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Startup Stock Options – Why a Good Deal Has Gone Bad

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

#91

Post by ghaff »

brootstrap wrote: post #74
toomuchtodo wrote: post #33

Earlier quoted context omitted.

> Worked 12 hours a day a lot, was stressed out all the time, didn't have a life, got calls at odd hours to deploy...but, if I didn't have that experience, I wouldn't have grown nearly as fast. Congrats on using the opportunity to grow in an abusive role. It should not be normalized is the point.

On the opposite side of this argument. I was there. I was shit in college but managed a degree and self taught programming. I was hustling hard to graduate and convince someone to hire me as a programmer even though I had no degree. I was 23 at the time. If you are in this scenario, just you, no wife kids etc. What is wrong with working really hard on a problem? I loved the startup and it fit my perfect niche. I woul…

I'm on team work/life balance but, in this case, I agree. First job out of school I had an engineering job (not software) in the oil business. Spent lots of time living in shipyards and offshore. Long days. Etc.

But I had a lot of responsibility. Was sort of thrown in the deep end with respect to a lot of things. It was a great experience out of school and, in retrospect, was absolutely the right job choice relative to my other options.

Would I have wanted to have done it long-term? (I left after 3 years to get another degree.) No way.

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

#93

Post by ummonk »

ssalazar wrote: post #90
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…

> Invalid reasons for working at a startup: > - Making a lot of money in salary. Once a startup raises a series A is there actually any reason to pay below-market? Fresh out of college I was employee #1 at a startup that had funding, and was basically at the mythical "Google salary for new college graduate" figure that is thrown around here, and higher than competing offers from name brand tech cos.

Equity grants from public companies are pretty liquid and as good as salary.

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

#94

Post by tomnipotent »

ssalazar wrote: post #90
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…

> Invalid reasons for working at a startup: > - Making a lot of money in salary. Once a startup raises a series A is there actually any reason to pay below-market? Fresh out of college I was employee #1 at a startup that had funding, and was basically at the mythical "Google salary for new college graduate" figure that is thrown around here, and higher than competing offers from name brand tech cos.

Yes, because startups are usually still cash poor after a Series A and you don't want to burn more than you need to. The whole point is to conserve cash until you can find more money or turn a profit, and employee salary is usually the largest cost for most companies.

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

#95

Post by btilly »

kurthr wrote: post #49
btilly wrote: post #19

To his suggestions, I have another. Offer internal Dutch auctions on a regular basis to provide an opportunity for investors/the company/etc to buy stock from employees at a reasonable price. This makes the value of the company, from the point of view of the employee, not "funny money" but something very tangible. With an opportunity to cash out long before it is public.

I'd be very careful with that... there are all sorts of internal/external events that can influence the perceived value of the company and information about them is not evenly distributed. Creating an environment where individuals in some groups can profit from this disparity (or even misinformation) is asking for ugly office politics.

All possible solutions come with downsides. It is still an option to consider.

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

#96

Post by donaldknuth123 »

CalChris wrote: post #44
seibelj wrote: post #4

Earlier quoted context omitted.

I too would like to win the lottery.

If you think of the Valley (or wherever you are) as a lottery then your chances of winning are about the same as those of a lottery. If you think of yourself as your personal VC then your odds approach those of a VC which while not great and moreover not diversified, they are much much better than a lottery.

This analogy fails almost immediately. Real VCs distribute their bets across dozens of companies. You personally are placing one massive bet on one single company so your odds are far worse than a VC.

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

#97

Post by bgentry »

theIV wrote: post #26
bgentry wrote: post #15

Earlier quoted context omitted.

You get switched to long term capital gains 1 year after exercise or two years after the grant start date, whichever is later.

I don't believe the "or" part of this statement is right. I think you still need to hold for 1 year after exercise AND two years after the grant for long term to kick in. Not sure what the best source on this is, but a quick DDGing: https://www.fool.com/knowledge-center/tax-rate-on-exercising...

I think we're saying the same thing.

If I early exercise my options on day 1, then I still have to wait until the 2 years after the grant date (2 years of employment) to get long term capital gains treatment.

If I wait 4 years, then exercise, then I have already satisfied the 2 years post-grant requirement, but I still have to wait a year after the exercise to get long term capital gains treatment.

The key part was my last clause: "whichever is later".

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

#98

Post by donaldknuth123 »

matthewowen wrote: post #71
dxbydt wrote: post #38

Earlier quoted context omitted.

> “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.

SF startup cash comp for engineers is comfortably in the 150k-200k range, and often higher. This is series A, series B stage companies. If you have a few years of experience and are making less than this then I'm please to be able to inform you that you are underpaid. If you have one of those incomes at the higher end, you can do these things in the bay area. If you have more than one then that stuff is not hard at a…

You seem to be massively misunderstanding the Bay Area real estate market. Homes are routinely bought in full cash 20% over asking. No average engineers are making those kinds of offers.

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

#99

Post by ummonk »

matthewowen wrote: post #71
dxbydt wrote: post #38

Earlier quoted context omitted.

> “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.

SF startup cash comp for engineers is comfortably in the 150k-200k range, and often higher. This is series A, series B stage companies. If you have a few years of experience and are making less than this then I'm please to be able to inform you that you are underpaid. If you have one of those incomes at the higher end, you can do these things in the bay area. If you have more than one then that stuff is not hard at a…

They'll be a lot more expensive by the time some of us turn 30.

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

#100

Post by nostrademons »

neilv wrote: post #78
deanmoriarty wrote: post #39

Earlier quoted context omitted.

In my very personal experience, many times startups are not full of the brightest engineers, especially if they are based in a major tech hub such as the Bay Area: most talented engineers these days, if location is not an issue, first try a shot at FAANG or similarly big companies where they can experience problems at massive scale and very high compensation. Hence, many folks who end up accepting to work at a startu…

I hear conflicting ideas about who's getting the most capable people, and I don't know what's true. Maybe a decade ago, a knowledgeable colleague, speaking of one of the better-regarded FAANGs, told me, "First they hired the A students, then they hired the B students, now they're hiring the C students." More recently, the sentiment I heard among CS-ish PhD students at one big university was that FAANGs (or, at least,…

I've worked at both (Google from 09-14, technical cofounder in 07-08 and again from 14-present, and also a financial software startup from 05-07) and my perception is that the kinds of problems you work on are very different.

At Google you do rigorous engineering, you're intensely data-driven, you have to work at massive scale, everything you touch is a distributed system (with all the skills and pitfalls that comes with working on that), and you'll often learn a lot of fundamental CS algorithms because you need to re-implement them to work across 1000s of machines rather than using a standard library built for a single address space.

As a founder, it's just one problem after another, rapid fire, and you might have 1-2 days to solve something that took 2 months at Google. You do a lot of hacky 80/20 solutions. You need to think big-picture on everything and understand how everything fits together. You solve a much wider variety of problems, but you don't really go into depth with anything. Rigorous engineering isn't really part of a founder's job description, and some people view that as being dumb or poorly trained, but you make up for that in speed, ambiguity, and breadth.

I'd say that when I joined Google in '09, the level of colleagues there was much higher than the general level of technical founder prowess in the Valley, and it remained that way for the whole time I was there. But the types of employees Google hired in '13 were very different from the types of employees hired in '09 (who themselves were very different from those hired in '02), and it wouldn't surprise me if starting in '15 or so the balance started shifting back towards startup founders. Honestly I think the best technical minds today are actually doing cryptocurrency "non-profits" (scare quotes because they're actually being paid by capital appreciation of their founder tokens) - I've been quite impressed by the algorithms being discovered by projects like Ethereum, OmiseGo, MakerDao, zCash, Monero, etc.

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