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10-Year Exercise Periods Make Sense

dangelo.quora.com

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Re: 10-Year Exercise Periods Make Sense

#91

Post by themartorana »

morgante wrote: post #85

Scott's post genuinely makes me angry. It uses subtle language to imply that employees are inferior individuals who are lucky that the owners of capital deign to share anything with them. In Scott's worldview, choosing to leave a company before it has exited is inherently disloyal. Even if they're paying you under market. Even if you could contribute more value elsewhere. I wonder if he would accept similar terms: 1.…

Couldn't agree more. If part of my compensation is equity, then I should get to keep it when I depart. If I don't, you're basically telling me I wasn't worth the compensation I was getting.

Taking back shares is akin to a temper tantrum, and Scott's post really, really shows no respect for the engineers that make his companies worth any money at all. It also hyper-values people who can flog a Power Point presentation, whether or not those people end up contributing the lion's share of the engineering.

It's a rather bald-faced admission of how employees are actually valued, and how distasteful compensating them is.

Re: 10-Year Exercise Periods Make Sense

#93

Post by aaronbrethorst »

argonaut wrote: post #82
aaronbrethorst wrote: post #80

Earlier quoted context omitted.

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

The only companies whose options are worth 0 ( zero ) in your example are Gilt and Fab. Evernote and Foursquare are still around - your options are worth less than their private valuations if you joined 4 years ago, but they are not worth 0, even after dilution. Foursquare is still a $650M company. And only in some twisted world is Dropbox not a success. They're a friggin multi-billion dollar company even if they are…

> It's also rather telling that these are among the worst examples of pre-IPO tech companies you can think of.

Nah, just the first ones that came to mind. Theranos is another good one I should've mentioned.

Re: 10-Year Exercise Periods Make Sense

#94

Post by lukeschlather »

danielweber wrote: post #60
american158931 wrote: post #5

Earlier quoted context omitted.

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…

During salary negotiations, say "tell me why I should think my options are safe against dilution."

From my (somewhat limited, but concrete) experience, there is no way to get a satisfactory answer to this question. Just value the options at $0 and set your salary expectations accordingly.

Re: 10-Year Exercise Periods Make Sense

#95

Post by hkmurakami »

morgante wrote: post #85

Scott's post genuinely makes me angry. It uses subtle language to imply that employees are inferior individuals who are lucky that the owners of capital deign to share anything with them. In Scott's worldview, choosing to leave a company before it has exited is inherently disloyal. Even if they're paying you under market. Even if you could contribute more value elsewhere. I wonder if he would accept similar terms: 1.…

FYI, you should be wary about any A16Z company then. This sentiment is nearly identical to what Ben Horowitz talks about here: http://www.bhorowitz.com/one_management_concept_from_how_to_...

And Ben Horowitz has publicly supported Scott Kupor's blog post on Twitter.

Given that he and Marc Andreesen run the show there, we can reasonably extrapolate that this is the firm's preferred stance. In fact, if either of them was against Scott Kupor's position, then the blog post likely would not have seen the light of day in the first place.

Re: 10-Year Exercise Periods Make Sense

#96

Post by pfarnsworth »

This is a well thought out answer, and frankly embarrasses the response from the VC. Of course the VC wants to protect his own interests, he's just obfuscating it by pretending he's talking about "wealth transfer" and "fairness". What a bunch of BS, and I'll never work for a company that he is "advising". Who knows what sort of dirty tricks he'll play against the employees.

Re: 10-Year Exercise Periods Make Sense

#97

Post by hkmurakami »

argonaut wrote: post #78
tarr11 wrote: post #49

Earlier quoted context omitted.

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.

Notice the companies you listed. They are/were the absolute hottest companies when they raised their rounds, and are still some of the most prominent startups around.

Put another way, they have negotiating leverage.

The ones with the leverage (including YC backed companies) have to lead the charge to change the status quo and "the standard". The average startup doesn't have the leverage to do something nonstandard. The fact that YC has come out in support of 10 year vesting periods and is making it a standard is a massive step forward.

Re: 10-Year Exercise Periods Make Sense

#98

Post by hkmurakami »

I've written several times in the past that only companies with substantial negotiating leverage against the gatekeepers of capital can afford to buck what is considered standard.

Hence we've only seen the hottest companies achieve 7-10 year exercise terms. https://github.com/holman/extended-exercise-windows

I've argued that as a cohort, YC is the best candidate to make a large push against VCs and make 7-10 years vesting terms an industry standard. Learning that this is now the case is incredibly exciting. https://news.ycombinator.com/item?id=11198991

harj 119 days ago | parent | on: Fixing the Inequity of Startup Equity

We're excited to make 10 years the new standard option exercise window for startup employees. Each of us have personally experienced someone close to us dealing with the stress of trying to exercise their options within 90 days and it sucks. We'd like to see more companies making this change, we'll be keeping the public list of YC companies who have either implemented or pledged to implement an extended window, updated here: https://triplebyte.com/ycombinator-startups/extended-options

Re: 10-Year Exercise Periods Make Sense

#99

Post by argonaut »

hkmurakami wrote: post #97
argonaut wrote: post #78

Earlier quoted context omitted.

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.

Notice the companies you listed. They are/were the absolute hottest companies when they raised their rounds, and are still some of the most prominent startups around. Put another way, they have negotiating leverage. The ones with the leverage (including YC backed companies) have to lead the charge to change the status quo and "the standard". The average startup doesn't have the leverage to do something nonstandard. T…

Asana was never a hot company.

Barely any companies even have extended exercise windows, so you can't go around excluding companies from the list because "they don't count". Also your logic is almost circular, because a16z tends to only invest in hot/great companies, by definition.

You can go down the list: https://github.com/holman/extended-exercise-windows. Many other companies have a16z as an investor. Tilt and CodeCombat are two of them.

Re: 10-Year Exercise Periods Make Sense

#100

Post by argonaut »

aaronbrethorst wrote: post #93
argonaut wrote: post #82

Earlier quoted context omitted.

The only companies whose options are worth 0 ( zero ) in your example are Gilt and Fab. Evernote and Foursquare are still around - your options are worth less than their private valuations if you joined 4 years ago, but they are not worth 0, even after dilution. Foursquare is still a $650M company. And only in some twisted world is Dropbox not a success. They're a friggin multi-billion dollar company even if they are…

> It's also rather telling that these are among the worst examples of pre-IPO tech companies you can think of. Nah, just the first ones that came to mind. Theranos is another good one I should've mentioned.

Theranos was never in the category of going-to-IPO-soon.
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