Cash vs ESOP

In our early days when we were significantly cash strapped, I offered someone a role with us with a small pay cut, but 0.5% ownership of Nium. We negotiated the offer a bit, but ultimately the person didn’t join. They didn’t want to take the pay cut.

Fast Forward to 2022 and that 0.5% ownership of Nium today is worth millions.

Lots of people who have never worked for a startup find themselves in this conundrum. To help them, here are three key elements to look at before you take that offer:

1. The Founder: What do you think of the person? Is he or she ready to manage all the challenges which their start-up will go through? Is the person ready to run through a wall to make it successful? Will the person pivot when needed? Evaluate the founder in detail, including asking his or her ex- colleagues in the corporate world about what they thought about him or her.
2. Business: Do you really believe this is a great idea? Can this be transformative in a sector? Can this company win? You need to genuinely believe in the idea and the impact it can have.

And finally:

3. Financial position: Can you take a pay cut, even a small one, for a few years? It’s an important thing to think through. When I quit my job after a decade of working, I had decent enough savings - no mortgage, no kids, and a partner who made a decent salary. The ability for me to take the risk was very high.?

If I had to weigh these three factors, I would give Founder (40%), Business Idea (30%) and Financial position(30%) to make this decision.?