How to make sense of your startup employee stock option package

For early-stage startups, offering employee stock options can be a key part of attracting and keeping key talent. A stock option is an agreement that gives an employee the right to buy shares in the company at a discounted rate.For the employee on the receiving end, making sense of a complex, jargon-heavy stock option offer can be daunting. Given that such shares can carry significant risk - with startups often having poor survival ratings - it is very important to properly evaluate your stock option offer.Here is a guide to making sense of your stock option offer.

First, do a basic assessment of the company

The first step is to conduct a basic assessment of the company. This is key to understanding the risk involved with any stock option plan.At what stage of investment is the company at? Is the company a pre-seed investment? If yes, you need to understand that this is the highest-risk stage of a company lifecycle. 90% of new companies never get to VC funding and founders can be delusional about their prospects for investment. So take any claims that a company has a large, interested investor with a grain of salt.