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The University of Virginia Darden School of Business supports high-potential entrepreneurs and innovators through its Batten Scholars Program.
With three dozen courses, professors, mentors, startup grants and a startup accelerator all designed to support students, the School prepares creative and agile thinkers to put their why — their professional purpose — to work everywhere from tech giants like Google and Amazon to high-potential startups.
With three dozen courses, professors, mentors, startup grants and a startup accelerator all designed to support students, the School prepares creative and agile thinkers to put their why — their professional purpose — to work everywhere from tech giants like Google and Amazon to high-potential startups.
Offers to work for startups can often be very different than job offers with traditional employers. How do you evaluate a startup offer? Darden’s Career Development Center and Alumni Career Services are there to help students and alumni at any stage of their career.
Startups and private companies sometimes entice recruits with an offer of equity compensation to offset lower cash compensation (base and bonus). The equity represents ownership — having a stake in the company you’re helping to grow and succeed. However, understanding and negotiating the equity offer can be difficult and time-consuming. The nuances of equity include different types of plans as well as other variables such as a subjective assessment of the future value of the company.
When evaluating an equity offer, you must first understand the lingo. You’ll want to ask educated questions and determine as much as you can about your equity offer up front in order to judge the value and weigh the risk versus potential reward.
Evaluating any compensation package is ultimately a very subjective process with many future unknowns. Once an offer is extended, there will be pressure to respond and move forward, so start your research on a startup as early in the recruitment process as possible. Thinking through these points will help you negotiate:
- What’s your assessment of the firm’s viability and growth potential? Will they share the business plan?
- Who has funded the venture to date, and how much has been put in? What are the plans to raise more capital, and when?
- What’s the current “burn rate” (cost of running the operation), and how long will current funding last?
- What are the founders’ backgrounds and reputations? Do they have a track record with other startups? What is their plan for growth and an exit?
- Who sits on the board and advises management?
- How willing is the firm to share equity information with you?
- Will you need the assistance of a tax adviser or attorney to help you evaluate the equity offer?
- Be sure to get your offer in writing and ask for clarifications on items you discussed that are not clear in the offer letter.
Before joining a startup, you should first consider your career goals, professional and skills growth, and your personal tolerance for risk. Many startups fail, making the equity (and your personal investment in the company) worthless. Yet, startups can be fun places to work that offer lots of interesting challenges and intangible rewards. Getting an equity stake will hopefully give you an upside payout tied to the company’s success.
About the University of Virginia Darden School of Business
The University of Virginia Darden School of Business delivers the world’s best business education experience to prepare entrepreneurial, global and responsible leaders through its MBA, Ph.D. and Executive Education programs. Darden’s top-ranked faculty is renowned for teaching excellence and advances practical business knowledge through research. Darden was established in 1955 at the University of Virginia, a top public university founded by Thomas Jefferson in 1819 in Charlottesville, Virginia.
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