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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

#231

Post by orthecreedence »

halfnibble wrote: post #218
orthecreedence wrote: post #182

Earlier quoted context omitted.

You're being downvoted, but I agree. I worked at a BigCorp and it was one of the worst years of my life. The work/life balance was awful, and the pay was shit compared to the hours I put in and satisfaction I got out of the job. All other experiences I've had have been much more satisfying. On top of this, people think BigCorp is a safe bet where a startup is not, but BigCorp lays people off in large swaths all the t…

Can someone tell me what letter "BigCorp" starts with? I'm scared because I'm looking at a job at a big corp., but I was under the impression that I could leave the office at 5pm.

I was at AOL.

My team was acquhired as a "startup within a larger company!!1" which ended up meaning: lower pay, longer hours, no equity, no actual autonomy.

But I was young and foolish and, caving to peer pressure, decided against my better judgement to take the gig. After my 1 year cliff (and successfully launching the Editions app that they soon after shitcanned) I got the fuck out.

EDIT: keep in mind, my hours were a product of my specific team, and the fact that I was commuting from Santa Cruz to Palo Alto. It would have likely been a regular 9-5 on other teams, and I'm pretty sure most of the other people there had regular hours.

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

#232

Post by pradn »

666lumberjack wrote: post #175
jessaustin wrote: post #132

Earlier quoted context omitted.

I'm pretty certain I've heard Amazon described as "evil". Apple are less objectionable, but I'm sure there are some things that some body wouldn't like.

Most plausibly their: - Attitude to third party repair - Puritanical content restrictions - Apparent disdain, in many cases, for their 'power users'

Labor conditions for workers at their factories and at supply-chair partners are not the best. Closed software ecosystem. etc

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

#233

Post by wolco »

jerguismi wrote: post #46
aliston wrote: post #18

Earlier quoted context omitted.

Article is titled "why a good deal has gone bad." My point is that winning does not make it a good deal. To expand on it further, even if you are lucky to have joined a unicorn, you still didn't get a good deal in comparison to virtually everyone else involved in the company. The founders are likely billionaires and you made off with a low 7 figure outcome while taking on only marginally less risk. That's not a good…

> To expand on it further, even if you are lucky to have joined a unicorn, you still didn't get a good deal in comparison to virtually everyone else involved in the company. The founders are likely billionaires and you made off with a low 7 figure outcome while taking on only marginally less risk. That's not a good deal by any reasonable definition. I wouldn't see the risk of being an employee and founder as similar.…

The issue is you can't ask for more money.

Increased risk of a startup should mean increased salary. What it has turned into is lower salary with options to get rewarded if all goes extremely well. If things go only okay then the salary is about the same.

The risk can be higher for a founder but could be more risky for an employee based on personal situations. The reward ratio is higher for founder and control over risk is in their hands.

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

#234

Post by mrnobody_67 »

deanmoriarty wrote: post #196
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…

See Zynga, cancelling options prior to IPO: https://news.ycombinator.com/item?id=3220819

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

#235

Post by deanmoriarty »

mrnobody_67 wrote: post #234
deanmoriarty wrote: post #196

Earlier quoted context omitted.

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…

See Zynga, cancelling options prior to IPO: https://news.ycombinator.com/item?id=3220819

Sure, that is incredibly shady, and doesn't deserve any sort of justification.

But, for the sake of the discussion, I'm purely focusing on common shares that the employee already owns, which means vested options that were already exercised.

Zynga's shady practice was affecting unvested options.

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

#236

Post by johannes1234321 »

stingraycharles wrote: post #221
deanmoriarty wrote: post #215

Earlier quoted context omitted.

But signing something without not understanding it is too naive. So, assume I already left the company and exercised a big bag of common options and so I have a decent amount of common shares. If they tell me to sign something that looks shady I just say: "No, it looks shady". What then, can they do?

Send to lawyer's office to pressure you. It doesn't take a lot of imagination to see that this can happen. People are generally naive, and there are just a few that will resist and fight.

Especially if you depend on the money the job pays now and you can't pay a legal battle while searching a new job.

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

#237

Post by xemdetia »

sgustard wrote: post #127
deanmoriarty wrote: post #85

Earlier quoted context omitted.

In my 10 year career, I've done 2 startups in the Bay Area (both early, one I left after Series A, another one I left after Series C) and more recently Google, and I can say the level of talent doesn't even compare in my opinion: from my experience, the engineers were so bad quality that I was feeling depressed and wasting my time most of the time (and constantly saying to myself "am I just a jerk in thinking of ever…

I get it, you've been at some bad startups and choose to generalize that experience. I can assure you I've worked in some large successful companies with building after building full of the dumbest people you've ever met.

This situation is common in acquisition/acquihire scenarios. The critical people end up leaving because they have the skills to move on or the new leadership above them becomes grating, and many other people end up being left behind. This leaves a piece of software/sub-organization that's making money but can't take it much further than where it was left when these people moved on. It is possible to not end up in this kind of situation but in my experience this was the most common reason why there was a whole floor of people without skills or leadership somehow staying on as a zombie.

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

#238

Post by nemo44x »

marcinzm wrote: post #36
andrew311 wrote: post #25

Earlier quoted context omitted.

Share grants would be seen as income by the IRS and most states and taxed at their Fair Market Value. Options on the other hand usually qualify as Incentive Stock Options that aren’t taxed at grant time and “when exercised, it isn't necessary to pay ordinary income tax. Instead, the options are taxed at a capital gains rate.” [1] Options are better up front because there is no outlay for the employee. They are a hass…

>Instead, the options are taxed at a capital gains rate As I understand it, they ARE taxed as income for all intents and purposes at exercise time (based on the value difference at exercise). They are not regular income but they are part of Alternative Minimum Tax income. You pay taxes on the greater of the two. The difference between exercise price and sales price is then taxed as capital gains assuming you held the…

Another trick, if it makes sense at the time, is to work out what your AMT threshold will be and only exercise enough options to keep it at 0 or something you're comfortable with.

This is especially useful if you have ISO's currently vesting and the company has since gone public.

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

#239

Post by icedchai »

martin_ wrote: post #211
deanmoriarty wrote: post #196

Earlier quoted context omitted.

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…

It happened to me recently, here's a couple of snippets document I received: The TLDR is "The majority of the board has already approved the decision of eliminating common stock and distributing excess payments to two founders and the product lead" Each holder of Preferred Shares is entitled to receive cash merger consideration in exchange for the cancellation of his, her or its shares pursuant to the terms of the Me…

Your common shares were worthless because after the preferred got paid, there was nothing left over. This is very, very common (no pun intended.)

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

#240

Post by twic »

jpm_sd wrote: post #109
mdorazio wrote: post #43

Earlier quoted context omitted.

FWIW, I've worked with a lot of entry-level people at normal companies over the years and would estimate that noob gainz are 30-50% higher in startup land for the first 1-2 years of career, maybe 10-20% higher the next two, then flat or actually lower than corporate thereafter. I think it comes down to 1) startups pile a lot more responsibility onto their young hires than normal companies are comfortable with + 2) st…

I've worked at two startups, then a BigCo, and now another startup. The wearing of many hats was definitely a leveling-up experience, but I felt that I plateaued in just the way you describe. Equity from both of those first two startups is now worth zero. In my years at BigCo I worked with engineers who have 10-20 years more experience than I do. Often felt like the dumbest guy in the room. I learned a ton. No compar…

I think there's a similar dynamic with consulting - ThoughtWorks / Pivotal Labs type places. You get shunted around between many different projects, there are never enough people, so there are opportunities to take more responsibilities, and things are often a bit fluid, because a consultancy coming in tends to (should!) crack the organisation a bit. There are downsides to all of that, but it's also a way of getting wider faster, if not getting a lot deeper.
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