61–70 of 325 posts
What strikes me as odd given the USA's reputation as the home of the self made millionaire that the taxation of employee options is so broken. Treating options on shares as Income when they are not is just stupid options are a high risk instrument that well be worth nothing as opposed to a higher sallery. Why is there not a PAC made up of tech industry employees lobbying for reform of Federal and state laws and argua…
I started off once thinking "yay, X% means I get X% of the company!" and then I found out the shares can be diluted. Then I learned "non-dillutable". Then I learned about vesting periods, windows for exercising options, and a whole slew of financial terms and devices; each one seemed to come with its own unique "gotcha" that, if you didn't know about, would cost you nearly everything. Everyone I talk to about these a…
>"yay, X% means I get X% of the company!" and then I found out the shares can be diluted. There seems to be a common misunderstanding about dilution. Dilution is not really the issue. In fact, dilution is a positive sign . It means more investors value the company and want to buy into the ownership. How do current owners who collectively own 100% of the shares "sell" more shares to future owners?!? By way of dilution…
Sometimes. But if this were simply a case of ignorance-correction, certain preferred investors would never ask for pro-rata, or everyone would be offered pro-rata.
I started off once thinking "yay, X% means I get X% of the company!" and then I found out the shares can be diluted. Then I learned "non-dillutable". Then I learned about vesting periods, windows for exercising options, and a whole slew of financial terms and devices; each one seemed to come with its own unique "gotcha" that, if you didn't know about, would cost you nearly everything. Everyone I talk to about these a…
Let's not forget the "asset only" acquisition where the company sells it's IP and employees but doesn't sell any shares. Been through one of these and this is what happened, screwing over former employees who had bought options and investors. I think the only people who profited were the bankers.
You may want to argue that IP is also part of these deals and past employees created part of that. This is probably true for some deals, but it has been minimally true for the deals I've seen directly. Sample size of two isn't great, but keep in mind the value of startups is largely believed to be in execution, not ideas. A startup on the verge of bankruptcy probably doesn't have immensely valuable IP because it's 1) not producing present value obviously and 2) isn't obviously worth a lot in the future, otherwise someone would be willing to give you discounted cash today for an ownership percentage of its future value (aka an investment).
Options are a complex topic, this article gets a lot wrong. 1. The base offer. Many startups pay competitive or close to competitive salaries + equity. 2. The value of the options depends on your ability to pick the right startup and you believe that you can make a difference to the company. I have a friend who picked the right startup 4 times in a row. 3. Stock options are typically priced at 25% of the last round.…
I started off once thinking "yay, X% means I get X% of the company!" and then I found out the shares can be diluted. Then I learned "non-dillutable". Then I learned about vesting periods, windows for exercising options, and a whole slew of financial terms and devices; each one seemed to come with its own unique "gotcha" that, if you didn't know about, would cost you nearly everything. Everyone I talk to about these a…
>"yay, X% means I get X% of the company!" and then I found out the shares can be diluted. There seems to be a common misunderstanding about dilution. Dilution is not really the issue. In fact, dilution is a positive sign . It means more investors value the company and want to buy into the ownership. How do current owners who collectively own 100% of the shares "sell" more shares to future owners?!? By way of dilution…
I left [large corporation], who had been paying me very well, to go try out the startup world. I found a cool local company doing something that sounded neat. I looked at the pay (better on a per-paycheck basis) and the options (better than the stock I was getting in the corporate world) and said "this is a great idea! If the startup succeeds, the options will be worth a lot!".
It's a great company with great people and I don't regret that, but the financial implications of the change are starting to sink in. I'm getting a bit more per paycheck, but on the whole I suspect my tax returns over the next few years will add up to less than I was making before, even if the startup succeeds.
If I do the math of taking the cash each time, do I end up close to what diluted options would provide, or more?
How many people do I know where options translated to sizeable cash, even after dilution?
Which statistic will I be a part of, where options have actionable worth, or little/nothing?
The questions above we're proposed to me by a founder who had taken funding and was diluted to the point where he realized his worth as a consultant/freelancer/contractor may have ended up ahead.
I know 100+ people from a dozen companies who've made $1mm+ on equity. None of my friends would write a post like this. That said, valuing equity is complicated: - most offers include a healthy mix of cash and equity and benefits. Evaluate the whole package. - unless you can pre-exercise via 83(b), I generally avoid options. RSUs are fine and many companies are offering them. Clever hack: counter the offer with a dem…
> I know 100+ people from a dozen companies who've made $1mm+ on equity. None of my friends would write a post like this. This is addressed in the post: > Another common objection is something like “I know lots of people who’ve made $1m from startups”. Me too, but I also know lots of people who’ve made much more than that working at public companies. This post is about the relative value of compensation packages, not…
Earlier quoted context omitted.
I hear this argument a lot. Mostly from people trying to sell the idea of a highly dilutive funding round. Sure, further rounds are a sign the company is doing well. The important word being "sign," they don't actually make the company more valuable (what the company does with the money they raise does). If you own a lot of stock, you probably already know if the company is doing well or not. In that respect, the rou…
Except, all things usually aren't equal. Most people explain dilution like this: you're getting a smaller piece of a bigger pie.
But I suppose the idea is that a bigger pie is able to expand larger and faster than it would have been otherwise.