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What I Wish I'd Known About Equity Before Joining a Unicorn

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Re: What I Wish I'd Known About Equity Before Joining a Unicorn

#31

Post by tibbon »

I've worked at several small startups, in the range of seed to C-rounds. Except for the one that I've was co-founder, I never knew when/how to ask or negotiate options things. It always felt like something that was supposed to happen at 'other companies' and not the one I was applying/negotiating to work at.

I know I should in theory ask to see the cap table, but it seems awkward and if shown it right then I'm not sure I'd entirely know how to read it properly (along with the terms), or how to immediately negotiate from it.

Stock options have been frequently presented to me as just a standard piece of paper offered, and not a thing for negotiation. It feels easier and less scary to haggle on salary (which I do quite well at generally).

Is it even reasonable to ask for twice as many options when I'm negotiating? Or is that like asking for double the salary and not reasonable?

Is it reasonable to ask for a bonus (at an A-round startup) in terms of options after being there for a year?

Re: What I Wish I'd Known About Equity Before Joining a Unicorn

#32

Post by uiri »

zzalpha wrote: post #12
fermigier wrote: post #10

Should have been titled "... in the USA" as tax rules are very different in other countries. For instance, in France, you only owe money to the taxperson when you sell your shares, for a profit. If you sell for a loss, this is tax-deducible.

Doesn't apply to Canada, either. Well, unless the options are for shares in a non-Canadian controlled private corporation. Got bit by that little loophole in my late stage startup when facing options expiration...

Just to clarify for those who may be less familiar with Canadian tax rules: Canadian-controlled private corporation is exactly what it sounds like and has special tax rules (including lower tax rates) in Canada.

I interpret the parent as referring to options in a corporation that is not a CCPC rather than options in a private corporation controlled by non-Canadians.

Re: What I Wish I'd Known About Equity Before Joining a Unicorn

#33

Post by JonFish85 »

chris_7 wrote: post #19

> fixed PTO Why on earth is this a downside? "Unlimited vacation" is a scam.

If you ever wanted confirmation of this, suggest to your company that instead of "unlimited vacation", which is really vague and hard to understand, the company give 8 weeks vacation that doesn't accrue or roll over year to year.

Re: What I Wish I'd Known About Equity Before Joining a Unicorn

#35

Post by zzalpha »

econner wrote: post #24
jaymzcampbell wrote: post #5

As always the main rule you need to live by is value the equity at zero and you'll be (maybe) happy. Short of being a founder (and thus not really being offered equity) I have never treated these things as anything beyond a minor on paper "bonus". Given you'd be lucky to get anything more than 1% even as a first employee I find them next to worthless as early stage motivators. Which is how everyone seems to play it -…

This advice is often given but it's easier said than done. Let's say you work at a unicorn for 3 years and in that time it goes up 10x in VC fantasy land valuation. On paper you have a lot of money and the company reasonably might go public a couple years after you leave. Let's say you're granted about a year's salary in shares when you first join so you've vested $100K for a round number. When you leave that equity…

It's much worse in late stage startups where expiration means use em or lose em.

It comes down to a gamble. With your numbers, a big one.

But until that choice is forced on you, I say wait. There's no reason for an early exercise. Even with slight tax advantages I'd rather call that the cost of minimizing my risk.

Re: What I Wish I'd Known About Equity Before Joining a Unicorn

#36

Post by edshiro »

xutopia wrote: post #7

I've been sucked in to paying money to exercise my stock options after I left a company. On paper I could pay off my house today... except I'll most likely never see that money. Nowadays I ignore equity and look at the bona fide package they offer and how enticing the challenge they have can be and decide based on that. Equity promises just don't fall in the balance anymore.

This. I would also optimise on cash compensation. Stock options are a nice to have but the windfall is ultimately very hypothetical since most startups fail.

Don't fall for the stock options trap if you are an employee: you are just as fortunate (or not) with a lottery ticket.

Obviously if you are a founder it's a different story...

Re: What I Wish I'd Known About Equity Before Joining a Unicorn

#37

Post by krallja »

Someone1234 wrote: post #20
fermigier wrote: post #10

Should have been titled "... in the USA" as tax rules are very different in other countries. For instance, in France, you only owe money to the taxperson when you sell your shares, for a profit. If you sell for a loss, this is tax-deducible.

The US really does have a lot of problems with their tax system to be honest. For a country whose citizens outwardly hate tax, you'd think they would have one of the best, most straightforward, and fair tax systems in the world. But instead you have one of the most convoluted, loopholey, broken systems in the world. Whereas in countries where taxes aren't as "hated" (Europe, Canada, etc) they don't pay a cent to file…

It doesn't cost money to file taxes in the United States. Well, you have to pay for the stamps, paper, and the printer ink, I guess.

Re: What I Wish I'd Known About Equity Before Joining a Unicorn

#39

Post by apercu »

mikepurvis wrote: post #23
equalarrow wrote: post #8

Great post and I totally agree. I recently talked to my financial advisor about my current company and we went through all the numbers for various pricing scenarios (of a public offering) over the next 4-6 year, at various valuations. From his point of view, he encourages me to stay the course - quite the opposite from most of the tech friends I know (most usually don't stick around after a few years). On a side note…

JIRA is what you make of it. My comment is that it requires a ton of gardening to keep it useful. You probably need 1 person for every 5-10 devs who has JIRA-wrangling as a primary responsibility that eats a significant chunk of their time. Part of this is the nature of project management, but part of it is that JIRA's workflows for basic tasks like "close as duplicate" or "do this action on all issues linked to issu…

Exactly. Jira UX is terrible (it've very hard to find things) and closing a ticket that was a mistake is at least 3 steps.
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