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If founders treated their investors the same way they treated their employees

software.rajivprab.com

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Re: If founders treated their investors the same way they treated their employees

#101

Post by solarkraft »

chii wrote: post #93
smattiso wrote: post #90

Earlier quoted context omitted.

The problem is that some people need money and can't say no. That's why anybody works for minimum wage... The executives and investors and FAANG engineers have all made good money and seen decent RSU terms, you can't pull the wool over their eyes. Someone who is just getting into tech may be allured by a 50k salary and "1 MILLION OPTIONS!!!!" (There are ten trillion in the option pool). I think engineers would do wel…

> The problem is that some people need money and can't say no. If they need money, and this is the best offer they got, then what's the problem with accepting it? They are still better off than not accepting it.

Of course there's no issue with that. I think the point is to know your options and worth.

If you have a low offer but no other options that's "fair" in a sense. If you can get something it'd be pretty silly to accept a bad deal, however.

Re: If founders treated their investors the same way they treated their employees

#102

Post by drchopchop »

e1g wrote: post #89
drchopchop wrote: post #53

Earlier quoted context omitted.

Agreed, I am 40+ and am a CTO at a startup which has great work/life balance. We pay approximately market (for a normal dev job, not FAANG), haven't had people do overtime in well over a year, are transparent about finances, and have practically zero politics. It is also possible for a startup to be "stable", especially if it's bootstrapped/profitable.

You might work at a small or young company that is not a startup. A "startup" is a specific type of business designed for rapid growth. If there are profits, that means holding cash in a bank offers better returns that re-investing into sales/operations which implies there is no fast growth.

We are small (So I'd call that a startup? It's not like we're not trying to achieve rapid growth, we just haven't found the secret magic yet to turn into a unicorn. Doesn't mean we're not trying.

Re: If founders treated their investors the same way they treated their employees

#103

Post by ipnon »

kentonv wrote: post #76
shehryarrr wrote: post #5

That 90-day expiry window is the most archaic bullshit. Can't come up with 200K cash? Too bad, and thanks for all that hard work and long hours you put in.

FWIW it's rooted in US tax law. Unexercised Incentive Stock Options (ISOs) are required to expire 90 days after an employee leaves. The way some companies get around it is that, after 90 days, they replace the expired ISOs with nonstatutory stock options which, as their name implies, are not recognized by the tax code. Tax code is complicated but NSOs are ultimately worth maybe 10%-20% less than "equivalent" ISOs. Bu…

Is there a website that contains all of this information in one place? Could any founder be expected to know about the 409(a) and 83(b) without a lawyer?

Re: If founders treated their investors the same way they treated their employees

#104

Post by sharklazer »

> Founder: Sure. We’re looking for a $100,000 commitment, and in return, you would be getting 0.1% of the company.

Founder: Sure. We’re looking for a $100,000 commitment, and in return, you would be getting 0.1% of the company on top of $100,000 in pay.

FTFY

Re: If founders treated their investors the same way they treated their employees

#105

Post by brd529 »

alecbenzer wrote: post #45
brd529 wrote: post #8

Bravo bravo bravo! This piece neatly encapsulates all the problems with ISOs. The biggest one is mentioned at the beginning - information asymmetry. I don’t really understand why most companies, especially small ones less than 100 people, can’t be transparent about their cap table with employees. I do think the culture around 90 day exercise Windows is changing. Here is a list of companies with extended windows [1].…

AFAIK the 90 day thing was more of a legal thing than something the companies themselves wanted to enforce?

It's true that a company can't issue ISOs if the termination window is more than 90 days, they have to be NSOs instead. IMO the downside of the NSOs (pay tax immediately upon exercise instead of at next year's tax deadline - ISOs don't actually change the amount of tax that is due, just the timing of when you pay it) is small compared to the very real risk that your options will go poof if you don't have the cash to exercise and pay tax if there is a termination event.

Re: If founders treated their investors the same way they treated their employees

#106

Post by tylerhou »

sharklazer wrote: post #104

> Founder: Sure. We’re looking for a $100,000 commitment, and in return, you would be getting 0.1% of the company. Founder: Sure. We’re looking for a $100,000 commitment, and in return, you would be getting 0.1% of the company on top of $100,000 in pay. FTFY

No, the $100,000 commitment represents the opportunity cost compared to a higher paying job.

That is, if the distinction is between:

1) $150,000 + 0.1%, or

2) $250,000

Picking (1) would equal trading $100,000 for 0.1%.

Re: If founders treated their investors the same way they treated their employees

#107

Post by me_me_me »

drchopchop wrote: post #53
skrebbel wrote: post #41

Earlier quoted context omitted.

Frankly I'm getting tired of this drum HN keeps beating about startups not offering a good work/life balance. Some startups don't, true. Some FAANGs don't either, what's the difference? I know plenty of startups that have a sane working culture as a key point of differentiation in the job market.

Agreed, I am 40+ and am a CTO at a startup which has great work/life balance. We pay approximately market (for a normal dev job, not FAANG), haven't had people do overtime in well over a year, are transparent about finances, and have practically zero politics. It is also possible for a startup to be "stable", especially if it's bootstrapped/profitable.

Maybe its a matter of language.

A typical HN startup is wannable Unicorn get rich quick scheme. Maybe we need a new term for that.

Re: If founders treated their investors the same way they treated their employees

#108

Post by blobbers »

This is so true, and incredibly frustrating. I joined a start up as the first employee, and the amount of equity they gave me was ridiculous. I got blinded by the notion of them raising a large amount of money and hiring at a rapid pace; the reality was they failed to raise an A round, then diluted employees despite giving a better valuation for their seed "friends and family" round.

When confronted just talked about how that was the business. Was super frustrating. Once I realized how the CEO operated, I left. I waited for my 1 year cliff though.

Re: If founders treated their investors the same way they treated their employees

#109

Post by jagged-chisel »

virgilp wrote: post #52
shehryarrr wrote: post #5

That 90-day expiry window is the most archaic bullshit. Can't come up with 200K cash? Too bad, and thanks for all that hard work and long hours you put in.

Another thing that may be hard to understand for non-US citizens. For me, exercising options costs me just that, the option price + bank fees; I owe no tax. I have to pay full tax when & if I sell the shares. This seems like a much fairer taxation regime - I pay tax when I earn something - just having un-sellable shares didn't suddenly increase my wealth. With this, it actually makes sense to exercise options and sta…

One should exercise at the earliest possible convenience. If I'd exercised on day 1 when I joined a startup, I wouldn't have owed tax because I wasn't getting a discount, but a locked-in price. So when I exercised after the value increased, I then owed tax.

I've seen it suggested that one should exercise on day 1. But that doesn't have to mean you pay for them immediately (after all, you don't get to keep them immediately - you have to wait for vesting...), so you work out a payment plan with deductions every paycheck so that you've pay fully for whatever is vested at the time it vests.

Re: If founders treated their investors the same way they treated their employees

#110

Post by hehsjsbb »

high_derivative wrote: post #84
drchopchop wrote: post #53

Earlier quoted context omitted.

Agreed, I am 40+ and am a CTO at a startup which has great work/life balance. We pay approximately market (for a normal dev job, not FAANG), haven't had people do overtime in well over a year, are transparent about finances, and have practically zero politics. It is also possible for a startup to be "stable", especially if it's bootstrapped/profitable.

'have practically zero politics' tingles my bs-meter. How would you know how your employees feel about this? There is always politics. Of course not for the ones who cannot be promoted further, but for everyone else. My boss not acknowledging the existence of politics would be a red flag to me.

Politics isn't just about promotion. It's about what kind of work people get to do, whose opinion is respected, etc.

I don't care about getting promoted in my current role (at a small start-up where the eng org is flat), but I'm miserable because there's obviously a clique of people who are "trusted" and take over the technical direction of anything interesting. What's left is basically just implementing their ideas and then having them rewrite it on you or nitpick it in PRs until they practically wrote it.

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