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Silicon Valley Venture Capitalists Prepare for an I.P.O. Wave

nytimes.com

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Re: Silicon Valley Venture Capitalists Prepare for an I.P.O. Wave

#81

Post by mathattack »

rifung wrote: post #31
mgummelt wrote: post #24

Earlier quoted context omitted.

If you had $1MM in cash, how much of it would you use to buy the company's stock?

This exactly. I work at Google and it astonishes me how surprised people are when I tell them I use autosale, the company program where your stocks are sold immediately as they vest. They always ask "Don't you think Google stock is going to go up?" And I always reply that yes I do think it will go up but 1) that's not the right question to ask, you should ask whether it will go up more/less than anything else you cou…

#2 is the dominant point. One of the subtle points on diversification is that it's ok to take less returns if they are uncorrelated to your other investments - you want things that go up when your main investments go down. Even if you're 90% sure that Google will beat the market, you want protection for the 10% case. (And yes - your human capital will take the upside when Google continues to do well)

Re: Silicon Valley Venture Capitalists Prepare for an I.P.O. Wave

#82

Post by dmoy »

dandelany wrote: post #77
jhundal wrote: post #46

Earlier quoted context omitted.

When the stock units vest (or are exercised in the case of options), you are taxed on their current value at the regular income tax rates. What would be taxed at the long term capital gains rate are any gains that happen _after_ the stock is in your possession. The former component is likely the one that will dominate within the timespan of a year.

Not in the case of Incentive Stock Options. They are taken into account with AMT, but you do not pay regular income tax at the time of exercise. If you have ISOs, selling within a year is subject to regular income tax, but if you exercise and hold the shares for more than a year, you only pay cap gains tax. And if they have a low strike price relative to current value, the difference can be quite significant. I know…

Right but the subject at hand here is rsu not iso.

Re: Silicon Valley Venture Capitalists Prepare for an I.P.O. Wave

#83

Post by mathattack »

allthenews wrote: post #6

So how do the "rest of us" profit from these IPOs?

Work for a bunch of startups for 1-4 year stints. Don't leave until you're at least 1/4 vested. Then if you don't think you're on a rocket ship, find another. This is a common career path among silicon valley folks. If you're not an engineer or talented executive, then make money another way and start angel investing and take a long time horizon.

Re: Silicon Valley Venture Capitalists Prepare for an I.P.O. Wave

#84

Post by exolymph »

ec109685 wrote: post #80
rifung wrote: post #31

Earlier quoted context omitted.

This exactly. I work at Google and it astonishes me how surprised people are when I tell them I use autosale, the company program where your stocks are sold immediately as they vest. They always ask "Don't you think Google stock is going to go up?" And I always reply that yes I do think it will go up but 1) that's not the right question to ask, you should ask whether it will go up more/less than anything else you cou…

If you feel your company will do better than an average company based on knowing the employees and strongly believing in its roadmap, culture and ability to innovate, it isn’t irrational to accumulate stock in it.

It's irrational to believe that you're more likely to be correct in that assessment than any other person who makes a bet on a specific stock.

Re: Silicon Valley Venture Capitalists Prepare for an I.P.O. Wave

#85

Post by closeparen »

modeless wrote: post #70
closeparen wrote: post #40

Earlier quoted context omitted.

The recommendation is typically to use a "fee only" financial planner, who actually charges by the hour for advice instead of taking commissions on the products they sell you.

And how will you verify that they are not taking commissions on the side in addition to your fees?

Depends on your threat model. If you're concerned about the inherent well-known conflict of interest in the industry, it's probably sufficient to ask (a key word is fiduciary - are they a fiduciary or not?). The general pattern for commissioned financial advisors isn't optimal for you as a client, but it isn't fraudulent. There's also an organization called NAPFA [0] that registers fee-only advisors.

If you're worried about a malevolent actor who's willing to commit fraud and openly lie, well, how do you deal with trust for any other kind of professional? Reputation, credentials, reviews, referrals, word-of-mouth, etc.

You can also seek advice from someone independent of handing them your money to invest. You can ask an advisor to tell you what you ought to be doing with a self-directed brokerage account at another firm. I guess it's not impossible that there could be an elaborate scheme to collect commissions even across institutions, but again, you need some sort of trust for the whole project to make any sense.

[0] https://www.napfa.org

Re: Silicon Valley Venture Capitalists Prepare for an I.P.O. Wave

#86

Post by zapita »

TeMPOraL wrote: post #75
zapita wrote: post #41

Earlier quoted context omitted.

You're thinking of people who charge you a management fee and try to "beat the market". I'm talking about people who charge you by the hour to explain to you how to manage your money. Maybe "financial advisor" is a better term? Either way qualifying any form of professional counsel as "a scam" seems a bit excessive, and also bad avice.

"By their fruits you'll know them". One has to be careful, because there is a lot of professional-looking scam artistry going in this space. Also, you mention the term "financial advisor". I urge people to remember that there are different kinds of those, including those who know shit and care even less, and all they want is to sign you up to some financial MLM scheme. Source: I know some of the latter kind personall…

Yes, you have to watch out for unprofessional and dishonest people when selecting a service provider. That's very different than saying all providers of financial advice are automatically dishonest by virtue of their profession.

Re: Silicon Valley Venture Capitalists Prepare for an I.P.O. Wave

#87

Post by AFNobody »

ec109685 wrote: post #80
rifung wrote: post #31

Earlier quoted context omitted.

This exactly. I work at Google and it astonishes me how surprised people are when I tell them I use autosale, the company program where your stocks are sold immediately as they vest. They always ask "Don't you think Google stock is going to go up?" And I always reply that yes I do think it will go up but 1) that's not the right question to ask, you should ask whether it will go up more/less than anything else you cou…

If you feel your company will do better than an average company based on knowing the employees and strongly believing in its roadmap, culture and ability to innovate, it isn’t irrational to accumulate stock in it.

If you are capable of correctly estimating that, you are likely better off running a hedge fund than working at Google.

Re: Silicon Valley Venture Capitalists Prepare for an I.P.O. Wave

#88

Post by seanhunter »

danieltillett wrote: post #58
rifung wrote: post #31

Earlier quoted context omitted.

This exactly. I work at Google and it astonishes me how surprised people are when I tell them I use autosale, the company program where your stocks are sold immediately as they vest. They always ask "Don't you think Google stock is going to go up?" And I always reply that yes I do think it will go up but 1) that's not the right question to ask, you should ask whether it will go up more/less than anything else you cou…

The real question is why a company like Google is still giving stock to employees. The whole thing is a con at the expense of ignorant shareholders who somehow think all this dilution is not coming out of their pocket.

As sibling points out, this is reported in the financials of the company so shareholders are informed.

The reasons companies (listed and otherwise) give stock rather than cash are: 1)cashflow - it allows them to compensate people without affecting the cash position of the business 2)tax - sometimes it's more tax-efficient for the company than cash compensation 3)incentivises retention - vesting keeps people on the treadmill, especially if you re-up people while they vest so they would always leave a lot on the table if they walk. This is standard practise at Wall St firms so it's not SV-specific. 4)incentivises long-term value creation - if people get granted at around the fair value of the company when they join, then when they (exercise and) sell, they receive a share in the value they helped to create. It very much more direct than other forms of compensation 5)flexible - it's very difficult in many cases to adjust people's cash comp downwards. On the other hand if you structure a big piece of their annual comp as a discretionary equity bonus you can flex that 6)clawback - unvested equity is easy to claw back in the case of employee malfeasance. Cash is pretty much impossible to get back short of a lawsuit and even then, good luck.

I totally get that people's long-term financial well-being is often too correlated to their employer's stock price, but it's really no mystery why firms do this. It's not at all an SV invention either, it's very similar to the template used for a long time by Wall St firms.

Re: Silicon Valley Venture Capitalists Prepare for an I.P.O. Wave

#90

Post by mgummelt »

AFNobody wrote: post #87
ec109685 wrote: post #80

Earlier quoted context omitted.

If you feel your company will do better than an average company based on knowing the employees and strongly believing in its roadmap, culture and ability to innovate, it isn’t irrational to accumulate stock in it.

If you are capable of correctly estimating that, you are likely better off running a hedge fund than working at Google.

Not really. Employees can have much more information and market insight than an external analyst, especially in tech.
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