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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

#151

Post by nbclark »

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…

Without knowing your exact situation, one thing to keep in mind is that the preferred value (last valuation / # of shares) of a share is generally a good bit higher than the tax liability (value of a common share from the 409a minus your strike). Still likely a big tax hit, but perhaps slightly better. IMO changes to tax law for illiquid assets is the best but most unlikely option here.

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

#152

Post by pb7 »

dilyevsky wrote: post #128
pb7 wrote: post #85

Earlier quoted context omitted.

Wouldn't it feel like it's a little bit bullshit if the company went out of business shortly after and all that work was for nothing? All of our work is so ephemeral.

Same happens in big cos when sometimes hundreds or more engineering years are scrapped purely because of internal political wars or “reorgs”

That's precisely my point. Startup work is not any more meaningful or everlasting than work at a big company. GP claimed PMs at big companies only come up with meaningless work but I think the work is meaningless almost everywhere. Every human needs purpose but pouring yourself into something that is very likely to have so little permanent impact seems foolish. I think there is a desperate call for balance in life which is why work-life balance provided by stable companies is valuable, not because the work you do there is any more or less important than a startup.

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

#153

Post by moron4hire »

lkbm wrote: post #66
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…

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…

Everything you're talking about is really just small companies, not startups at all.

Go to work for an established, profitable, small company. Make a good salary and have a fulfilling career.

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

#154

Post by kyuudou »

omarhaneef wrote: post #78
kristopolous wrote: post #57

Earlier quoted context omitted.

I'm sorry, that's really uncalled for and a complete misrepresentation of the topic. Would you like to add to the conversation instead? I'll be happy to read whatever you have to say.

I am (obviously?) kidding, which you would know if you saw me. (Too good looking for startups too). I did not mean to upset you.

I'm tempted to try a cover of the old 80s/90s era song Right Said Fred "I'm too sexy for your startup"

Thanks for unglooming my day!

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

#155

Post by rpastuszak »

lkbm wrote: post #66
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…

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…

> Main reason: it's more fun.

Agreed, although things can get much less fun once you end up burned out.

I think this Tweet does a decent job at describing the tradeoffs/challenges:

    > Typical designer mid-career crisis.
    > 
    > * You want to stay hands on
    > * You want a relaxed, low stress environment doing “meaningful work”
    > * You want to maximise your earning potential
    > 
    > The majority of roles you see force you to pick just two.
Source: https://twitter.com/andybudd/status/1204458288118714370

---

Minor digression: now, not all startups are completely hectic, option-fueled sweatshops. I'm talking about the default picture that comes to my mind when I hear this word. The most successful small startups I know are quite the opposite in fact. Well, I guess having an actual market, solving a real problem is important. (OK, "scale-ups" are the f*cking worst still as you end up with chaos and inability to get work done).

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

#156

Post by C1sc0cat »

ahelwer wrote: post #19
try-perforate wrote: post #13

Isn't this capitalism? Labor and capital are two different factors of production. If you're willing to take the pay cut and risk associated w/ joining a startup, but are unhappy with the returns, why wouldn't you just keep your job, invest the $100,000, and get access to the preferential terms given to capital?

Good luck investing in private companies with $100k. The only way us serfs can get access to those opportunities is to chain our futures to the company and go work for them. Also means we can't diversify our portfolio like the VCs can.

Are there no listed PE funds

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

#157

Post by laser »

I think startups would have a lot easier time recruiting great people if they offered Stock Appreciation Rights [1] instead of typical options. I didn’t even know SARs existed, they’re so non-standard in the startup industry, until as a founder considering an open-ended hiring offer for the first time I desperately looked for some legal upside compensation system that wouldn’t screw me in all likely scenarios. Stock would mean tax bill upfront with high chance of failure. Options would likely expire before I could securely exercise and liquidate to cover costs.

I ultimately decided to stay the founder course, but glad to have found what I think is an acceptable compensation structure. Even if requiring it adds friction to deals until docs are standardized, at least people should know it’s an option. I’d be curious to understand if anyone has found a downside, except to the investors that build these anti-employee systems to arbitrage on knowledge asymmetry.

[1] https://en.m.wikipedia.org/wiki/Stock_appreciation_right

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

#158

Post by cs-szazz »

nbclark wrote: post #151
cs-szazz wrote: post #130

Earlier quoted context omitted.

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…

Without knowing your exact situation, one thing to keep in mind is that the preferred value (last valuation / # of shares) of a share is generally a good bit higher than the tax liability (value of a common share from the 409a minus your strike). Still likely a big tax hit, but perhaps slightly better. IMO changes to tax law for illiquid assets is the best but most unlikely option here.

Yeah it's a good call out, in this case FMV is about 1/3rd the preferred. Sadly the that still puts it out of reach for me, but means I can afford to exercise at least some.

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

#159

Post by quickthrower2 »

richardbrevig wrote: post #121
quickthrower2 wrote: post #119

Earlier quoted context omitted.

You can always bluff. I don’t think people do this enough! I mean a shit job is still a BATNA, and you simply don’t tell the next guy you hate the job. Which is as good as you loving your job and “just dipping my toe in the market” from a negotiation point of view.

I don't believe he's talking about the employer, he's discussing the emotional well-being a job seeker would need. If the job seeker hates their own job, they're more likely to jump from one bad situation to another bad situation. But you're right, and I've done that myself. Where I hated a job so badly and just pretended and smiled as much I could until someone hired me out of that situation.

Oh yeah I’ve been in this boat of jumping from bad to bad. That is probably what sparked my comment. Something about experience being the best education also the most expensive!

The problem is i didn’t realise there is really no way to tell what a job wi be like until you’ve done it for 1-2 years! Therefore if you think “oh i really want to work for them because they are offering a good job” that’s the weakness I had - in reality you can’t put stock into how good you think it will be. They are trying to sell you on working there after all. By not putting stock into it “ah this is a another job I’ll do my best work but it may turn out shit might be good” then you can emotionally walk away from their offer more easily, and ask for caveats. “Can I move teams if I decide I don’t enjoy the first team after 6 months” and stuff like that could be negotiated before starting. Oh and get it in writing I’ve been burned by verbal “miscommunications” before.

And finally I’m going to say “Haskell Tax” is a thing and similar dynamic plays here. They might be the only shop in town offering a Haskell job but if you make it look like you have other options “I applied for a blockchain job too. It’s c++ and Scala not Haskell but the tech looks really cool” then you don’t appear to need them as much.

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

#160

Post by actuator »

a13n wrote: post #147
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 a…

I doubt that's the reason. Like some FAANGs do with stocks, can't you always deduct a part of RSUs as tax liability and add the remaining into the employee's account?
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