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TLDR Stock Options

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141–150 of 213 posts

Re: TLDR Stock Options

#141

Post by yojo »

pmiller2 wrote: post #131
lafay wrote: post #40

Earlier quoted context omitted.

Early exercise / 83(b) has another benefit that most people aren't aware of -- if the exit is at least 5 years out, you can exclude 100% of your gain from federal cap gains tax under IRS Section 1202. See here for more: https://blog.wealthfront.com/qualified-small-business-stock-...

Aren't 83(b) elections only really available to founders, though?

No, it's at the discretion of the company. I asked for an 83(b) option at a 10 person startup I worked at and the CEO made it happen. The startup still went under so it didn't matter in the end, but management definitely did what they could for the employees.

Re: TLDR Stock Options

#142

Post by austenallred »

einarvollset wrote: post #132
austenallred wrote: post #55

Earlier quoted context omitted.

I completely disagree. It's really not hard to find a company with great product market fit, say series B, get a bunch of equity, a decent salary, and wait a couple years for your equity to be valuable. Assuming the company is successful (of course there's risk there, but by series B a lot has been mitigated), your equity will likely be quite valuable. I actually think, risk adjusted, that's the easiest way to make a…

Yes. However, you are basically making the argument that your options are worth ~50% salary. The problem with that argument (at least in the valley) is that you are making the calculation off the initial starting salary. Salary/RSU growth at companies like Google, FB, etc is surprisingly rapid in the first ~24 months, to the point where I would argue that if you haven't doubled it in that timeframe you need to work o…

I only stayed 1 yr

Re: TLDR Stock Options

#143

Post by austenallred »

mgummelt wrote: post #134
austenallred wrote: post #55

Earlier quoted context omitted.

I completely disagree. It's really not hard to find a company with great product market fit, say series B, get a bunch of equity, a decent salary, and wait a couple years for your equity to be valuable. Assuming the company is successful (of course there's risk there, but by series B a lot has been mitigated), your equity will likely be quite valuable. I actually think, risk adjusted, that's the easiest way to make a…

> and wait a couple years for your equity to be valuable Product-market fit does not imply appreciation. Growth is priced in. Unless you think you know more than the market (the VCs), you shouldn't expect a return.

Product market fit and further growth are generally pretty correlated, though

Re: TLDR Stock Options

#144

Post by pcmaffey »

Fyi to the site developer: I highly recommend giving the links at the bottom of the page their own routes, as clicking on one makes it impossible to use the browser back button and return to the main page.

Re: TLDR Stock Options

#145

Post by kasey_junk »

ruleabidinguser wrote: post #135
fnbr wrote: post #48

Earlier quoted context omitted.

Yeah, I agree. There's no way that an engineer is getting integer percentages of equity after seed round. Maybe if they're highly recruited, in which case Google et al. would pay more.

Who would get integer percentages after seed round?

C-suite hires that have other choices and capital investors.

Re: TLDR Stock Options

#146

Post by austenallred »

AlexandrB wrote: post #98
JumpCrisscross wrote: post #71

Earlier quoted context omitted.

There is a developed secondary market for venture-backed companies' stock. (Source: I do this.)

I thought private stock transactions were subject to board approval, or is that just Canada?

Depends on the terms. In most startups board can only match the offer.

Re: TLDR Stock Options

#148

Post by mgummelt »

austenallred wrote: post #143
mgummelt wrote: post #134

Earlier quoted context omitted.

> and wait a couple years for your equity to be valuable Product-market fit does not imply appreciation. Growth is priced in. Unless you think you know more than the market (the VCs), you shouldn't expect a return.

Product market fit and further growth are generally pretty correlated, though

Yes, but growth and appreciation are (theoretically) not. Growth is priced in. You're saying product-market fit -> growth -> appreciation. The first part of that is true. The second isn't. Assuming market efficiency, the VCs know just as well as I do that the company is going to grow, so they'll pay a higher rate, which means my options will be priced higher (or I'll get fewer RSUs, accordingly). Growth does not imply appreciation.

Re: TLDR Stock Options

#149

Post by obstinate »

mikekij wrote: post #9
eries wrote: post #3

Our goal with building this was not to be comprehensive, but to give founders and employees a way to have a more productive conversation about options and what they are worth. Too many startup employees I meet don't properly value the options they have, and too many potential hires don't negotiate for the right things, and wind up disappointed. We hope this will take a small step towards correcting this problem.

Tools like this are really helpful for startup employees. Thanks for sharing! Looks like there are some hidden assumptions about liquidation presence etc. Might be good to add a slider for that. (My employees would do pretty well at a $25M exit!)

Hah. This is a good point. I was going to call you out for having barely any employees and so of course they'd do well. But, for anyone who hasn't tried this, if you give the hypothetical employee 10% of the company, they come out with $0 in all scenarios at a $25M exit on this tool.

And it looks like this is the slider you were asking about. ;) https://captable.io/

Re: TLDR Stock Options

#150

Post by RonanTheGrey »

scosman wrote: post #81

Correct me if I'm wrong, but this seems to be assuming a seed round valuation of $40 million (it's returning $0 unless the exit is > $40m). That's absurd. Edit: the assumption of 0.01% is also absurd. A simplified calculator should include reasonable defaults. This is like a mortgage calculator called tldrCanYouAffordAHouse.com that assumes 25% interest rates and doesn't disclose that.

Why is the assumption of 0.01% absurd? From what I have seen, that's exactly what an early employee can expect. 10% of the available stock gets split between the early employees, most of which (9%) goes to the founders/c-suite. The other 90% is reserved for investors, of which the founder(s) may be one.

If you have 100 employees by the time you exit, and 1% of the stock was divided among them (exactly the situation where I am), each would get.. 0.01%. That is 0.0001 of the issued shares..... as options.

This is no longer uncommon.

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