If founders treated their investors the same way they treated their employees • Hacker News Board

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

#141

Post by jchallis » Tue, Aug 18, 2020, 5:29 PM UTC

bquinlan wrote: post #91

lkbm wrote: post #66

Earlier quoted context omitted.

Main reason: it's more fun. I could be a cog in a giant corporate machine, or I can have a measurable impact where I work. I can stay in my lane and do my specific job tasks, or I can run around putting out fires and helping wherever help is needed. I mindlessly build the specific design product handed me, or I can guide my own work in accordance to the needs of our customers and the business. I can follow policy and…

>I could be a cog in a giant corporate machine, or I can have a measurable impact where I work. I think that point can support working for either a big company or a small company depending on what type of impact you are looking for. I've worked for startups in the past and have had a huge impact on the startup but almost no impact on the outside world because the startups just weren't tackling very visible problems.…

The chromecast screensaver is the background on the TV in my Airbnb. Multiple guests have told me how much that screensaver makes them feel at home when they travel, and makes the world a little less strange.

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

#142

Post by [deleted] » Tue, Aug 18, 2020, 5:29 PM UTC

cs-szazz wrote: post #130

chii wrote: post #95

Earlier quoted context omitted.

Options being dangled in front of employees to trick them (only later to find out they can't afford to exercise it) is infuriating - it's almost fraud imo.

100% agree. I'm in the low 7-figures right now (on paper), and will probably be mid-7 with the next round of funding. So I have 0 chance of affording the taxes if I wanted to leave, and am kind of at the whim of the board if they want to extend my window. It's not a great feeling, especially when you contributed a lot to the company at a very early stage. I am glad there's companies popping up to help with this probl…

[deleted]

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

#143

Post by mlvljr » Tue, Aug 18, 2020, 5:34 PM UTC

bquinlan wrote: post #91

lkbm wrote: post #66

Earlier quoted context omitted.

Main reason: it's more fun. I could be a cog in a giant corporate machine, or I can have a measurable impact where I work. I can stay in my lane and do my specific job tasks, or I can run around putting out fires and helping wherever help is needed. I mindlessly build the specific design product handed me, or I can guide my own work in accordance to the needs of our customers and the business. I can follow policy and…

>I could be a cog in a giant corporate machine, or I can have a measurable impact where I work. I think that point can support working for either a big company or a small company depending on what type of impact you are looking for. I've worked for startups in the past and have had a huge impact on the startup but almost no impact on the outside world because the startups just weren't tackling very visible problems.…

Dude, gotta say thanks for the screensaver, toO!

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

#144

Post by [deleted] » Tue, Aug 18, 2020, 5:34 PM UTC

chris11 wrote: post #133

kentonv wrote: post #76

Earlier quoted context omitted.

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…

> NSOs are ultimately worth maybe 10%-20% less than "equivalent" ISOs I'm at a company that gives NSOs. Can you explain what you mean when you say that NSOs are worth less than ISOs?

[deleted]

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

#145

Post by justinclift » Tue, Aug 18, 2020, 5:34 PM UTC

brogrammernot wrote: post #72

thinkingkong wrote: post #24

Earlier quoted context omitted.

The invalid reasons are all accurate. The only challenge is (almost?) everyone has a friend or colleague that worked at Slack or Uber and made stupendous amounts of money; far in advance of what they would get at a FAANG. It doesn't take into account luck & risk, but this kind of casual relationship with successful startups colours peoples expectations in a different light.

How much money do you actually need though? I’ve worked for 5 startups now and my equity payout has been 0, 0, 0, 0, and now I stand I make low 7 figures from the equity on this last company (publicly traded now). During those startups the following happened: - I saw my nieces and nephews so little they forgot my name. They were young, sure, but it still stung when they look at you like a stranger - Messed up a 8+ ye…

> ... now I stand I make low 7 figures from the equity on this last company (publicly traded now).

Isn't that a "never need to work again" situation though?

eg, you've effectively freed up your future to put time into whatever you want?

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

#146

Post by cs-szazz » Tue, Aug 18, 2020, 5:35 PM UTC

steindavidb wrote: post #140

cs-szazz wrote: post #71

This hits home. I'm a fairly early employee at a unicorn, with no exit in sight. I've talked to the cofounders about extending my exercise window, and got the response of "We can probably do that when the time comes". Of course if that turns out to not be the case, well then I'm now stuck leaving behind a huge portion of my equity to cover the taxes, assuming I can sell to cover. Love that this seems to be getting mo…

Hi cs-szazz. I remember being in your situation; it's frustrating because you can't Google for answers. Here is advice I was given when in a similar situation. - Find the other people at the company in your situation (size of grant, type of options). Share your learnings with each other. Consider getting professional advice, the Bay is full of attorneys and CPAs for whom this is a familiar situation. - If you're at a…

I think you hit the nail on the head, it's frustrating because there's no clear answers, very little resources on the topic.

I'm actually in Canada, so I'm not sure on the ISO -> NSO distinction.

I do think your advice about coworkers is good though, I know of a couple other early employees in my position (similar grant sizes, also unable to afford to fully exercise). I've often considered what would happen if all of us decided to push for an extended window (and convert to NSO's)

As for the secondary, I don't actually want to sell. I want the ability to wait until there's liquidity to sell, and do it on my terms. Selling now significantly reduces future upside. What I'm really trying to avoid is getting stuck at one company because I can't afford to leave in the future.

I do appreciate your advice though, always good to chat with someone who's been in a similar situation!

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

#147

Post by a13n » Tue, Aug 18, 2020, 5:37 PM UTC

mdorazio wrote: post #69

Always absent in these kinds of essays/posts is the reason why startups are able to get away with this. If it didn't work, obviously the options games would have stopped a long time ago. A lot of people don't want to admit that there's a small army of young, naive employees who are enamored with startups and are perfectly willing to sign up for below-market salary and extremely unfavorable options terms in exchange f…

Options aren't a game. They're preferable to employees, for tax reasons. If startups gave employees shares, then employees would have to pay taxes on those shares, even though they're illiquid - so you're paying taxes on something you can't even sell!

Options solve this problem well, by delaying the tax burden until the equity is actually worth something. If it ends up worth nothing, you don't exercise your options and you don't pay any taxes.

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

#148

Post by mooreds » Tue, Aug 18, 2020, 5:38 PM UTC

smattiso wrote: post #90

nostrademons wrote: post #86

So founders do treat some of their investors like this - look at every ICO, and a lot of dumb overseas money, and a good number of friends/family/fools rounds. And conversely, there are some employees that they treat with kid gloves, who basically get the investor treatment. Look at executive hires. The difference is basically two letters: "No". Most institutional investors have the ability and inclination to say no…

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…

> I think engineers would do well to know that you are a COST CENTER to the business and the people who run it. They need you to make their product so they can make money but they hire you begrudgingly.

I don't agree. Engineers are sometimes a cost center, but they can also be a profit center. You can help revenue by decreasing expenses by automating something or noticing how the business is wasting money w/r/t tech and taking steps to help fix that.

You can also help revenue by increasing sales by building something, internal or external, that can either be sold or help sales.

But your larger point is correct. When you are starting at a company, know how your efforts are connected to revenue and sales. If your interviewer can't answer how they will be, find someone who can.

I wrote a bit more about understanding the business here: https://letterstoanewdeveloper.com/2018/10/12/understand-the...

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

#149

Post by acwan93 » Tue, Aug 18, 2020, 5:40 PM UTC

bquinlan wrote: post #91

lkbm wrote: post #66

Earlier quoted context omitted.

Main reason: it's more fun. I could be a cog in a giant corporate machine, or I can have a measurable impact where I work. I can stay in my lane and do my specific job tasks, or I can run around putting out fires and helping wherever help is needed. I mindlessly build the specific design product handed me, or I can guide my own work in accordance to the needs of our customers and the business. I can follow policy and…

>I could be a cog in a giant corporate machine, or I can have a measurable impact where I work. I think that point can support working for either a big company or a small company depending on what type of impact you are looking for. I've worked for startups in the past and have had a huge impact on the startup but almost no impact on the outside world because the startups just weren't tackling very visible problems.…

I agree with this mentality. I was at a FAANG company as well, and some of the projects I worked on had a small impact on the company but a huge impact on a certain group. 4% of a billion users is the total population of Canada.

Now that I'm at a startup, I'm making a huge impact on the startup, but it's having very little impact on the outside world and the industry. I guess the hope is that one day the startup will have impact on the world, but very few ever do.

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

#150

Post by ashtonkem » Tue, Aug 18, 2020, 5:43 PM UTC

nostrademons wrote: post #86

So founders do treat some of their investors like this - look at every ICO, and a lot of dumb overseas money, and a good number of friends/family/fools rounds. And conversely, there are some employees that they treat with kid gloves, who basically get the investor treatment. Look at executive hires. The difference is basically two letters: "No". Most institutional investors have the ability and inclination to say no…

I think you’ve got cause and effect a bit backwards.

> whenever you feel you’re treated unfairly, walk away. People will stop treating you unfairly.

Walking away from a bad deal certainly prevents you from being taken advantage of in that moment, but it will do nothing to prevent the next company who knows nothing about you from trying to hoodwink you again. While the ability to say no to a bum deal is important, it’s no substitute for actual leverage in these situations.

Executives and highly valued FAANG engineers have more leverage not because they say “no”, they have more leverage because both parties know they can say no, and they’re valued enough for that no to hurt. The startup needs not just an engineer, but that specific one. The threat of a “no” those with leverage gets far more results than from someone without it.