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10-Year Exercise Periods Make Sense

dangelo.quora.com

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Re: 10-Year Exercise Periods Make Sense

#71

Post by lifeisstillgood »

Everyone has a burn out point, a point when the company and the culture and just your life stages mean you want to move on. Being handcuffed to one is bad for everyone.

I would worry about the value of employees who basically wanted to leave the company four years ago but are only hanging in because their shares are worth a million. Surely it would be better to get those people paid and then out the door rather than keeping your senior influential ranks full of people who stopped caring years ago.

Surely there is a better way?

Stock options are some kind of payment - so why not treat it as a pro rata accrument. You are the first hire - you get 2% of the company if you stay ten years. Leaving after five to get married and move country? Fine here is 1%, just sign here, and we all are happy.

No matter how nice your arresting officer is, everyone resents handcuffs.

Re: 10-Year Exercise Periods Make Sense

#72

Post by argonaut »

danielweber wrote: post #70
argonaut wrote: post #68

Earlier quoted context omitted.

You won't be told about funding rounds if your contract doesn't mention it. Like I said, any details you desire should go in the contract.

Yes, the standard contract is completely opaque to the employee, and they don't have the specialized knowledge required to understand it. And the company sure isn't going to help you. So value the funny-money at 0. If the industry wants to change this perception, then there should be a widespread standardization on a contract that is fair to the employees and it should be easy for employees to understand any diffs fr…

If a contract is opaque to you, you get a lawyer to look it over. End of story. If you sign a contract that is opaque to you, without talking to a lawyer or at least someone knowledgeable (e.g. personal friends that are senior engineers that have talked to lawyers), you only have yourself to blame, not Silicon Valley.

It goes without saying that I've rarely found the contracts I've signed to be opaque.

Re: 10-Year Exercise Periods Make Sense

#73

Post by anf »

Why doesn't everyone just exercise as soon as they join a company? At least at earlier stage startups, it seems that the amount of salary offered as compansation is at least an order of magnitude more than the amount of options. Given this ratio, it seems like most employees should have enough in liquid savings after even a few years to avoid taxes on the appreciation between stock grant and vest times.

Of course, there's the possibility that a startup will tank, but even in that case, losing out on having bought stock seems much smaller than the opportunity cost of not having worked at a sure-bet tech giant.

Re: 10-Year Exercise Periods Make Sense

#74

Post by argonaut »

guelo wrote: post #61
argonaut wrote: post #32

Earlier quoted context omitted.

Valuing stock options at zero is one of those HN memes that are repeated endlessly, mostly, I suspect, by people not from Silicon Valley who know few, if any, engineers who got rich from stock options. Just because stock options should be valued at less than a company's private valuation does not mean they are worth 0. Very few engineers actually value them at zero. Adding on to this comment: It's a spectrum, not a b…

Would you estimate the percentage of Web 2.0 Silicon Valley engineers that have been able to cash out anything significant (let's say > 1 year market salary) at greater than .1%?

Yes, because you are ignoring the fact that most engineers that make money off stock options are doing so at well-established startups that haven't gone IPO yet. Companies like Airbnb, etc. 4 years ago, everyone knew Airbnb, Pinterest, etc., would be successful.

Re: 10-Year Exercise Periods Make Sense

#75

Post by lhc- »

dasil003 wrote: post #29

Thank you for this Adam, as an early-stage startup guy who still hasn't made his FU money, this really nails all the salient points for me. Scott Kupor tries to decorate his article with references to employees' interests and considerations, but it's clear the guy has spent his career on the on the management/finance side where he doesn't really understand what it means to be a ground-level early-stage contributor to…

I agree with all of this. a16z and other VC's are pretty clearly on the side of capital, and don't really believe that labor provides any value. Employee's taking lower salaries and investing years of their lives don't provide any lasting value according to a16z. I just cannot believe that he would try to justify taking back fairly given compensation because an employee did not want to continue doubling down and investing more and more money and labor into a startup.

Re: 10-Year Exercise Periods Make Sense

#76

Post by dmansen »

jsprogrammer wrote: post #10
sama wrote: post #2

I agree with Adam's post and intensely disagree with A16Z's post on this topic. I don't think companies should take back stock compensation on a technicality. It'd be silly to even discuss taking back cash compensation when someone leaves a company! I appreciate Adam starting this trend years ago.

>10-Year Exercise Periods Make Sense >I agree with Adam's post >I don't think companies should take back stock compensation on a technicality. Isn't a 10-year period a technicality? Anything that can take back compensation is a technicality. Heh, can't even get a response without downmods.

here you go

your post doesn't add anything to the conversation

it might technically be a technicality but 10 years is long enough in startup life units that it doesn't matter

you're pointing out definitions when it was clear what the author meant and people don't like that because it's very annoying

Re: 10-Year Exercise Periods Make Sense

#77

Post by jsprogrammer »

dmansen wrote: post #76
jsprogrammer wrote: post #10

Earlier quoted context omitted.

>10-Year Exercise Periods Make Sense >I agree with Adam's post >I don't think companies should take back stock compensation on a technicality. Isn't a 10-year period a technicality? Anything that can take back compensation is a technicality. Heh, can't even get a response without downmods.

here you go your post doesn't add anything to the conversation it might technically be a technicality but 10 years is long enough in startup life units that it doesn't matter you're pointing out definitions when it was clear what the author meant and people don't like that because it's very annoying

If it is technically a technicality, which it is, then all the other fluff pieces and unpunctuated sentences in the world do not matter.

Maybe you could elucidate sama's "clear" meaning? It was lost on me. As far as I can tell, the post adds nothing but confusion to this conversation (you could counter by pointing out something of value contributed by the post).

Annoying is when people continually post contradictory or unclear things and never respond to their rightful critiques, or even change their future actions.

Re: 10-Year Exercise Periods Make Sense

#78

Post by argonaut »

tarr11 wrote: post #49
sama wrote: post #2

I agree with Adam's post and intensely disagree with A16Z's post on this topic. I don't think companies should take back stock compensation on a technicality. It'd be silly to even discuss taking back cash compensation when someone leaves a company! I appreciate Adam starting this trend years ago.

The answer here is for you to convince VCs and other investors to support this, publicly, and tell founders that they won't be punished for this on future fundraising. Hearing from A16Z that they don't support this is a big negative signal to any founder.

a16z is a major investor (growth round resulting in a board seat for a16z) in many of the companies that have extended vesting periods, such as Coinbase, Pinterest, and Asana. So I doubt they block companies from doing this.

Re: 10-Year Exercise Periods Make Sense

#79

Post by robrenaud »

american158931 wrote: post #5
sama wrote: post #2

I agree with Adam's post and intensely disagree with A16Z's post on this topic. I don't think companies should take back stock compensation on a technicality. It'd be silly to even discuss taking back cash compensation when someone leaves a company! I appreciate Adam starting this trend years ago.

What's your opinion on how an employee should deal with a founder who clearly believes more in the A16Z stance on stock options more than the Adam's? Apart from obvious knee-jerk reactions like "stop working there." Obviously it's in the founder's financial best interest (at least on the very surface level) for employees to not have the option to leave the company with shares at all. It is just lost money, from their…

> Obviously it's in the founder's financial best interest (at least on the very surface level) for employees to not have the option to leave the company with shares at all.

On the that same surface level, it's also in the founder's financial best interest for employees to work for free.

Fundamentally companies offer better terms in compensation to attract better talent. I spent 11 years at Google. I was recently looking around for new places to work, the lack of liquidity even in the face of success was a big deterrent for me to work at any early stage startup.

Re: 10-Year Exercise Periods Make Sense

#80

Post by aaronbrethorst »

argonaut wrote: post #74
guelo wrote: post #61

Earlier quoted context omitted.

Would you estimate the percentage of Web 2.0 Silicon Valley engineers that have been able to cash out anything significant (let's say > 1 year market salary) at greater than .1%?

Yes, because you are ignoring the fact that most engineers that make money off stock options are doing so at well-established startups that haven't gone IPO yet. Companies like Airbnb, etc. 4 years ago, everyone knew Airbnb, Pinterest, etc., would be successful.

Kind of like how everyone knew Evernote would be successful four years ago? Or Gilt? Or Dropbox? Or Fab? Or Foursquare?
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