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The Lack of Options for Startup Employees’ Options

a16z.com

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Re: The Lack of Options for Startup Employees’ Options

#111

Post by solidsnack9000 »

dangelo wrote: post #58

We were the first startup to use 10 year exercise periods, which started this trend. I wrote a long response to this here: https://dangelo.quora.com/10-Year-Exercise-Periods-Make-Sens...

> Do employees want to join companies with the expectation that if any of these things happen at any point over the course of 10 years before an IPO, they end up with nothing?

This is a great thing to highlight. There's the company and the opportunity and then there's all that random stuff that you only understand after a decade in the industry.

Re: The Lack of Options for Startup Employees’ Options

#112

Post by reality_czech »

I had to chuckle at the end. One way to compete for the stupidest and most naive employees is to offer really drawn-out vesting periods, where if you leave before the IPO, you get nothing! Considering that the average length of a job in sillicon valley is about 2 years, that would effectively put an end to anyone with any talent or brains working for a startup.

Re: The Lack of Options for Startup Employees’ Options

#113

Post by abalone »

abcampbell wrote: post #32
abcampbell wrote: post #29

Earlier quoted context omitted.

"Rationally, the now-former employee will hold off until the end of the exercise expiration window before deciding whether to exercise at all." Classic example of good maths, bad thinking. This is nonsensical. For employees where these options represent 90% of their wealth, the benefit from marginal time value in these options is trivial when compared to getting liquidity and diversification. "The bottom line is that…

Our take... http://bit.ly/youshouldsellyourequity

I'll save everyone the click.. It's advocating secondary sales. But most companies don't allow those anymore because it turns out it creates a messy cap table and accounting headaches.

Re: The Lack of Options for Startup Employees’ Options

#114

Post by sportanova »

jamiequint wrote: post #34

This piece is inane and I'm surprised to see it published by A16Z. Options are a form of compensation, it's not as if the value created by the early employee goes away if they leave before a liquidity event. They created value and got compensated for it. To call the process of making it easier for departed employees to actually get access to this part of their compensation "optimizing for former employees at the expe…

It's basically admitting that their main protection against dilution is fucking over previous employees

And how are previous employees "dead equity" but not andreeson ?

Re: The Lack of Options for Startup Employees’ Options

#115

Post by abcampbell »

abalone wrote: post #113
abcampbell wrote: post #32

Earlier quoted context omitted.

Our take... http://bit.ly/youshouldsellyourequity

I'll save everyone the click.. It's advocating secondary sales. But most companies don't allow those anymore because it turns out it creates a messy cap table and accounting headaches.

#overconfident

Not arguing for secondary sales, arguing that we take these companies public to clean up that crap.

Re: The Lack of Options for Startup Employees’ Options

#116

Post by tn13 »

xiphias wrote: post #7
tn13 wrote: post #5

Earlier quoted context omitted.

I really don't understand why employers don't allow the employees to exercise the options right in the beginning when the value is much much lower.

I really don't understand why good employees work in startups instead of going to an IPO-ed company. Most of the time in the current climate they are worse off.

I must second you here. Many times the stock options that you get at Google, or Facebook even today outperform all other forms of investment.

Re: The Lack of Options for Startup Employees’ Options

#117

Post by xiphias »

ropiku wrote: post #83
xiphias wrote: post #7

Earlier quoted context omitted.

I really don't understand why good employees work in startups instead of going to an IPO-ed company. Most of the time in the current climate they are worse off.

If you are talking just about $ then totally but there's more than just money. Big companies have bureaucracy, corporate politics, etc.

I'm working at one of those companies and I prefer the bureaucracy and real big data & machine learning over iterating on the web platform (Rails, Javascript, Angular...). With small companies it felt like I had to create features after features, but as there were not many users, I didn't have the same impact (number of users * $/user earned for the company)

Re: The Lack of Options for Startup Employees’ Options

#118

Post by ThomPete »

throwaway2016a wrote: post #101
ThomPete wrote: post #98

Earlier quoted context omitted.

You can. You just can't do long term capital gains.

It's my understanding I have to pay tax on the difference between excise price and fair market value for the year I exercise my option that year. And I've gotten conflicting tax advise on whether or not private investor rounds set a fair market value as far as the IRS is concerned. This article seems to be of the same opinion. Either way, if you can't do capital gains and you're still at the company no use wasting th…

Yeah but thats gets done right away in the process.

It's the long term thats the problem because thats more like a loan.

Re: The Lack of Options for Startup Employees’ Options

#119

Post by throwaway2016a »

ThomPete wrote: post #118
throwaway2016a wrote: post #101

Earlier quoted context omitted.

It's my understanding I have to pay tax on the difference between excise price and fair market value for the year I exercise my option that year. And I've gotten conflicting tax advise on whether or not private investor rounds set a fair market value as far as the IRS is concerned. This article seems to be of the same opinion. Either way, if you can't do capital gains and you're still at the company no use wasting th…

Yeah but thats gets done right away in the process. It's the long term thats the problem because thats more like a loan.

Yes, but without the tax if you have a 90 day window when you leave it wouldn't be a big deal that the company isn't liquid yet, you might just buy the shares as an investment. My point is that because if the tax, buying the shares in this scenario (if the stock isn''t liquid enough) is not obtainable.

Re: The Lack of Options for Startup Employees’ Options

#120

Post by ThomPete »

throwaway2016a wrote: post #119
ThomPete wrote: post #118

Earlier quoted context omitted.

Yeah but thats gets done right away in the process. It's the long term thats the problem because thats more like a loan.

Yes, but without the tax if you have a 90 day window when you leave it wouldn't be a big deal that the company isn't liquid yet, you might just buy the shares as an investment. My point is that because if the tax, buying the shares in this scenario (if the stock isn''t liquid enough) is not obtainable.

Thats true.
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