Startup Stock Options – Why a Good Deal Has Gone Bad • Hacker News Board

Re: Startup Stock Options – Why a Good Deal Has Gone Bad

#51

Post by rooam-dev » Wed, Apr 10, 2019, 3:31 PM UTC

dleslie wrote: post #37

rooam-dev wrote: post #27

Earlier quoted context omitted.

At a start-up? How do you manage live/work balance? Are there any on-call duties? Thanks in advance.

It's a startup, yes. I work eight hours a day on average, and being that we have staff on most continents we don't really have a need to be on call. That said, I've had a handful of 3am emergencies over the course of the last few years. I work in my garage; so I have no commute, and I no longer lose over two hours a day to commuting. That's meant I contribute far less to open source, which I did while on transit. How…

Thank you for your reply. This gives me more food for thought.

I am lead engineer at a start-up and my goal is to create a good work environment for our current and future devs. #1 enemy is the on-call, which should be resolved with customer support + some automation.

Re: Startup Stock Options – Why a Good Deal Has Gone Bad

#52

Post by CalChris » Wed, Apr 10, 2019, 3:32 PM UTC

mlthoughts2018 wrote: post #22

l2c1928 wrote: post #2

It's bad for most people, but when it's good it's really good. I was lucky to join a now unicorn as one of the first few dozen employees a few years ago. I forward exercised with a few thousand out of pocket (section 83b) an equity grant now worth around $1.5m. Because I forward exercised my options at a low valuation I didn't have to worry about paying taxes if I exercised at a later time when the company's valuatio…

Your story still leaves a lot of room for skepticism. For one, 1.5MM is not actually a very good deal for an engineer in your situation, and likely the company gave you very unfavorable terms. Electing 83b is a fairly irrelevant detail in your story as it only affects taxes, not the outcome of the company. Your shares are likely going to get hugely diluted exactly because of growth investing like in the article. Inve…

If you can't afford to pay for your options up front and elect 83b then is it really a startup? For example, Uber is not a startup. It was a startup but that was awhile ago.

Re: Startup Stock Options – Why a Good Deal Has Gone Bad

#53

Post by swish_bob » Wed, Apr 10, 2019, 3:32 PM UTC

rooam-dev wrote: post #27

dleslie wrote: post #13

Earlier quoted context omitted.

> You want to work a certain way (remote, on the beach, whatever) and they are willing to go this route. This is me. I quit my well paid job and took a massive pay hit so that I could work from home and so be able to spend more time with my daughters. Absolutely worth it.

At a start-up? How do you manage live/work balance? Are there any on-call duties? Thanks in advance.

I've worked at a startup that mandated no developers worked outside core hours (unless responding to an on-call issue, we all took turns on call).

It worked fine. The founders were fairly enlightened people, and well aware that we were in this for the long haul - success would take time and nobody could work long hours without the quality of the work suffering.

This wasn't the case for all staff, mind. There were definitely people in some roles who worked longer hours. Marketing and PR mostly.

Re: Startup Stock Options – Why a Good Deal Has Gone Bad

#54

Post by jpmattia » Wed, Apr 10, 2019, 3:34 PM UTC

I think an important point was missed: Steve writes:

> The first big idea is that unlike in the 20th century when there were two phases of funding startups–Seed capital and Venture capital–today there is a new, third phase. It’s called Growth capital.

It used to be that The Public would provide the "Growth capital" via an IPO; Now the public is providing, I suppose, post-Growth capital via the IPO. In an current era where the market believes P/E ratios of 24 make sense [1], that has so far been viable.

If more historically normal valuations return to public companies, or if the latest crop of unicorns fail to provide great returns for the IPO investors, I strongly suspect this new division of funding phases will come to an end.

[1] https://www.macrotrends.net/2577/sp-500-pe-ratio-price-to-ea...

Re: Startup Stock Options – Why a Good Deal Has Gone Bad

#55

Post by rooam-dev » Wed, Apr 10, 2019, 3:34 PM UTC

jerguismi wrote: post #30

rooam-dev wrote: post #27

Earlier quoted context omitted.

At a start-up? How do you manage live/work balance? Are there any on-call duties? Thanks in advance.

There seems to be some kind of understanding that start-up means aways working overtime etc. AFAIK that is not often the case, but people can work quite normally in early-stage companies as well. And mostly it is the founders who are working hard and employees are not required to work the same way.

Yes, I agree. We have (trying to have) a similar culture. The overtime is not expected, but the problem is task/context switching, which got better (less).

Re: Startup Stock Options – Why a Good Deal Has Gone Bad

#56

Post by JMTQp8lwXL » Wed, Apr 10, 2019, 3:34 PM UTC

seibelj wrote: post #3

Valid reasons to work for a startup: - You are a cofounder. - You have little experience and you are using this to break into the industry, and get experience on many different technologies ("wear many hats"). - They are working on a very specific problem or using a specific technology that you strongly desire to work on and it's difficult to do it anywhere else. - You want to work a certain way (remote, on the beach…

What kind of startup are we talking about here? E.g., 1-10 person company, or one that's accepted a few rounds of founding and has a measurable likelihood of IPOing in a few years? Both can reasonably be considered startups.

Re: Startup Stock Options – Why a Good Deal Has Gone Bad

#57

Post by aetherson » Wed, Apr 10, 2019, 3:34 PM UTC

dxbydt wrote: post #38

throwaway5752 wrote: post #31

Earlier quoted context omitted.

"Making a lot of money in salary." I think a bit of perspective is in order. When the bar for comparison is technical principles at FAANG, yes. If you want to own a house, have paid-for cars, put your kid through school, put away savings, and otherwise be completely comfortable then you can do just fine. That is "wealthy" for a lot of people in this country. I know someone that delivered food to restaurants. He woke…

> “If you want to own a house, have paid-for cars, put your kid through school, put away savings, and otherwise be completely comfortable then you can do just fine.” lol wut ? if you work in a typical SF startup, you can do precisely none of these things. Like, literally zero.

Well, it depends on the definition of "startup." If you work exclusively at seed-stage or A-round companies with like less than 15 employees, your salary will be a lot lower than if you work at lots of B and C-stage companies.

I've worked at companies that at least called themselves startups for my entire career, and I own a house in San Bruno, my wife and I each have paid-for cars, we can put our kids through school, and we put away savings.

Re: Startup Stock Options – Why a Good Deal Has Gone Bad

#58

Post by markbnj » Wed, Apr 10, 2019, 3:35 PM UTC

> As Venture Capital emerged as an industry in the mid 1970’s, investors in venture-funded startups began to give stock options to all their employees.

I don't understand this part of the post. When do "investors" grant stock options? When I did a startup back in the 90's the founders owned all the equity the day after the company was incorporated and a stockholder agreement signed specifying what each of us owned. We then sold equity to angel and venture investors by carving out a piece of the common in the former case, and issuing new preferred shares in the latter. Later the company granted ISOs to employees by an act of management, ratified by the board which did of course include investors. But at no time would I have said that the investors "shared their ownership" with employees. All current owners were diluted by the issuance of new shares or rights to new shares, but it was never a flat-out decision by the investors to share what they owned. It was a management decision.

Re: Startup Stock Options – Why a Good Deal Has Gone Bad

#59

Post by dleslie » Wed, Apr 10, 2019, 3:35 PM UTC

rooam-dev wrote: post #51

dleslie wrote: post #37

Earlier quoted context omitted.

It's a startup, yes. I work eight hours a day on average, and being that we have staff on most continents we don't really have a need to be on call. That said, I've had a handful of 3am emergencies over the course of the last few years. I work in my garage; so I have no commute, and I no longer lose over two hours a day to commuting. That's meant I contribute far less to open source, which I did while on transit. How…

Thank you for your reply. This gives me more food for thought. I am lead engineer at a start-up and my goal is to create a good work environment for our current and future devs. #1 enemy is the on-call, which should be resolved with customer support + some automation.

FWIW, we're a reasonably successful social application that's _heavy_ on real time networking; so there's always a large number of users active and our services are generally humming along at high throughput.

Lots of automated tests. A good community team. Code reviews. A _rigid_ feature-branch-and-test process. A _rigid_ closed beta->open beta->release process.

And we still have bugs. But things don't catch fire often, and when they do, it's usually not our fault. ;)

Re: Startup Stock Options – Why a Good Deal Has Gone Bad

#60

Post by hangonhn » Wed, Apr 10, 2019, 3:36 PM UTC

save_ferris wrote: post #10

Why don't startups offer actual equity grants instead of options? It seemed strange to me when I was starting out in my career that I needed to take a lower salary and options to exercise upon my exit, which wound up costing me thousands of dollars from that lower salary. Two years later, one founder forced out his two other cofounders, started a new company in the exact same space, and poached his best employees, es…

Because you'll be taxed on something that often has no liquidity nor market. The estimated value on your stock may be $5 and you'll get taxed on that but if you were to go sell it you may only be able to fetch a fraction of that on the secondary market (if there is even one for those stocks), possibly not even covering the taxes you have to pay.