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Bolt Financial's loans come due

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Re: Bolt Financial's loans come due

#171

Post by s1artibartfast »

throwaway92394 wrote: post #139
bombcar wrote: post #83

Earlier quoted context omitted.

Stock options (sometimes?) have an exercise date. If you don't exercise by that date, you give up on the options. But some of them would incur a tax liability at option exercising (the IRS values the "gain" at "stock price - option exercise price" and I believe now causes mark to market at the exercise time?) which would need to be paid also. Bolt offered to loan people money to exercise their options (and pay the ta…

I'm more familiar with traditional retail options, but I'm confused. I understand why the employees would want a loan - they need money to buy the shares required to exercise the loan - and I guess they can't do it through a normal broker? If the employees Exercise-to-sell-to-cover or Exercise-to-sell they should be fine right because they would have closed the loan? This would explain why so many took the loan but s…

Bolt isn't public so there is no sale option.

You have to pay to exercise, pay taxes, and pray for a sale option some future date.

Re: Bolt Financial's loans come due

#172

Post by dghlsakjg »

icelancer wrote: post #93
dghlsakjg wrote: post #70

Earlier quoted context omitted.

Also isn’t this in somewhat direct competition with Apple Pay, Google Pay, Amazon Pay and Stripe? I would not want to bet against any one of those companies, let alone ALL of them.

Correct, and you didn't even name their toughest competitor - Shopify's one-click checkout.

Isn't shopify one-click limited to stores on their platform?

Re: Bolt Financial's loans come due

#173

Post by lumost »

renewiltord wrote: post #162
lumost wrote: post #156

The tax benefits of options over RSUs are vastly overstated relative to the risks. At the end of the day, you're going to save ~15% on the total exercise through options compared to RSUs. That's 15% of what for many people may be a 5-10 year investment horizon. The risk you take on as an employee with those options is much greater than 15%. If you have used loans to purchase the options, you have a substantial risk o…

So you grant stock and that’s taxed at grant or you grant RSUs that convert at vest and are taxed at vest. But the stock is not liquid. How are you going to pay the tax. At least, with options you can just choose to sit on them. One of my friends walked away from an options grant and I exercised only when I wanted to. No tax implication till exercise. That’s a big advantage. Early exercise is a big play. You do it if…

RSUs are only taxed when the company is liquid, not when they are vested (which is one and the same post IPO).

So the tax free options are really just locking in long term cap gains. Of course the con is that it’s not actual compensation as the stroke will be equal to the present valuation.

Re: Bolt Financial's loans come due

#174

Post by gkoberger »

gwbas1c wrote: post #166
gkoberger wrote: post #49

Earlier quoted context omitted.

Sure, but this isn't realistic. Like you said, most people can't afford to exercise early. Even at a small company, most people don't have an extra $10k to gamble on a startup that may go nowhere. This is what Bolt was trying to solve. They did it the wrong way and hurt a lot of people, but they were trying to give people the opportunity to exercise early. The correct answer is a 10-year extended window. It's not per…

> The correct answer is a 10-year extended window How would that work? Very few people stay in a tech job for 10 years. I stayed in a software job for 9 years, until I was laid off, and that's extremely unusual.

Normally, the exercise window starts when you leave and lasts 90 days. The 10 years works the same way, except much longer! It has nothing to do with how long you're at the company (although some companies only trigger an extended window after you've hit X years).

Here's more: https://zachholman.com/posts/fuck-your-90-day-exercise-windo...

Re: Bolt Financial's loans come due

#175

Post by Apocryphon »

sillysaurusx wrote: post #131
planarhobbit wrote: post #112

Earlier quoted context omitted.

Not to derail this thread but what’s two faced and charlatan about JF/DHH? Or are you referring to someone else?

Seconded. It’s surprising to hear Basecamp referred to in such a manner. Did something happen?

The whole brouhaha that led to a mass exodus. I don’t know the specifics, but to alienate such a substantial amount of a workforce after decades of pontificating on the proper way to build company culture shows that the wisdom they were hocking ain’t what it’s cracked up to be.

Re: Bolt Financial's loans come due

#176

Post by s1artibartfast »

mbesto wrote: post #151
subsubzero wrote: post #88

Boy do I hate how ISO options are treated by the IRS for startup employees. It puts an insane amount of risk on the employee in both coming up with the cash to exercise(bolt offered loans for this part) and then the worst part, being taxed on unrealized gains. The latter to me seems completely against how the rest of the tax code when it comes to stock based assets. And it leaves employees who are not well informed o…

> It puts an insane amount of risk on the employee The market is what dictates this. You don't have to take a startup job. Facebook, Google, etc. minted hundreds of millionaires when they IPO'd. It's hard for me to feel bad for people who take those risks. I'd argue a whole lot of engineers should be much more judicious about joining startups and ask for more options. If engineers knew how to calculate startup risks…

The market has nothing at all to do with ISO tax policy.

As OP said, it is taxing unrealized gains. It makes as much sense as making employees pre-pay 10 years of income tax when they start a job.

Re: Bolt Financial's loans come due

#177

Post by s1artibartfast »

bpodgursky wrote: post #91
subsubzero wrote: post #88

Boy do I hate how ISO options are treated by the IRS for startup employees. It puts an insane amount of risk on the employee in both coming up with the cash to exercise(bolt offered loans for this part) and then the worst part, being taxed on unrealized gains. The latter to me seems completely against how the rest of the tax code when it comes to stock based assets. And it leaves employees who are not well informed o…

- If you join as an early employee, your strike price is minimal and this isn't a concern at all - If you want to minimize risk in return for higher taxes (call ~40%), just hold your ISOs and exercise-and-sell as a same-day sale when you're liquid (ie forgo the tax advantages of ISOs). There's absolutely no way for you to get screwed over if you're willing to take the gain as standard income.

Sure, but nobody is complaining about taxes on penny options. They complain about a 100k tax bill for an asset that is not liquid and may never be worth anything.

Re: Bolt Financial's loans come due

#178

Post by scarface74 »

subsubzero wrote: post #155
mbesto wrote: post #151

Earlier quoted context omitted.

> It puts an insane amount of risk on the employee The market is what dictates this. You don't have to take a startup job. Facebook, Google, etc. minted hundreds of millionaires when they IPO'd. It's hard for me to feel bad for people who take those risks. I'd argue a whole lot of engineers should be much more judicious about joining startups and ask for more options. If engineers knew how to calculate startup risks…

you pick two out of thousands! Google IPO'd so long ago that the rules regarding ISOs were different back then, strike prices could be arbitrarily lowered to whatever value the company wanted, not the maximum valuation as required by law now. https://www.sec.gov/news/testimony/2006/ts090606cc.htm

And this “I’ll get rich!” statistical improbability is why thousand of employees are willing to work for less than their market value in exchange for Monopoly money. My former CTO who did have a lot to do with our former company having a 10x exit after I left (with very little equity that I didn’t exercise) tried to get me to work with him as a tech lead for what would have been a competitive local offer (mid 100s) - I work remotely - and “equity”. But couldn’t come near the base + RSUs at BigTech even with the recent 30% YTD drop.

They also have absolutely no idea how VC funding and the public markets for IPOs work during a bear market.

At least I can sell my RSUs for real money when they vest.

Re: Bolt Financial's loans come due

#179

Post by scarface74 »

renewiltord wrote: post #162
lumost wrote: post #156

The tax benefits of options over RSUs are vastly overstated relative to the risks. At the end of the day, you're going to save ~15% on the total exercise through options compared to RSUs. That's 15% of what for many people may be a 5-10 year investment horizon. The risk you take on as an employee with those options is much greater than 15%. If you have used loans to purchase the options, you have a substantial risk o…

So you grant stock and that’s taxed at grant or you grant RSUs that convert at vest and are taxed at vest. But the stock is not liquid. How are you going to pay the tax. At least, with options you can just choose to sit on them. One of my friends walked away from an options grant and I exercised only when I wanted to. No tax implication till exercise. That’s a big advantage. Early exercise is a big play. You do it if…

You pay the tax by selling shares of the stock when they vest. It’s earned income like any other earned income. Some companies let you sell fractional shares to cover taxes.

Re: Bolt Financial's loans come due

#180

Post by s1artibartfast »

tempsy wrote: post #86
gkoberger wrote: post #80

Earlier quoted context omitted.

If you're working at a small tech startup, you're likely not making a huge salary. Good, sure, but not huge. It's possible you left your high-paying FAANG job to be developer #3 at a tiny little startup, but in my experience this almost never happens. Also, $10k is a lot of money. Even if you have it in savings (and I'd agree a lot of tech people technically do), it's a huge gamble on an unknown startup. You're alrea…

if that’s truly how you feel why would you accept an offer where that’s how a significant percentage of your compensation works? these types of work environments self select for people who are comfortable taking on risk. no one is forcing you or anyone else to join.

The point is that it sucks and is largely avoidable.

Sure people can not work at companies that don't provide 10 year exercise options. Its not like they are slaves.

But that doesn't mean there aren't better ways of structuring options and it is bad to point this out.

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