EDUCATION UNCUBED NOV. 2 , 2015

COMPENSATION & STARTUP FINANCE

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WHAT WE’LL COVER

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Raising $1.5 million to hire and accelerate growth

My Background

Reasons to Join a Startup

(But….What’s a Startup?)

The Truth About Startup Compensation

What About Stock Options?

Super Quick Stock Options Primer

About That Capital Structure

Resources

Q&A

MY BACKGROUND

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CEO, Co-Founder of Uncubed

University of Iowa – BBA, Finance / BA, English

Spent 8 years in finance before joining/building startups

80,000

1,000

250

25

0—>250

0—>18

No. of Employees

REASONS TO JOIN A STARTUP

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• Leverage a scarce skillset

• Potential to move up quickly (i.e. head of dept/or company at 27)

• Don’t want to spend next 30 years working way up in large company

• Value the culture (“going to that office doesn’t feel like work”)

• Make a lot of money

• Ok making little money (trading for something else)

BUT WHAT’S A STARTUP?

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Used to mean this

• 2 people in a garage

• No salary?

• Lots of risk

• 50 - 500 employees

• Salary benefits

• Less risk

• High growth

• 5 years old

• 1000s of employees

• $50B+ valuation

Now also means this

Enormous opportunity set

THE TRUTH ABOUT STARTUP COMPENSATION

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There is no truth. Just a lot of misleading headlines….

Now significant overlap with corporate compensation

• Varies by skillset

• Varies dramatically by size of company

• Starting salaries for software development roles can be $40-100k+

• Starting salaries for other roles can be $30-60k+

WHAT ABOUT STOCK OPTIONS?

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Google famously minted “a thousand millionaires” at IPO - due to stock options

or

Stock options:

• Give a sense of ownership

• Additional compensation

Potential outcomes:

Opportunity for this

Best to plan for this

SUPER QUICK OPTIONS PRIMER

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Options hugely affected by the capital structure of the company

Pretty complex, but good to learn the high points

Options are not stock…

• They are the right to buy stock

Options are on vesting schedules

• You earn them over time – usually 4 or 5 years

• Usually include a “cliff”

You have to do something about them when you leave

• Have to “exercise” or not —> can be a cash issue

ABOUT THAT CAPITAL STRUCTURE

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The key is understanding “what’s my fully-diluted ownership %?”

One of the biggest keys to understanding what options might be worth

Startups raise money from all sorts of places

• Friends/family, angel investors, accelerators, venture capital groups

• These folks generally get paid before options holders

This makes headlines tricky…..

Was this good or bad?

A FINAL WORD ON STOCK OPTIONS

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It’s not all bad news, we just need information and a little education!!!

Remember Google’s Thousand Millionaires!

And you get to walk around like you own the place

RESOURCES

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Angel List (www.angel.co)

Quora (www.quora.com)

Google / Blogs

QUESTIONS?

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Q&A now, or email later

chris@uncubed.com