161–170 of 243 posts
There is a downside to RSUs. Say you work for a private company with a high valuation, e.g. AirBnB at $25B, and you are granted 0.01% equity over 4 years. That means you are vesting $2.5m of RSUs over 4 years, and these RSUs are taxable at that amount. Typically for folks earning over $150k/year in base salary, particularly if married, even half as much will put you into AMT territory, and you will end up paying a si…
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That's the name of the game. You take a risk to make big money, and sometimes that risk doesn't pay off.
Or you start working for a company thinking their product(s) are cool, strong and survivable as its own thing, and then it turns out the plan was not to build a business but to cash out.
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> So it looks like we're in agreement that this primarily would apply to the upper levels of ibanking when there is an expectation of deal sourcing. I've never worked in finance, but I have a lot of friends who do. From the day they entered (ie. as junior analysts), up or out has been the mantra. You simply cannot be in a position for more than a few years. If you're not promoted to the next level, you're fired (thou…
Where do a lot of them tend to end up if they jump ship, and where to they tend to end up if they don't have the foresight to jump ship and are fired?
A good portion of the business people you meet outside of finance are people who wanted to work in finance but couldn't hack it.
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In my experience the salary difference isn't usually that large. Sometimes it is, and some companies do pay unusually low salaries in exchange for options, obviously increasing risk, perhaps to an undesirable level. I'm CEO and co-founder of a funded company. We pay competitive salaries + options. I don't begrudge someone who isn't interested in options. Options are actually expensive to me. We are still fairly early…
> In my experience the salary difference isn't usually that large. Speaking as someone who recently did a round of interviewing with a mix of established companies and startups, $50k is a _very_ conservative guess. The difference between my Google offer and the highest startup one was ~$100K - if you drop to the average startup offer, it goes up to ~$150k. And that was at ~3.5 years of experience - it gets worse as y…
That said, this is makes sense to me. Google's stock options aren't making employees wealthy these days. Yet it's still a fantastic company and obviously compensates with salary. On the other hand, no startup that I know of can pay 3-400K salaries for 3-4 years exp.
Also it should be said that the type of work you likely do and the culture at a large public company will likely be very different from a small startup. Culture, ability to influence direction, large potential upside (though unlikely) are reasons people continue to pick startups despite lower salaries.
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> same conclusion many years ago and has been making money "arbing" it out ever since. Can you (or someone else) please explain how you'd make money based on set of assumptions listed above?
Basically your thesis is that as an asset class, late stage private technology companies are underpriced, since the presumed employee option pool will be smaller than previously assumed, and thus dilution will be smaller than previously assumed. Thus you can bid a higher price than your competitors and still come out ahead in your investment in this asset class. What I don't understand is how you get around the fact…
If you didn't lead investments and instead diversified substantially amongst late-stage companies, you could probably get sufficient overall exposure to the class so as to not be driven by the performance of individual companies.
In reply to your other comment, VC investors tend to have a "thesis" about a particular market but PE firms can and do have a much broader thesis. "Changing conditions have led to late-stage equity being undervalued as an asset class" would definitely qualify.
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> same conclusion many years ago and has been making money "arbing" it out ever since. Can you (or someone else) please explain how you'd make money based on set of assumptions listed above?
Basically your thesis is that as an asset class, late stage private technology companies are underpriced, since the presumed employee option pool will be smaller than previously assumed, and thus dilution will be smaller than previously assumed. Thus you can bid a higher price than your competitors and still come out ahead in your investment in this asset class. What I don't understand is how you get around the fact…
Picking the winners isn't so hard if you can protect your investment like this. The lower bounds on their expected returns isn't $0.
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> same conclusion many years ago and has been making money "arbing" it out ever since. Can you (or someone else) please explain how you'd make money based on set of assumptions listed above?
Basically your thesis is that as an asset class, late stage private technology companies are underpriced, since the presumed employee option pool will be smaller than previously assumed, and thus dilution will be smaller than previously assumed. Thus you can bid a higher price than your competitors and still come out ahead in your investment in this asset class. What I don't understand is how you get around the fact…
Since JPM is far from equivalent and most VC capital you don't have access to short, in practice I assume that a) you would assume that any startup receiving financing / investments at unicorn valuations is already a winner, and b) go long a sufficiently large and diverse basket to try to eliminate risk.
Unfortunately (a) is so far from true I'm not sure this would be an effective investment thesis.
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> In my experience the salary difference isn't usually that large. Speaking as someone who recently did a round of interviewing with a mix of established companies and startups, $50k is a _very_ conservative guess. The difference between my Google offer and the highest startup one was ~$100K - if you drop to the average startup offer, it goes up to ~$150k. And that was at ~3.5 years of experience - it gets worse as y…
Interesting data point. Thanks for sharing. I'm no longer in SF so may be out of touch with current salary gaps. That said, this is makes sense to me. Google's stock options aren't making employees wealthy these days. Yet it's still a fantastic company and obviously compensates with salary. On the other hand, no startup that I know of can pay 3-400K salaries for 3-4 years exp. Also it should be said that the type of…
To be fair, the Google offer does include RSUs. However, since you can immediately sell those I think its fair to treat them like cash.
It's interesting to see the popular response to this thread being one where people think employees are better off with salary over options. This seems crazy to me as I have watched many close friends cash out options from companies including Google, Yelp, Apple and Pandora and buy houses (some with cash), start companies, become investors and/or take long sabbaticals with the proceeds from their options. With salary…
I would like to point out that there is a practical third option given that some people say "Pay Employees A Market Salary", whereas some companies may not yet be able to afford it. In practice when you're a technical founder (or cofounder with one), you might have three fantastic people you can't afford, great technical roles. They'd do great work for 40 hours per week, they believe in your vision and you, because y…
Working really hard and acquiring technical debt isn't really an alternative to hiring and compensating employees, it's (usually) a prerequisite. A single technical cofounder can be enough to get a company to Series A, but at some point you have to hire people.
If we wanted to discuss an actual alternative, it would be to hire people in other locations at far lower rates than those commanded in SV. But that comes with its own set of problems.