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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

#191

Post by brownkonas »

I think another correction to the diminishing value of stock options and longer IPO horizon is that insane hours are less common now, even at the peril of the success of the median startup. It's also a result of the tight tech labor market and the wealth divide between new startup comp and FAANG comp. Why should I would disproportionate hours if there's another job with a more certain outcome that does not require this.

Curious if others have seen a drop in hours expected from your average startup (separate discussion if longer hours is a key ingredient and overall a good thing).

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

#192

Post by phamilton »

akoumis wrote: post #134
landryraccoon wrote: post #111

Earlier quoted context omitted.

Wait, I enjoy my job, want to write code and get lost in my work and you think that’s pissing in the pool? I know some people at work that sort of have your mindset. I think it’s the worst. Not only do they not want to help someone who’s passionate you now make me suspect they’re incentivized to undermine hard workers as well, since they make you look bad. Fine, take it easy at work, I don’t care. Just don’t make it…

You are being exploited. Do you get compensated 1.5x your base for all those 12 hour work days?

On salary (not hourly) this is a useless question.

Say they make 100k/yr. With 40hr weeks that's roughly $50/hr. With 60 hour weeks and 1.5x base pay, you could say it's $20/hr. It's all the same.

What you seem to be asking for is for companies to pay you the same, just say your base is lower so they can pay you 1.5x you base for appearances sake.

Now, optics aside, if you take an offer with an expectation of 40 hrs / week and they make you work 60, then sure. That's exploitation. But if the expectations are clear upfront, "base pay" is just legalese.

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

#193

Post by paulddraper »

brownkonas wrote: post #191

I think another correction to the diminishing value of stock options and longer IPO horizon is that insane hours are less common now, even at the peril of the success of the median startup. It's also a result of the tight tech labor market and the wealth divide between new startup comp and FAANG comp. Why should I would disproportionate hours if there's another job with a more certain outcome that does not require th…

I think startup demographics are changing slightly. Fewer early 20 bachelors.

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

#194

Post by president »

brownkonas wrote: post #191

I think another correction to the diminishing value of stock options and longer IPO horizon is that insane hours are less common now, even at the peril of the success of the median startup. It's also a result of the tight tech labor market and the wealth divide between new startup comp and FAANG comp. Why should I would disproportionate hours if there's another job with a more certain outcome that does not require th…

If anything, I have only seen an increase in work hours in my peer circle. Which startups are cutting hours?

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

#195

Post by dsfyu404ed »

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.

That's a California problem, not inherent to startups themselves.

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

#196

Post by deanmoriarty »

kabdib wrote: post #183

I made a bunch of money from ISOs at large, established companies. I made zero (well, negative, really) from startup stock options, even before things got really shifty in the 2000s. One startup that I left, that is now a billion dollar company, simply decided to "extinguish" the shares I bought a few years after I resigned. I was probably cheated, but it's not worth the effort to go after them and they know it. Trea…

I would be really curious if someone could shed some light on how a healthy company could simply decide to "extinguish" exercised shares. Like how exactly would they go about doing that, and do you have examples I can read up describing where and how this happened?

I would understand if that happened when the company is in trouble (e.g. valuation dropping below the last preferred valuation, so preferences kick in, or as a result of the company having to honor very high liquidation preferences), but otherwise?

The only couple very shady cases I know about where Facebook with the Brazilian cofounder (with a complicated legal process where they reincorporated the company into a new one or something like that) and Skype with the employees (who naively signed a clawback clause in their agreement stating that the company could repurchase shares in the future at the original grant value even if their price skyrocketed, or something similar).

In all the other cases I know about where employees got screwed, it was because the company saw its valuation plummet and the investors preferences kicked in, in one way or another, so "extinguishing" common shares in that case is "expected" and more similar to a public company declaring bankruptcy and seeing the shareholders being wiped out while the bond holders can generally recoup something, since they have "preferred" terms inherent in the nature of the bonds.

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

#197

Post by djakjxnanjak »

pnw_hazor wrote: post #103
dasil003 wrote: post #45

Earlier quoted context omitted.

FANG is undisputably the best risk-adjusted compensation return for a programmer, and they're up there in terms of working with super smart colleagues, and therefore they have a high floor, compared to say a startup that goes nowhere with the blind leading the blind, but the ceiling is also constrained by what projects you're working on. In terms of raw software engineering development there's probably no substitute…

Though at F and G there is the cost of having to rationalize working for an organization that is evil.

If you put a lot of mental energy into organizing your ideology to think of them as evil, sure.

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

#198

Post by phamilton »

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.

> is there actually any reason to pay below-market?

"market" is a big chunk of change. "Google salary" is not market. It's closer to 50% of market. (GSUs and annual bonus are significant aspects of comp that are basically cash). "Netflix salary" is market, and for a series A company there are a lot of reasons not to pay senior engineers 300k+.

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

#199

Post by phamilton »

mlthoughts2018 wrote: post #117
zrail wrote: post #73

Earlier quoted context omitted.

The IRS considers RSUs that don’t have an expiration date as being close enough to actual shares to be taxable income. There has to be a “substantial risk of forfeiture” to qualify for deferred taxation.

In that case, then only the second suggestion.

That's usually referred to as Phantom Stock, and is a thing.

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

#200

Post by dwaltrip »

dalbasal wrote: post #154
thesausageking wrote: post #21

He glosses over an important point: it's now typical for founders to take money off the table as part of financing rounds, sometimes as early as the A round. Founders will request it as part of a funding round and, there's so much competition to invest in the top startups, that VCs go along with it. Decades ago, this wasn't the case. Founders waited for the IPO like employees. If you're an engineer sitting on $5m of…

If early liquidity wasn't an option for founders, this massive pre-ipo/private-ipo market wouldn't exist. Without early liquidity, a pre-ipo zuck/kalanick/etc. would be a paper billionaire with $0 in the bank and >$1bn "invested" in a risky tech startup. That's not financially or mentally sound, even by their risk lovin standards. If investors demanded every penny go towards growing the business, those CEOs would jus…

Why do investors want to delay an IPO?
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