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10-Year Exercise Periods Make Sense
131–140 of 149 posts
Re: 10-Year Exercise Periods Make Sense
#132Earlier quoted context omitted.
Every time any tech company goes IPO or gets acquired for a large number (~>$50M), that's on average 1,000+ engineers who probably made some amount of money from options.
These numbers don't make sense to me. You're saying an average tech company that exits has over 1000 engineers alone? Certainly a $50M company can't support 1000 engineers. Or a $100M one. (And, just for fun, if a co exited at $1B with 1000 engineers... Let's use round numbers to sketch it out. Let's say the engineers alone get 10% of that value (which seems generous). That's $100M. Divided amongst 1000. So $100K. No…
I'm saying the average number of engineers is pretty high (because it's an average, it's skewed up).
Regardless, quibbling over this doesn't really detract from my broader point which is that every time you see a company go public, that's hundreds, if not thousands, of engineers that made some money off their options. Some got rich. Most probably just ended up with an above-market salary. Others (those who just joined) get a tiny amount. The same applies for acquisitions, though obviously you'll need to scale the number up or down depending on the $$.
Re: 10-Year Exercise Periods Make Sense
#133Earlier quoted context omitted.
You'd still have to pay taxes on it as per your (audit-able) 409a valuation.
Sure, depending on the country it works different ways. But if there is tax to pay, it is on a low valuation (very early, remember).
To be fair, there is another catch-22, which is that a low valuation means the startup is early-stage, which means your options are worth less.
So sure, you can early exercise, but there is a greater chance your early exercising will lose you money (if the options end up worthless).
Re: 10-Year Exercise Periods Make Sense
#134Why 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, th…
Vesting. You can't exercise unvested options - the company needs to have set up an early exercise option as a part of it's stock plan for this to work.
But whether they offer an early exercise program is a very good question to ask any early-stage company you're planning to join.
Re: 10-Year Exercise Periods Make Sense
#135Scott'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.…
Don't hate the player hate the game :) The human genome is what's screwed up. Things well covered in recent years: Power increases hypocrisy and cognitive bias over-values our own contribution to our success (it is my capital and my idea that made all this wealth, not your work). Also capitalism is explicitly about extracting surplus value from employees. I think this type of behavior from people like Scott is, on the whole, to be expected. But... anyway our genetic predisposition towards fairness makes a rage reaction to this behaviour expected too so hate away. :)
Re: 10-Year Exercise Periods Make Sense
#136Earlier quoted context omitted.
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…
you said you wanted a response and not just downvotes. i tried ¯\_(ツ)_/¯
Re: 10-Year Exercise Periods Make Sense
#137Earlier quoted context omitted.
Sure, depending on the country it works different ways. But if there is tax to pay, it is on a low valuation (very early, remember).
To be fair, there is another catch-22, which is that a low valuation means the startup is early-stage, which means your options are worth less. So sure, you can early exercise, but there is a greater chance your early exercising will lose you money (if the options end up worthless).
Note I said "give stock", not "give options". Granted, this doesn't solve everything - it was an aside comment about early stage vesting (where liquidation events can be a long way off)
Re: 10-Year Exercise Periods Make Sense
#138I understand where the 10 year exercise period came from and I can understand the arguments against it.
A solution I haven't seen put forward is a compromise between the common 90 day window and the 10 year window, which is to have an exercise period equal to the amount of time you were an employee. This discourages people from bouncing around jobs collecting equity but gives a reasonable timeframe in which to exercise if you do want to leave after putting 5 years into growing the company.
Re: 10-Year Exercise Periods Make Sense
#139Earlier quoted context omitted.
The tax burden is the primary problem, that is what all this discussion is really about.
I dunno, I had to pay nearly $15k to exercise options and while I barely escaped amt issues, the money wasn't easy. And represented a 10% rebate on after-tax salary for the period I worked for that company.
Sure, that happens. But it is a very different situation from the one where AMT (in the US, other jurisdictions have similar issues) makes it financially impossible to exercise your options.
Re: 10-Year Exercise Periods Make Sense
#140Earlier quoted context omitted.
I find this sort of burden-shifting abhorrent. It's the company who will spend thousand or tens of thousands of dollars having the contract made. It's the company who gets to amortize the costs of a complicated contract over many hiring interactions. It's the company who has the advantage of a strong information and experience asymmetry. In short, the company has a lot more power. If somebody with power screws somebo…
Sure. But none of your perfectly valid comment changes the fact that if you are clueless about a contract, you should either talk to a lawyer (or otherwise someone knowledgeable) or decline to sign it. It goes without saying that employment contracts all use the same language, I have never personally run into a clause I found opaque or confusing.
You are making the argument that whatever the company does is legal. That's fine and I don't disagree with it.
It's not just a matter of not understanding the entire legal contract. Someone could understand every single thing, but not realize, like you said above, "you won't be told about funding rounds if your contract doesn't mention it." They wouldn't even think about that because they aren't experts in that field.
I've negotiated plenty of employment and IP agreements. I've found 100% willingness to, at the least, discuss them. But employee options grants must often be the same for everybody. And for a normal employee (as opposed to some C-level executive hire), once you start negotiating "in case I leave early I want more rights" you are signaling bad things.
Really, all I'm telling people is "if you don't understand something fully, assume it's worthless." Your reaction is that, for some reason, employees should jump into the deep end of the pool and try to outsmart the VCs at the game they play every single day of their lives. And for what purpose? The vast majority of the time the options are going to end up at $0 anyway.
I say no. Assume legalese is written in order to screw you over. Smile and accept the options because you might get lucky, but never ever stay late at the office imagining how they will make you rich.