Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Startup Stock Options – Why A Good Deal Has Gone Bad (2019)

steveblank.com

Post reply on HN
Print view View original

71–80 of 379 posts

Re: Startup Stock Options – Why A Good Deal Has Gone Bad (2019)

#71

Post by draw_down »

I would like for my company to go public. Leadership has shared a timeline with us (as in “it will happen in the next x years”).

Do I like having illiquid equity? No, but the company has opportunities to access some liquidity. More importantly, working for about five years will have provided me more than many people earn in a career. I want many of the things described here to change like anyone else does, but it would be nuts to call it a bad deal.

I have a feeling people use this kind of junky thinking (“stock options are lottery tickets to be valued at $0”) to justify starting their own thing instead of being employed. But you should do whatever you’re going to do without needing to lie to yourself about how equity compensation actually works out for engineers.

Re: Startup Stock Options – Why A Good Deal Has Gone Bad (2019)

#72

Post by asah »

phendrenad2 wrote: post #29

Has anyone here made significant (2x exercise price) amounts from stock options at a non-unicorn in the last 5 years?

Several close friends have had their options worth $1M+ at Splunk, Slack, JFrog and more - I know the numbers because they've called me for financial advice.

Re: Startup Stock Options – Why A Good Deal Has Gone Bad (2019)

#74

Post by Mauricebranagh »

phendrenad2 wrote: post #29

Has anyone here made significant (2x exercise price) amounts from stock options at a non-unicorn in the last 5 years?

Did that in the past in the UK at BT.A (and the forced split of cellnet) and RELEX more recently and I am in an EMI scheme at the moment that will pay out on the sale of my current employer

Having said that there are significant protections in UK law for employee share schemes

Re: Startup Stock Options – Why A Good Deal Has Gone Bad (2019)

#75

Post by Mauricebranagh »

beagle3 wrote: post #11
geoffharcourt wrote: post #7

Earlier quoted context omitted.

Pre-IPO the venture is likely not profitable, so you'd be getting a share of zero. Companies that are VC-backed are going to be held to an expectation of a big payoff, and will be in general discouraged from offering incentives that uncouple employee incentives from an exit. If I understand this right, it's part of why founders have started to be allowed to sell some of their vested shares at funding events, it gives…

Note GP asked about revenue sharing, whereas you discuss profit sharing. That's not the same thing. Salespeople and sales partners are often compensated with a sales based commission, which is a revenue sharing scheme. It's common and expected, and practiced everywhere there's deal flow. Technical people can rarely prove "ownership" of revenue, so they can't leverage that in negotiation and are left with "general" ow…

And sales commissions are very rarely contractual and open to massive fiddling by the employer.

Re: Startup Stock Options – Why A Good Deal Has Gone Bad (2019)

#76

Post by hn_throwaway_99 »

cddotdotslash wrote: post #43
brabel wrote: post #10

Earlier quoted context omitted.

Why would anyone want to work for your startup when they can get much higher salaries working for larger companies? Stock options used to be that differentiator for startups... now it's just an empty promise in most places.

> Why would anyone want to work for your startup when they can get much higher salaries working for larger companies? As much as I agree with the "lottery ticket" mentality, this line of thinking has been popular to parrot on HN for at least 5-10 years. And as far as I'm aware, startups don't have much trouble attracting senior talent. So until that changes significantly, they are going to continue offering lower sal…

> And as far as I'm aware, startups don't have much trouble attracting senior talent

That seems like a pretty broad assessment to make on a hunch.

Re: Startup Stock Options – Why A Good Deal Has Gone Bad (2019)

#77

Post by Nimitz14 »

mlthoughts2018 wrote: post #56
Nimitz14 wrote: post #45

Earlier quoted context omitted.

This does not match my experience.

Then you have an extremely rare experience. It’s like a professor who did happen to get tenure listening to all the post docs talking about how awful academia is. I’m happy for that one lottery winner but their experience doesn’t count for anything.

Lol, have you considered it might be you who had the extremely rare experience?

Re: Startup Stock Options – Why A Good Deal Has Gone Bad (2019)

#78

Post by Mauricebranagh »

polote wrote: post #12

In what world do we want employee to have stock options ? I mean, for me this is where the problem is, there is no reason to promise a lot of equity to an employee. Pay them well. Now any (private growing) company is well funded, you can afford market salaries.

Your seriously asking this question?

Its to reward taking a riskier job and also for the sweat equity you put in.

Re: Startup Stock Options – Why A Good Deal Has Gone Bad (2019)

#79

Post by brianwawok »

dd36 wrote: post #69
roflc0ptic wrote: post #26

I just started working somewhere that does a different equity scheme called “profit interest.” The gist is, they issue you equity whose worth is based on growth in valuation from when you joined. So if you’re granted 1% shares and the company grows from 100m to 200m on liquidity, you’re entitled to 1m. It avoids you having to front money for stock options, and it also avoids the tax burden b/c when issued, the shares…

Doesn’t that just mean you work for an LLC?

Yah, I think this is fairly common in the LLC world. You don’t want to get equity in LLc, equity = tax burden. You own 1% equity in a LLC and profit 100 million dollars? Congratulations, you now owe the tax on 1 million in income, even if you saw none of the income and have no way to sell your shares.

Re: Startup Stock Options – Why A Good Deal Has Gone Bad (2019)

#80

Post by rongenre »

The other point here is that it's taking ~10 years to go from a company being started to going public. So most employees are going to have to make the decision to either cough up thousands to exercise their illiquid options and pay taxes on them or just have them expire worthless.

At this point, joining as a seed-round or series A employee seems like a sucker's bet if you're expecting equity to be worth anything.

Post reply on HN