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

Silicon Valley's best kept secret: Founder liquidity

stefantheard.com

Post reply on HN
Print view View original

701–710 of 943 posts

Re: Silicon Valley's best kept secret: Founder liquidity

#701

Post by hector_vasquez »

onlyrealcuzzo wrote: post #417
foobarian wrote: post #406

Earlier quoted context omitted.

> making ~$1M per year working 6 hour days at FAANG Can you say more on this? I didn't realize FAANG TCO was quite that high. Maybe it's time to swallow some pride and take the adtech money after all...

The average SUCCESSFUL founder is in their earlier 30s. At that point - you should be at least L4 (probably L5) at FAANG. Salaries are about ~$450k at that level and age. In 5 years, if you work even a fraction of as hard as you need to be a successful founder, you should be L7 - salaries are usually >$800k at that point. No, it is not like any average slacker straight out of college in 5 years can get to a $1M salar…

The average L5 SWE salary at Google in the SF Bay Area is $215,000 [1].

1. https://www.levels.fyi/companies/google/salaries/software-en...

Re: Silicon Valley's best kept secret: Founder liquidity

#702

Post by sshconnection »

underdeserver wrote: post #673
corry wrote: post #652

Earlier quoted context omitted.

I'm curious why you think these employees -- who are getting the worst end of the deal -- are working for startups in the first place? Either they have the skills to be a founder themselves or to work at BigTech... or they are financially ignorant/disinterested enough to not understand how equity in corporations work? Or is the charming and misleading founder who is to blame? My point is that considering the high avg…

Or they want to work at a small startup and have the technical skills, but don't necessarily want to manage people, work insane hours, and meet with customers and potential hires instead of building the product.

An early stage startup is a bad place to avoid working insane hours.

Re: Silicon Valley's best kept secret: Founder liquidity

#703

Post by indoordin0saur »

AlwaysBCoding wrote: post #681
0xB31B1B wrote: post #657

Earlier quoted context omitted.

its not done this way because the founders want to screw you, its done this way because of a bunch of arcane tax laws. Its complicated to explain, but the origin of all of these weird "options not equity" and "90 days to expire" type things are because of US tax law. If the startup could give you shares without putting the employee and the company both in a very puntantive tax situation they would.

This isn't true. Company executives don't owe a fiduciary duty to employees or holders of stock options in a company, they only owe a fiduciary duty to concrete shareholders. There are a lot of founders of less than high moral character who want to keep it this way. I sent a Section 220 demand letter to the founders of this company to get transparency on the money that was taken during the secondary stock sale and th…

I'm pretty unknowledgeable when it comes to tax law but... If you're an employee at a series A start-up valued at $50 million and part of your annual salary pay package is being issued equity worth $100,000 do you have to pay tax on that immediately? If you can't cash out because there hasn't been a liquidity event how do you pay the tax?

Re: Silicon Valley's best kept secret: Founder liquidity

#704

Post by llmblockchain »

indoordin0saur wrote: post #700
llmblockchain wrote: post #649

Earlier quoted context omitted.

This happened to me as well, but even worse because they killed my equity by getting rid of me on month 11 of year one. I joined a company as employee #2 (though, I started the same day as #1). I started working with the founder and co-founder in a We Work office that barely fit the four of us. Within 11 months the company was worth over a billion dollars and my wife was about to give birth. At this time the company…

Wait, your 11 month old company with a handful of employees was valued at a billion?

Yes-- and worth more today.

I don't think it's an ordinary path. The founder had success before, and the company I was a part of skipped seed and started with a series A before raising more pretty quickly.

edit:

From the looks of it, they have 500+ employees now.

Re: Silicon Valley's best kept secret: Founder liquidity

#705

Post by FreakLegion »

Finbarr wrote: post #629
flyinglizard wrote: post #603

Earlier quoted context omitted.

Not realistic to maintain control past A unless you built a real rocketship. The board doesn’t usually want to run your company - they have enough other companies, some evidently better than yours as they don’t require this intervention.

> some evidently better than yours as they don’t require this intervention. I’m not sure where that’s coming from. Also plenty of companies out there have control past the A.

Most have voting control, subject to certain investor veto powers, after the A. Very few have it after the B.

Re: Silicon Valley's best kept secret: Founder liquidity

#706

Post by gafferongames »

shermantanktop wrote: post #602
BoorishBears wrote: post #222

Earlier quoted context omitted.

It's not really compared to an average person's life, but in SV tradition never let the chance to subtly flaunt a wealth gap pass by freely (This is the part where you say "Yes, having lived both ")

Has 50M: wishes they had 250M Has 250M: wishes they had 1B

Tres Commas

Re: Silicon Valley's best kept secret: Founder liquidity

#707

Post by indoordin0saur »

matuszeg wrote: post #628
tomp wrote: post #607

Earlier quoted context omitted.

employees aren't shareholders they get options, not equity personally, I never understood why they don't get actualy equity (in particular, given that the options are "fairly priced" i.e. the call price is the latest equity round price, making them worth literally $0!) and that equity should have the same terms as investors get (no "liquidation preference" lol) because - guess what - you're literally exchanging your…

I have received equity as an employee. When I started, the company was very early and their evaluation was still very low. The way it worked was that I had to pay for the equity grant upfront. I forget exactly how much but it was That same company eventually raised a sizeable equity round and then began issuing options for new employees. If they were to continue issuing equity grants, the cost to purchase the grant w…

IMO, the real problem with options seems to be that you have no idea what they are truly worth. You have the option for 10k shares and you know the company is worth $200 million, but you have no idea how many shares are outstanding. Meanwhile, shares are being diluted, or maybe they aren't. You're just kept in the dark as to what is happening. At least that was my experience.

Re: Silicon Valley's best kept secret: Founder liquidity

#708

Post by earnesti »

LargeWu wrote: post #527
throwaway98797 wrote: post #288

Earlier quoted context omitted.

cause if you fail you have to let people go cause if you fail you have to tell your investors you lost money cause if you fail is a thought that’s always running through your head as you live it

"cause if you fail you have to let people go" This isn't the founder's risk. It's the employee's risk. And it has the added bonus of, if there is a liquidity event, the employee's don't get the upside. I was like engineer #3 at a company that eventually was acquired for ~$250MM. My payout was $60,000, after 5 years of employment there. I could have made more by going and contracting at megacorp for a single year. The…

> There was never any upside for me.

That was because you negotiated and accepted a shitty deal. Unless someone scammed you into believing something that isnt' true, which I doubt. Founders can be overly optimistic, but it isn't same as scamming.

Startups are a difficult game. Everyone gotta watch for themselves. Don't blame on others if you accepted a suckers deal.

Re: Silicon Valley's best kept secret: Founder liquidity

#709

Post by indoordin0saur »

llmblockchain wrote: post #704
indoordin0saur wrote: post #700

Earlier quoted context omitted.

Wait, your 11 month old company with a handful of employees was valued at a billion?

Yes-- and worth more today. I don't think it's an ordinary path. The founder had success before, and the company I was a part of skipped seed and started with a series A before raising more pretty quickly. edit: From the looks of it, they have 500+ employees now.

Seems like you would have had a good case to a lawsuit, at least enough to give them a headache settle in court. Strange that they dumped you if you were valuable to the effort. Did they just squeeze you for what you were worth and decided they could get by with other engineers or did they not see your work as valuable?

Re: Silicon Valley's best kept secret: Founder liquidity

#710

Post by AlwaysBCoding »

indoordin0saur wrote: post #703
AlwaysBCoding wrote: post #681

Earlier quoted context omitted.

This isn't true. Company executives don't owe a fiduciary duty to employees or holders of stock options in a company, they only owe a fiduciary duty to concrete shareholders. There are a lot of founders of less than high moral character who want to keep it this way. I sent a Section 220 demand letter to the founders of this company to get transparency on the money that was taken during the secondary stock sale and th…

I'm pretty unknowledgeable when it comes to tax law but... If you're an employee at a series A start-up valued at $50 million and part of your annual salary pay package is being issued equity worth $100,000 do you have to pay tax on that immediately? If you can't cash out because there hasn't been a liquidity event how do you pay the tax?

you are issued equity in the form of stock options. Stock options give you the opportunity to buy stock in the company at a specific "strike price" enshrined as the fair market value of the company when you sign your offer letter.

you aren't actually vesting stock month to month you are vesting your stock options. when you "exercise" your stock options you pay the company the strike price * number of options you want to exercise in order to purchase the actual stock in the company.

If the company has grown in value since you joined then you would have a taxable event upon exercising your stock options because you are buying the stock at the strike price, but the fair market value of the stock is significantly higher, so that is a taxable capital gain that you have to deal with.

Any sane company will give you a 10-year exercise window after leaving the company to actually pull the trigger and "exercise" your stock options so that you don't incur a tax liability but some companies only give you three months. Which means not only do you have to front the cash to "exercise" the options, but you also have to pay the tax liability on the capital gain of stock for that year.

If you're asking how you can possibly be expected to pay the tax on a million dollar+ capital gain, without ever even having access to cash or a guarantee you even will have access to cash in the future, then welcome to the scam that is being an employee at a Silicon Valley startup and the fucked up logic of the US tax code.

Post reply on HN