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Why I will not exercise my GitLab stock options

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Re: Why I will not exercise my GitLab stock options

#201

Post by nojvek »

johnmarcus wrote: post #99

Back in 2003, after i had given my two weeks notice but had not left yet, I posted on Yahoo finance that i thought the company i worked for "underpaid employees". That was it. And who is reading Yahoo finance anyway? I was asked to leave prior to the two weeks ending, and at least one person at where i was being hired had read it. I deleted it, pronto, and nothing bad happened to me, but it was definitely a learning…

So if you openly complain about sexual harassment or employers treating their employees in an unethical way, no one wants you?

Re: Why I will not exercise my GitLab stock options

#202

Post by pfarnsworth »

hkmurakami wrote: post #171
pfarnsworth wrote: post #156

Earlier quoted context omitted.

I actually have no idea what you're talking about. 0.27 strike price was the 409A valuation at the time that the options were issued. There is usually another 409A valuation after the funding round. But we don't know what that value is. You can speculate, but using the funding round as the amount is wrong.

There's typically a lower bound of 1/10 the paper valuation, otherwise you risk the IRS coming after you at some future date. That relative lower bound ratio should be consistent across rounds, hence I'm approximating with a paper valuation ratio with a fudge factor of 2.

The company doesn't control the 409A valuation. That's done by an independent company who determines the 409A. So it's not something that is in the control of the company.

Re: Why I will not exercise my GitLab stock options

#203

Post by hkmurakami »

pfarnsworth wrote: post #202
hkmurakami wrote: post #171

Earlier quoted context omitted.

There's typically a lower bound of 1/10 the paper valuation, otherwise you risk the IRS coming after you at some future date. That relative lower bound ratio should be consistent across rounds, hence I'm approximating with a paper valuation ratio with a fudge factor of 2.

The company doesn't control the 409A valuation. That's done by an independent company who determines the 409A. So it's not something that is in the control of the company.

You can't control them, but you can definitely "provide guidance" to the independent company as to what your desires are. They obviously won't give you something egregious but it's you who's paying them and will continue to pay them every year (a 409a valuation needs to be within 1 year to be valid for options). If a firm doesn't do something you like, you'll move onto the next one.

Re: Why I will not exercise my GitLab stock options

#204

Post by jdmichal »

pfarnsworth wrote: post #202
hkmurakami wrote: post #171

Earlier quoted context omitted.

There's typically a lower bound of 1/10 the paper valuation, otherwise you risk the IRS coming after you at some future date. That relative lower bound ratio should be consistent across rounds, hence I'm approximating with a paper valuation ratio with a fudge factor of 2.

The company doesn't control the 409A valuation. That's done by an independent company who determines the 409A. So it's not something that is in the control of the company.

Sure, just like a house appraiser is an independent entity who determines the value of the house... Except that they always take the contract price in mind and basically attempt to not rock the boat. If they can make a case for a valuation close to the contract price, that's what they'll use. If they go too high or low, they risk killing the deal -- and their continuing business with the involved parties. Same problem as with legal arbiters and binding arbitration contracts.

Re: Why I will not exercise my GitLab stock options

#205

Post by jdmichal »

owenversteeg wrote: post #139
bdonlan wrote: post #115

Earlier quoted context omitted.

It's called margin, and you can only margin (use as collateral) shares that are liquid - i.e. publicly traded.

I know what margin is, and it's definitely possible to collateralize a loan with private shares. If you had options for 0.1% of Facebook before the IPO I guarantee somebody would write you a loan. The question I was asking was: does any lender do this as a matter of policy as opposed to one-offs? The answer appears to be yes - Silicon Valley Bank appears to have let customers collateralize loans with private shares.

Yes, but before they're liquid they're close to worthless. A bank can't pay their bill with collateral that they can't liquidate after they repossess it. If the company is already scheduled to IPO, that huge risk mostly disappears, so of course someone would write that loan.

As for Silicon Valley Bank... They're serving the needs of the individuals around them. It's definitely not a common thing, and you're probably not getting anything close to a car or mortgage interest rate. (But still probably better than an unsecured loan.)

From their own copy: [0]

> Our tailored lending solutions can help you unlock the value of your private assets and simplify your financial life—in a way many traditional banks can't or won't.

[0] https://www.svb.com/private-equity-venture-capital/private-b...

Re: Why I will not exercise my GitLab stock options

#206

Post by jaboutboul »

For the less seasoned, we should all learn from this. There are 2 sides to every story and I am almost sure that management has a dramatically different view of what transpired. Not because either is right or wrong, but they seem to be viewing things through lenses.

That being said, working at a startup is like a marriage, you have to find the right fit. When he joined Gitlab, it may have been the right fit, but companies and founders much like everyone else who suddenly comes into money, often change. Sometimes even thought you love the company, priorities shift and change. When you start noticing that, it may be time to move on.

Kudos to him on not choosing to cash in his options. Definitely putting his money where his mind is.

Re: Why I will not exercise my GitLab stock options

#207

Post by FullMtlAlcoholc »

zem wrote: post #200
FullMtlAlcoholc wrote: post #181

Earlier quoted context omitted.

My father worked for Chrysler and has only bought Chrysler cars. The lot at the HQ was filled with over 95%+ Chrysler cars. It's not a requirement, but it hints at not believing in the company you work for. Imagine the drama if Uber's CEO preferred to use Lyft. If you don't have confidence in the product, it implies that you are just there to collect a paycheck. The optics from an outsider is that you have no confide…

i've worked on lots of things where the internals presented interesting technical challenges, but where the product itself was nothing i would personally use. there's nothing wrong with that. sports teams are not a fair analogy; they're about loyalty and tribal affiliation, whereas work is about getting stuff done.

> the internals presented interesting technical challenges

Most jobs are not like that and a lot of them are about loyalty and tribal affiliation, especially jobs with auto companies. It's a relic of the previous generation, but for a number of people the company they work for becomes a large part of their identity.

Re: Why I will not exercise my GitLab stock options

#208

Post by annnnd »

"Whenever a company takes on VC investment, there are certain expectations attached to it. It depends a lot on which fund invests on the company, but more often than not, with this investment comes the expectation that you have to spend the money as quickly as possible in order to grow, and once you have spent it, you’ll have to ask for more money again so that you can keep on spending it, and so on and so forth. All this is necessary to create this illusion of value, importance, and relevance needed to maintain outrageous valuations."

This is something all entrepreneurs who are looking for investments should really understand. VC money dictates huge growth and this is not suitable for all business opportunities. For some viable businesses taking VC money is akin to signing their own death sentence.

Re: Why I will not exercise my GitLab stock options

#209

Post by annnnd »

mixologic wrote: post #9

I didnt really see anything here of any real substance, other than OP strangely thinks that twitter is private, and that the CEO rightly advised him to link to their own product instead of their competitors. I cant really see how thats a "run in" with the CEO. All the other cultural issues he seems to bemoaning are all consequences of growth in a startup. Information flow gets harder with more people. As far as the C…

> The one thing he's likely right about is that there probably isnt enough market to actually chase ...

I agree completely with your last paragraph. Of course Atlassian's market is very lucrative and they execute poorly (Jira is simply awful), so this seems like a viable business strategy to me.

Re: Why I will not exercise my GitLab stock options

#210

Post by johnmarcus »

nojvek wrote: post #201
johnmarcus wrote: post #99

Back in 2003, after i had given my two weeks notice but had not left yet, I posted on Yahoo finance that i thought the company i worked for "underpaid employees". That was it. And who is reading Yahoo finance anyway? I was asked to leave prior to the two weeks ending, and at least one person at where i was being hired had read it. I deleted it, pronto, and nothing bad happened to me, but it was definitely a learning…

So if you openly complain about sexual harassment or employers treating their employees in an unethical way, no one wants you?

Well...yes. For the most part. The ugly reality is that if a company doesn't hire a known troublemaker, they are less likely to be subject to troublemaking. If you think companies, startup or otherwise, are going to act in some altruistic compassionate way toward employees at their own risk, well, you will probably be disappointed. Like 99% of the time. Especially when most of the whining sounds very subjective to opinion, as it is here.
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