now. References should represent the past and the present to help paint a more complete portrait.

 

5.) It could be a situation where the candidate left the company on good terms but the company never got over it because it was in the middle of a big project. The review isn’t reflection of the candidate’s working ability but rather disappointment of losing a good employee.

 

For more advice & insight into the world of recruiting, contact us HERE

Top Quick and Easy Tips on interviewing well in today’s competitive market

Filed under: Interview, Redfish Speaks

Top Quick and Easy Tips on interviewing well in today’s competitive market

By Jon Piggins, Director of Business Development

 

Smile: a smile is magic, it improves your mood & the mood of those around you. If you’re not a naturally “smiley” person, consciously practice doing it more & in front of a mirror so that it becomes more natural. In general be mindful of your facial expression while you are listening – smiling is a good default but some people tend to look away and it becomes obvious when they aren’t actively listening. Even if you’re nervous, or feel like the interview isn’t going well, think of something that makes you happy & brings a smile to your face…it makes a big (and positive) impression!

Err on the side of being more formal than not: It’s perfectly acceptable to ask your recruiter or HR what type of attire you should wear for your interview. Even if the office is a board shorts & tank tops kind of place, business casual (on the conservative side) will never get you in trouble.

Do your research: Know enough about the job description and company that you could explain both clearly to someone at a dinner party. Look up the Linkedin profiles of the people you’ll be interviewing with and note any shared connections or commonalities, perhaps you & the hiring manager went to the same college or grew up in the same state. Doing your homework will make you feel more comfortable and will showcase your level of interest & preparation.

Have questions prepared: See above…when researching a company & it’s people, prepare 3-5 relevant questions. It will reinforce your level of interest and it also helps you to maintain some control in the process…and it’s an easy way to buy yourself some time if you get flustered or feel like you’re doing all the talking. Ask a thoughtful, open ended question, and relax (and listen!). Wrap up the interview by asking how you compare to other candidates in the mix? Also, ask if they have any concerns about them as a candidate? Also, ask for the job if you want it!

Get the names & email addresses for EVERYONE you meet, connect with them on Linkedin & send them each a “Thank You” email. It’s also fine to send one thank you to the group of people you met with, just make sure to include everyone…even the person who greeted you at the front desk. You never know who might be involved in the hiring process & it shows proper respect to everyone who might be your future co-workers.

 

 

Will Brewer

Filed under: Redfish Team

Business Development Manager

 

Born in Ft Meyers, FL, raised in Atlanta, and a proud graduate of The University of Georgia (Go Bulldogs!) Will made the move to the Sun Valley, ID area on the advice of his Dad who spent time here as a ski bum in the 80’s. Will has spent the past 4 years working @ the Sun Valley Resort’s Terrain Park and one of the reasons he’s so excited about joining Redfish is our dedication to work/life balance and long lunches that allow enough time to get in some turns on the ski hill.

 

Fun Facts

If you could have an endless supply of any food, what would you get? Sushi!

What is one goal you’d like to accomplish during your lifetime? Start & raise a family.

What’s your favorite cartoon character? Eric Cartman.

Who is your hero? LeBron James.

What are your greatest fears? Spiders!

Meet Will Brewer, the newest addition to the Redfish team!

Filed under: News

Meet Will Brewer, the newest addition to the Redfish team!

 

Redfish Technology is excited to introduce Will Brewer as our newest Business Development Manager. Born in Ft Meyers, FL,  raised in Atlanta, and a proud graduate of The University of Georgia (Go Bulldogs!) Will made the move to the Sun Valley, ID area on the advice of his Dad who spent time here as a ski bum in the 80’s. Will has spent the past 4 years working @ the Sun Valley Resort’s Terrain Park and one of the reasons he’s so excited about joining Redfish is our dedication to work/life balance and long lunches that allow enough time to get in some turns on the ski hill.

2 Steps to Hack your Career Search (in 10 minutes or less)

Filed under: Candidate / Job Seeker

2 Steps to Hack your Career Search (in 10 minutes or less)

 

Actively looking for a new job…or just want to test the water to see what’s out there, but the thought of overhauling your old resume or creating a new one makes you cringe? 5-10 minutes spent on making a few changes & updates to your LinkedIn profile is a great way to increase your visibility to hiring companies & recruiters.

 

Companies & recruiters utilize Linkedin’s platform to run granular searches for candidates based on keywords in their profiles and their account settings. You can help control if and how you’ll be included in the results of these searches. Follow the simple steps below to increase your profile’s visibility and your odds for being contacted about relevant, new opportunities.

 

1st go to your linkedin profile and click on the “pencil” edit icon on the right hand corner (adjacent to your profile picture). Make sure that your contact info is up to date and that your “Summary” contains key words relevant to not only your current position, but also to the type of position(s) you’re interested in.

 

2nd, modify your settings to drive your relevance in searches being done on Linekedin. You can do this two ways:

 

Straight from Linkedin’s help page:

Sharing your career interests with recruiters from the Settings & Privacy page.

To share your career interests from the Settings & Privacy page:

  1. Click the Me icon at the top of your LinkedIn homepage.
  2. Select Settings & Privacy from the dropdown.
  3. Click the Privacy tab at the top of the page.
  4. Under the Job seeking preferences section, click Change next to Let recruiters know you’re open to opportunities.
  5. Switch the toggle to Yes to share that you’re open and appear in recruiter searches matching your career interests. Switch the toggle to No to stop sharing your career interests with recruiters.
  6. Your changes will be saved automatically.

Note:  Visit the Career interests page to edit additional settings such as job titles you’re considering, the types of jobs you’re open to, the industry you prefer, and more. Learn more about updating your career interests

 

Sharing your career interests with recruiters from your profile.

To share your career interests from your profile:

  1. Click the Me icon at the top of your LinkedIn homepage and click View profile under your name.
  2. From Your dashboard, click Career interests to access the Career interests page.
  3. In the Career interests section, toggle right to turn this feature on.
  1. You can write an optional introduction about yourself and anything else you’d like the recruiters to know. The maximum character count is 300.
  2. Follow the prompts on the page to select your career preferences:
    • Where are you in your search?
    • What job titles are you considering?
    • Where would you like your next job to be located?
    • What types of jobs are you open to?
    • What industries do you prefer?
    • What size company would you like to work for? (Number of employees)
  1. Any changes made to your job preferences will be automatically saved.

 

For more recommendations on how to super charge you job hunt, contact Redfish Technology’s teams of experienced recruiters today!