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Who pays when startup employees keep their equity?

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Re: Who pays when startup employees keep their equity?

#221

Post by wtvanhest »

wtvanhest wrote: post #158
cubano wrote: post #109

Earlier quoted context omitted.

It wouldn't be very hard to collect existing data points and come up with a rough approximation, would it? I would think enough data now exists to allow such an analysis to have some idea of those numbers.

I doubt it. The past 5 years have been somewhat unique in that companies were given lots of cash with liquidation preferences and 'fake' valuations. A good example are T Rowe Price's 'unicorns': http://www.marketwatch.com/story/uber-airbnb-and-other-unico... If UBER IPOs for any less than $12.5Bn, what will the early employees get? Probably not much compared with the value they helped create. Right now, that looks im…

*precedent not president

Re: Who pays when startup employees keep their equity?

#222

Post by Retric »

dpark wrote: post #179
Retric wrote: post #128

Earlier quoted context omitted.

If X, says nothing about if not X. Dual income no kids @ 200+k can be a great way to save a lot of money. But, you have far less control over your spouses spending and willingness to relocate. Also, even if you don't move having 500+k / person in the bank is life changing. The median bay area house is 635,000$ which becomes affordable while saving money. Dual income with a 1+ Million down payment and you can actually…

In general conversation, "if X" often says a lot about "if not X". "If you're a white male on America, you have entrenched institutional benefits" actually does imply something about non-white/non-males. It implies that non-white/non-males do not have the same entrenched institutional benefits. General conversations do not follow the rules of prepositional logic. When you repeatedly refer to being single, you imply t…

The glaring exception for dual incomes as I said was you can't control your partners behavior. That's a major caveat and derails the conversation. You go from stuff you can do, to some sort of theoretically ideal couple. In most areas the major savings is being socially acceptable to share a bedroom with someone and being a 1 car family. But, in SF you may already be sharing a bedroom limiting the savings.

Further a 100k income simply can't afford to buy a 900k place. 900k * .06 = 54k/year + taxes + repairs + insurance + utilities. Put a 500k down payment on that and suddenly it's a 400k place and much higher taxes. Now you might be able to swing 900k that with a roommates, but again not having them is a major life change.

Re: Who pays when startup employees keep their equity?

#223

Post by dpark »

Retric wrote: post #222
dpark wrote: post #179

Earlier quoted context omitted.

In general conversation, "if X" often says a lot about "if not X". "If you're a white male on America, you have entrenched institutional benefits" actually does imply something about non-white/non-males. It implies that non-white/non-males do not have the same entrenched institutional benefits. General conversations do not follow the rules of prepositional logic. When you repeatedly refer to being single, you imply t…

The glaring exception for dual incomes as I said was you can't control your partners behavior. That's a major caveat and derails the conversation. You go from stuff you can do, to some sort of theoretically ideal couple. In most areas the major savings is being socially acceptable to share a bedroom with someone and being a 1 car family. But, in SF you may already be sharing a bedroom limiting the savings. Further a…

> in SF you may already be sharing a bedroom limiting the savings.

I mentioned that in another fork of this thread but was being facetious. Adults do not generally share a bedroom unless they're in a sexual relationship. Sharing a bedroom platonically is not a reasonable thing to expect people to do to save money. Sharing an apartment, yes. A bedroom, no.

> Further a 100k income simply can't afford to buy a 900k place. 900k .06 = 54k/year + taxes + repairs + insurance + utilities. Put a 500k down payment on that and suddenly it's a 400k place and much higher taxes. Now you might be able to swing 900k that with a roommates, but again not having them is a major life change.*

Your numbers don't make sense. First, if you're paying 6% on your mortgage, you're overpaying by a ton. Assuming you even try to get a decent rate, you're looking closer to 3% once you factor in the tax advantages. Second, if you can save 500k in 10 years, you're saving close to 50k/year plus paying for housing. So it's a lie to claim you cannot afford 54k/year in house payments.

Re: Who pays when startup employees keep their equity?

#224

Post by wyman »

rbcgerard wrote: post #215
wyman wrote: post #198

Earlier quoted context omitted.

Where are all these secondary market companies "arbing" it out on employee stock option liquidity? The market should be HUGE, both for locked-in employees, and for buyers who want a small discount on hot startups. This would totally solve the 90-day exercise period problem for the employees, without requiring company goodwill. Some companies like ESOFund, 137 Ventures, EquityZen can do deals without company involveme…

Usually the major problem with buying employee shares on the secondary market is information asymmetry - the company is not going to provide the buyer with any information, therefore unless the buyer is intimately familiar with the inner workings of the company (I.e. An investor, or incredibly well plugged in) they really have no idea how the company is doing (despite being a "hot" company) which in turn makes it inc…

That's definitely true - so basically, the buyer is more averse to buying especially considering they are essentially investing in the dark, going off of public news or hearsay? For some of the most-fundraised private companies e.g. Uber, Airbnb, Stripe etc. I figure many would be satisfied with the last private round valuation or a small discount, and the loss/market inefficiency here (5-10%) would still allow most deals to work. However, as a seller, your pitch, especially for less-well-known companies, would be much more difficult.

Re: Who pays when startup employees keep their equity?

#225

Post by Retric »

dpark wrote: post #223
Retric wrote: post #222

Earlier quoted context omitted.

The glaring exception for dual incomes as I said was you can't control your partners behavior. That's a major caveat and derails the conversation. You go from stuff you can do, to some sort of theoretically ideal couple. In most areas the major savings is being socially acceptable to share a bedroom with someone and being a 1 car family. But, in SF you may already be sharing a bedroom limiting the savings. Further a…

> in SF you may already be sharing a bedroom limiting the savings. I mentioned that in another fork of this thread but was being facetious. Adults do not generally share a bedroom unless they're in a sexual relationship. Sharing a bedroom platonically is not a reasonable thing to expect people to do to save money. Sharing an apartment, yes. A bedroom, no. > Further a 100k income simply can't afford to buy a 900k plac…

Interest is only part of the cost of a loan you also need to pay principle if you don't have a large down payment your interest rate increases. Feel free to calculate a 900k home w/ 0.8% property taxes and insurance. http://www.bankrate.com/calculators/mortgages/mortgage-payme...

You do get to deduct interest, but you lose out on the standard deduction you can also play a lot of games with savings. Things like not taking a car loan because use can pay with after tax money saving on the loan and paying less for the car. Financing your own credit card saves money where if your house poor debt is just a fact of life etc. You can also more safely have a high deductible health insurance.

Also, you get interest on savings so your not saving 50k per year to get 500k in 10 years.

Re: Who pays when startup employees keep their equity?

#226

Post by dpark »

Retric wrote: post #225
dpark wrote: post #223

Earlier quoted context omitted.

> in SF you may already be sharing a bedroom limiting the savings. I mentioned that in another fork of this thread but was being facetious. Adults do not generally share a bedroom unless they're in a sexual relationship. Sharing a bedroom platonically is not a reasonable thing to expect people to do to save money. Sharing an apartment, yes. A bedroom, no. > Further a 100k income simply can't afford to buy a 900k plac…

Interest is only part of the cost of a loan you also need to pay principle if you don't have a large down payment your interest rate increases. Feel free to calculate a 900k home w/ 0.8% property taxes and insurance. http://www.bankrate.com/calculators/mortgages/mortgage-payme... You do get to deduct interest, but you lose out on the standard deduction you can also play a lot of games with savings. Things like not ta…

I'm quite painfully aware of what a $1MM mortgage costs with taxes and insurance. The point is that if you can save enough to put down half of that in 10 years, you could swing the cost of the mortgage today. When you talk about saving, you have to remember that 1) you still have to live somewhere, and that's definitely not free, and 2) home prices are generally increasing over time so you probably need to save more than you think. On the subject of the standard deduction, you're right that you'd lose that, but with a jumbo mortgage, you'll still come out ahead for many years.

Interest on savings is negligible. If you take the highest money market rates, you'll get just north of 1%. If you stick the money in a 5-year CD, you'll get 2% and lower liquidity. Meanwhile the housing market is rising faster (how long that's sustainable is unknown).

I'm not sure what you're talking about with the car loan. If you think it's worth having a cushion of cash in the bank (I certainly think so) so that you can do things like buy your cars in cash, then saving for 10 years so that you can dump all the money into the house is a terrible idea because you've just lost your cash cushion. (Your best bet for saving on cars is to just buy fewer of them anyway.) For the high-deductible insurance, you only need a few thousand in the bank to take the risk out of that. You need enough cash on hand to cover your deductible. After that it basically looks like any other insurance plan. And certainly, a larger cash cushion makes copay/coinsurance easier to handle, but that's not specific to high-deductible insurance.

If you think you should live far beneath your means as a general rule, I can't argue with that. There's no compelling argument for why you should spend all your money if you have the option to save. It insulates you from risk and allows you to retire sooner if that's your goal. But if you are living far beneath your means so that you can just dump all your savings into a house in 10 years that you could afford today with the same income, I think you're wasting your time, especially in a market like SF where home prices are increasing so rapidly.

Re: Who pays when startup employees keep their equity?

#227

Post by jsprogrammer »

madgar wrote: post #218
jsprogrammer wrote: post #181

Earlier quoted context omitted.

Do you believe companies can accomplish anything they envision, without employees? Or do you think employees are entirely fungible? Does my last employer not have a large contract with Prudential, because of my work?

> Or do you think employees are entirely fungible? This is what every self-respecting capitalist believes and knows in their heart. Employees are resources. If a founder doesn't know that they will fail. Maybe you thought startups were an exception and that startup employees are unique snowflakes but BigCo employees are drones? > Does my last employer not have a large contract with Prudential, because of my work? If…

It was a consulting firm trying to break in with a larger client, so they had to move to other projects. Last I saw, they were working on Android projects.

>Maybe you thought startups were an exception and that startup employees are unique snowflakes but BigCo employees are drones?

No, I just don't think anything can be done without people and that one person is not the same as another.

Re: Who pays when startup employees keep their equity?

#228

Post by srtjstjsj »

nommm-nommm wrote: post #136
Retric wrote: post #133

Earlier quoted context omitted.

Depends on # of kids. Many great schools are well under 10k/year, but that's only so useful if you have 5 kids.

9k a year is not cheap.

It's cheap compared to paying an extra 20k/yr in rent or mortgage and property tax.

Re: Who pays when startup employees keep their equity?

#229

Post by srtjstjsj »

usaar333 wrote: post #194
sokoloff wrote: post #191

Earlier quoted context omitted.

Citation, please? Most of the time, RSUs are taxable at the time of vesting, as most plans vest and release the shares simultaneously.

That depends on the plan. Plenty of private companies don't release the shares as they vest. Larger ones - and public ones - generally will though.

Then what does "vest" mean? Are you conflating options with RSUs?

Re: Who pays when startup employees keep their equity?

#230

Post by jonny_eh »

home_boi wrote: post #37
timcederman wrote: post #26

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…

Does the government take private RSU's as payment for taxes? It seems unfair to tax people for equity that even the government itself doesn't value.

But if I pay you bitcoin for goods/services, you still need to pay tax on that, in USD.
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