Earlier quoted context omitted.
Yes, they were literally handcuffed.
You must have been shown a part of the Uber offices outsiders don't normally get to see.
Or insiders, for that matter.
Handcuffed to Uber
181–190 of 211 posts
Re: Handcuffed to Uber
#182Earlier quoted context omitted.
Sam Altman has commented on this before. Among other things, he advocates for much longer (10 years) exercise periods for equity grants.[0] He also discusses the need for a change in tax treatment by the IRS. One of the fundamental issues is how options are taxed. Should you exercise an option, you will need to pay taxes on the spread (delta of strike price and current FMV, i.e. latest 409A valuation). In many cases,…
If the spread is nonexistent, why exercise at all? Why not just dump your money in an index fund?
I early exercised my CloudFlare stock as soon as I got it. As a result, I had 0 taxable gain at that point, and if the company eventually exits, my gains will be long term capital gains, AND they will be gains in whatever state I'm resident in at the time (exceedingly unlikely to be California -- Washington, for instance, has 0% income tax, no tax on capital gains, and no AMT, plus (outside Seattle) I can afford to buy a house.)
Re: Handcuffed to Uber
#183> Not only does it not allow employees to sell their shares to secondary buyers, it also won’t allow them to use services like those offered by 137 Ventures, which makes loans to founders and early employees using their stock as collateral. (Snapchat, Dropbox, and Airbnb have similar policies.) Does keeping early employees "handcuffed" essentially as indentured servants until IPO align with YC's ethics policy?
Uber pays entry-level software engineers ~$110k [0], experienced engineers closer to $130k. According to Glassdoor this is in the same ballpark as Facebook, Google, Twitter, etc [1]. You are not really making the startup "worse salary but potential equity" trade by working there, when the straight-out-of-college salaries are similar to the averages across all of Google. [0] https://www.glassdoor.com/Salary/Uber-Softw…
Glassdoor numbers are about 50% of reality.
Re: Handcuffed to Uber
#184Earlier quoted context omitted.
The twist here is that the options end up worthless despite the hard work of the employee that leads the company to be successful. The options are supposed to incentivise this. Something about the incentive structure is wonky---in the case of Uber going bankrupt then the options "should" be worthless. But if Uber succeeds, then the incentive should pay out.
But options can end up (near) worthless anyway, for a number of other reasons. The company could go bankrupt. It could a new set of preferred shares that take priority over the current shares. It could get bought for a pittance. Granted, few of these probably apply to Uber, but they are all things that happen to companies in the broader space of start-ups. The reason we're focusing on the 90-day clock for exercising…
I agree. I think that extending the exercise period to something like seven years (as suggested elsewhere) would essentially fix this problem at the individual employee level. The employee shouldn't face risk that their option will end up worthless just because he or she makes the fairly reasonable decision to seek employment elsewhere.
Re: Handcuffed to Uber
#185Why is it the norm that employees even need to pay cash to buy their options? Why don't companies set the exercise price to zero?
Or if one must have a non-zero exercise price - why isn't there a way to do something like a "cashless exercise"? (i.e. buy your vested options by selling a small fraction of them back to the company).
Re: Handcuffed to Uber
#186Just another instance on why an employee shouldn't consider stock options as adequate equivalent to compensation.
In theory, those employees were promised to receive x shares of the company that now (partly due to their personal performance) are worth some significant amount.
In fact, that was a lie and they are not actually able to receive that part of their compensation despite having been promised and earned it, vested, etc.
Beware of scams (the legal details cause similar sized of equity options to have extremely different de facto value) and/or treat the offered equity as having near-zero value when comparing compensation offers from different employers.
Re: Handcuffed to Uber
#187Earlier quoted context omitted.
You disagree in terms of diction. It was an analogy, after all. History doesn't repeat itself. It rhymes. Do you actually support the practice from an ethical standpoint? Employees are recruited to start-ups with equity. That's a core part of their compensation for their work (for which they likely could have received more salary from Google, Amazon, Facebook, etc). Then after they've already done the work , that com…
This behavior is absolutely ethical. They have done some work, not all the work as you have implied. Part of the basis of paying employees with options is so that they stick around - early employees know this when excepting this form of payment. This is the small price they are paying for getting rich later.
The whole point of this article is that the employees have stuck around for the agreed vesting terms, the company has been successful, and the "later" has arrived now - but they are still prevented from exercising the promised gains and will be, potentially forever (e.g. if the major owners decide to keep the company private indefinitely under current terms).
That was not the initially accepted bargain. The bargain was that they take the risk of options becoming worthless or them not staying through the vesting period. Those risks didn't happen, this is the point where they would have earned the right to cash out, but now it turns out that the option isn't actually there.
Re: Handcuffed to Uber
#188Earlier quoted context omitted.
If the spread is nonexistent, why exercise at all? Why not just dump your money in an index fund?
I early exercised my CloudFlare stock as soon as I got it. As a result, I had 0 taxable gain at that point, and if the company eventually exits, my gains will be long term capital gains, AND they will be gains in whatever state I'm resident in at the time (exceedingly unlikely to be California -- Washington, for instance, has 0% income tax, no tax on capital gains, and no AMT, plus (outside Seattle) I can afford to b…
I wonder how many Uber employees asked for early exercise and got it in their offer letters. It is definitely not standard practice AFAIK.
Re: Handcuffed to Uber
#189Earlier quoted context omitted.
I early exercised my CloudFlare stock as soon as I got it. As a result, I had 0 taxable gain at that point, and if the company eventually exits, my gains will be long term capital gains, AND they will be gains in whatever state I'm resident in at the time (exceedingly unlikely to be California -- Washington, for instance, has 0% income tax, no tax on capital gains, and no AMT, plus (outside Seattle) I can afford to b…
I wonder how many Uber employees asked for early exercise and got it in their offer letters. It is definitely not standard practice AFAIK.
At some companies it is in the standard offer letter. Unless you are coming in very senior or very early (or both, really) you are unlikely to get a modified option grant, other than just number of shares negotiations.
IMO the gold standard here is to issue actual founder shares as long as possible (up to and possibly past series a) and then to do options with early exercise and extended validity, and of course complete transparency on all the numbers.
Re: Handcuffed to Uber
#190Earlier quoted context omitted.
Your citation gets that number solely by defining "small business" extremely narrowly and in such a way as to mostly exclude businesses affected by estate taxes.
Well, let's have fun with the words you chose. Hobby Lobby is famously a "closely-held family business"... and it has 23,000 employees and $3.3bn in annual revenue. I'm not going to lose sleep over that being subject to taxation, and though someone could spin it as "mom and pop's family crafts store", it would be disingenuous to do so.
It would be a pretty terrible thing for the world if this business died/were seriously hindered due to the need to come up with instant liquidity.
I have no idea why you and gamblor are obsessing over "mom and pop" or "small business" - that wasn't a claim I made at all.