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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)

#271

Post by dehrmann »

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.

Productivity is a ceiling for wages. "Decoupling" implies that, for various reasons, there's been a surplus in the labor market since the 70's.

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

#273

Post by dehrmann »

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…

> hindsight is 20-20

Might be best to stop using this idiom.

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

#274

Post by medium_burrito »

dehrmann wrote: post #271
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. Productivity is a ceiling for wages. "Decoupling" implies that, for various reasons, there's been a surplus in the labor market since the 70's.

Which there has been, basically. We effectively double the workforce with women entering the labor supply. H1B ramped up in the 90s, but that's not the same magnitude of change.

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

#275

Post by weeksie »

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…

No. What happened was that in the 70s energy got expensive. As renewables and battery tech get cheaper, we'll see bigger gains across the board. The "evil bankers" stuff is mostly a just so story to explain away the slowing of real growth for the last 40 years.

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

#276

Post by pdonis »

lisper wrote: post #259
throwaway09223 wrote: post #255

Earlier quoted context omitted.

I think it is more accurate to say that wealth growth at the low end is not as rapid as wealth growth at the high end. Nothing is driving wealth down . Wealth is increasing for everyone, generally speaking. This observation is important because it recognizes that wealth is created, not allocated. This is not a zero-sum game. You say it seems unlikely that actual value is increasing at the high end but I do not think…

> Wealth is increasing for everyone, generally speaking That depends a lot on how you count. See: https://fred.stlouisfed.org/series/WFRBLB50107 The average net worth of the bottom 50% over the last 30 years is about the same as it was 30 years ago. Compare to: https://fred.stlouisfed.org/series/WFRBLT01026 and note that the net worth of the top 1% has been increasing more or less monotonically for the last 30 years,…

These charts aren't showing wealth, they're showing money. Money is not wealth.

For example, suppose you have a car that you paid $20K in cash for this year. That works out to about $10K 30 years ago (I think the Fed charts you showed are in inflation-adjusted dollars, though they don't say so). So as far as monetary vaue is concerned, you have the same net worth in your $20K car today as a person 30 years ago would have in a car that cost $10K then. (Or even a car that cost $20K then, if we aren't adjusting cost for inflation.)

Having owned cars over this entire time period, however, I can tell you that the wealth contained in that $20K car today is quite a bit greater than the wealth contained in a car that cost $10K 30 years ago. A $20K car today will be more reliable, get better gas mileage and give better average performance, have numerous safety features that didn't even exist 30 years ago, and have more bells and whistles in general. So in terms of wealth, I'm quite a bit more wealthy with $20K worth of car today than a person 30 years ago would be with the same inflation-adjusted monetary value of car.

And cars are actually a pretty poor example as compared with, say, computers or phones.

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

#277

Post by pdonis »

weeksie wrote: post #275
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…

No. What happened was that in the 70s energy got expensive. As renewables and battery tech get cheaper, we'll see bigger gains across the board. The "evil bankers" stuff is mostly a just so story to explain away the slowing of real growth for the last 40 years.

> What happened was that in the 70s energy got expensive.

Only temporarily. Energy today, adjusted for inflation, is actually quite a bit cheaper now than it was even before the early 70s oil crisis.

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

#278

Post by pianoben »

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?

I worked at a promising mobile-app startup whose gigantic ambitions didn't pan out; I figured they'd be an acquisition target and bought my options for like $4K. At some point the founders decided to cash out, but instead of selling, they started paying out dividends.

That first check alone more than tripled my money - and came with a cap table, too, so I could see the $1m+ payouts to each founder as a nice little lesson in the disparity between founder and early-employee outcomes.

Not that I'm complaining - this has turned into the single highest-performing investment I've ever made :) Career-wise it launched me into the big leagues. A+, would do it all again.

The only other startup that paid me equity money, I got enough to buy a used motorcycle. Yay.

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

#279

Post by joshuamorton »

silentsea90 wrote: post #260

Slightly related, Stripe now gives fixed $ amount of RSUs per year to new hires, which limits both upside and downside significantly. Not to act cynical, but to me it seems that this is another way of screwing employees by denying them stock appreciation on their initial grant. I understand that new hires would be signing off on this while joining so the rug isn't pulled beneath their feet, but this does seem like a…

> Slightly related, Stripe now gives fixed # RSUs to new hires, which limits both upside and downside significantly.

Pretty much all companies start doing this once they get large-ish (snap, airbnb, lyft, uber, etc. all did essentially the same thing).

At the valuation stripe has, I'm not seeing the downside, given that the upside of options is limited once you're the size of stripe today.

> but to me it seems that this is another way of screwing employees by denying them stock appreciation on their initial grant

How? If I'm granted 100 RSUs, and the company value doubles, my RSU value doubles. Fixed # of RSU is the better way (imo) in comparison to fixed dollar amount grants.

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

#280

Post by dragonwriter »

weeksie wrote: post #275
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…

No. What happened was that in the 70s energy got expensive. As renewables and battery tech get cheaper, we'll see bigger gains across the board. The "evil bankers" stuff is mostly a just so story to explain away the slowing of real growth for the last 40 years.

> What happened was that in the 70s energy got expensive.

Well, sure, but not durably so; the most dramatic examples being a pair of transitory geopolitical events producing short-term supply shocks.

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