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

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

#241

Post by mensetmanusman »

danans wrote: post #123
mensetmanusman wrote: post #102

The recent HN article on meritocracy comes to mind. I had never considered it this way in the past, but in the 70’s, productivity started decoupling massively from productivity gains. I.e. the best people at finance (meritocracy) figured out how to capture all the new earnings relative to the workers (who didn’t know this game was going on). This has snowballed into a situation where the financial meritocracy is comp…

> productivity started decoupling massively from productivity gains. I think you meant "wages started decoupling ...", right?

Yes, brain autocorrect. Can’t edit now that people have replied though :)

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

#242

Post by snowmaker »

chubot wrote: post #201
ghufran_syed wrote: post #62

YC has historically had a big influence on improving financing terms for founders and reducing founder-hostile behavior by investors, by creating competition among investors for YC companies. Should YC maybe consider developing and enforcing a code of conduct addressing these issues, that might similarly improve the situation for start-up employees? They could maintain a public list of YC companies that abide by the…

Blog post from 2014: https://blog.samaltman.com/employee-equity That's more of an admonishment, but at least they recognized the problem ...

(I work at YC)

Yes, we care a lot about making employee equity more generous and more fair. Part of our YC curriculum now is teaching founders about these issues and encouraging them to follow best practices around being generous and transparent with employees about equity compensation like Sam discussed in his blog post.

I think there is still a lot more we can do, though.

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

#243

Post by JMTQp8lwXL »

zpeti wrote: post #167
travisoneill1 wrote: post #107

Earlier quoted context omitted.

I don't buy this explanation. Very few employees are paid in any financially complex way. Wages dropping overall must have a different explanation, which I suspect is an increase in labor supply due to women entering the labor force and illegal immigration combined with a decrease in demand due to automation.

It’s funny how economists never talk about this (women in the workforce). Its adding 50% more people to the workforce. Yes, it’s less because women might work less or part time, buts it’s an insanely high number in terms of market effects. I wouldn’t be surprised if one of the reasons you simply can’t survive on one person per household working, as in the 60s and 70s, is simply that two people are willing to work now…

The 70's, into the 80's, more or less began the long-term decline of interest rates in general, but also specifically for the 30 year mortgage. With multiple factors influencing what people are willing to pay for a home, I question how much we can separate out the dual-income household effect.

I wouldn't say it has no influence, but it's probably difficult to state with much precision how great the effect is.

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

#244

Post by JMTQp8lwXL »

VRay wrote: post #186
zpeti wrote: post #167

Earlier quoted context omitted.

It’s funny how economists never talk about this (women in the workforce). Its adding 50% more people to the workforce. Yes, it’s less because women might work less or part time, buts it’s an insanely high number in terms of market effects. I wouldn’t be surprised if one of the reasons you simply can’t survive on one person per household working, as in the 60s and 70s, is simply that two people are willing to work now…

Man, I'd like to see some more info on the whole housing industry in general It seems to be completely FUBAR to me. In Japan, housing ISN'T a glamorous investment, and I think that helps the house pricing situation a lot.. You can get a nice apartment in the fanciest part of downtown Tokyo for cheaper than a dangerous hole in the wall in San Jose

It's cultural. Americans generally have lower savings rate (when compared to other nations) and a home is one place where 'investing' and spending can overlap in a fairly bespoke way compared to anything else you spend money on.

You can't live in a share of stock, though it may appreciate faster than a house. (You also generally speaking can't use leverage to purchase shares). But even if shares appreciate faster than homes, they don't feed into conspicuous consumption: and that matters to some segment of the population.

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

#245

Post by adrr »

rexreed wrote: post #205

Stock options are a poor proxy for company value. Instead, a company should allocate an interest in any in-the-money exit towards a pool that is distributed to employees on a rata share depending on duration of employment and period of employment. I've been working on an interesting formula for this that even rewards those who have left the company. Most employees don't need or want a share of the company. They want…

Ownership comes with legal protections from being screwed over during a liquidity event.

End of the day, I want to be holding the same type of shares of the founders because I know that our interest are aligned.

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

#246

Post by lisper »

HALtheWise wrote: post #231
lisper wrote: post #219

Earlier quoted context omitted.

> doesn’t really match the evidence Here's some data: https://www.pewsocialtrends.org/2020/01/09/trends-in-income-... Something is driving down wealth at the low end while driving it up at the high end. It seems unlikely in the extreme that this a reflection of actual value produced by people at the high end relative to those at the low end. Much more likely is that this is a reflection of some kind of structural pro…

I wouldn't dismiss so quickly that it's impossible for some people to create orders of magnitude more value than others, or for that distribution to change dramatically with time. In farming, for example, increased mechanization has allowed a ~100x increase in per-worker production, and unless literally every other occupation had the same change over the same time period, that should lead to dramatic productivity dif…

> The real difficulty is in deciding who "gets credit" for producing a given thing.

Exactly. The situation we currently have is that the people who are getting the most "credit" as you put it are by and large the same small group of people who make the rules for who gets the credit. "Bankers" is a convenient popular label for those people even though most of them don't actually work at banks.

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

#247

Post by mobjack »

jhowell wrote: post #8

> One possibility is to replace early employee (first ~10 employees) stock options with the same Restricted Stock Agreements (RSAs) as the founders. I am sure RSA are and will always be available to those with the skilleset that commands this level of compensation. I am unclear what would motivate the founding team or investors in a start-up to act otherwise.

You need to pay taxes on RSAs when granted so they mainly make sense when the share price is really low on paper.

Once the valuation is higher, RSUs can shield employees from paying taxes until a liquidity event.

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

#248

Post by TheCoelacanth »

indymike wrote: post #24
eternalban wrote: post #20

Earlier quoted context omitted.

> Technical people can rarely prove "ownership" of revenue Maybe we geeks should let the sales teams run Powerpoint presentations instead of the actual product to address that misunderstanding.

This is such a silly thing to argue about. Sales are very dependent on product quality, availability and dare I say delivering features customers need when they need them.

Of course, that is not what anyone is claiming.

With sales, it is very easy to tell which specific people are responsible for any specific deal. That's why sales compensation usually includes a share of revenue.

With product development, unless you have a very small team working on the product, it's nearly impossible to tell which specific people were responsible for a specific chunk of revenue. When someone buys a product, it's hard to determine which specific features were responsible for the deal.

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

#249

Post by wyclif »

fennecfoxen wrote: post #218
dudeman13 wrote: post #179

Earlier quoted context omitted.

I wished people had decided Software Engineers made 125k Could achieve financial independence in 2 years

I made $125k total by year 3 of my career. If you need $125k, look elsewhere (and specifically look in California and maybe possibly New York.) The unfortunate consequence of the taboo of salary discussions is young software engineers not knowing how much they can actually make.

Look for CA and NY companies and salaries, but live in a low cost of living region and work remotely.

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

#250

Post by burnte »

sanity wrote: post #174

I'm facing a headache with some options I was granted for a startup back in 2013 for being an advisor. I didn't exercise the options at the time (hindsight is 20-20). The startup is doing well - it recently raised ~$300m at a ~$3b valuation, but my options expire in Dec 2023 and I'm growing increasingly concerned that they won't have a liquidity event before then. If I exercise my options before then it will be taxed…

Can't sell them back to the company or to another investor in the company?
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