An Engineer’s guide to Stock Options
blog.alexmaccaw.com
An Engineer’s guide to Stock Options
1–10 of 162 posts
Re: An Engineer’s guide to Stock Options
#2Two corrections:
1. OP says: Once you’ve cliffed, you have the right to buy shares in the company.
"Cliffing", when used as a verb, refers to firing someone just before the cliff-- not an employee achieving it. It's something you'd rather avoid.
2. If the company isn't publicly traded, you should ask to see the cap table. If you're employee #30 and your share is 0.05%, that might be fair if it's a biotech that has already taken a $100M infusion from the venture capitalists (who'll typically take 90%, in that case). For a web startup, it's terrible. You need to know how much equity the investors, executives, and employees at various levels have, so you can evaluate your likelihood of getting an improvement if you perform well. Without the cap table, you don't know enough about the startup to decide whether to take a job there.
Re: An Engineer’s guide to Stock Options
#3Can you talk a bit more about the dilution an employee should expect if the company completes more funding? That could have a serious impact on your shares. Who usually gets diluted first? Founders? Previous investors? Employees?
If you're an employee that received options and the company is doing another round of funding, should you be worried or on the front foot about finding out what will happen to your options?
Re: An Engineer’s guide to Stock Options
#4Two corrections: 1. OP says: Once you’ve cliffed, you have the right to buy shares in the company. "Cliffing", when used as a verb, refers to firing someone just before the cliff-- not an employee achieving it. It's something you'd rather avoid. 2. If the company isn't publicly traded, you should ask to see the cap table. If you're employee #30 and your share is 0.05%, that might be fair if it's a biotech that has al…
you should ask to see the cap table.
I've asked that at every non-public company where I've had "options" and they've never complied. Just have to treat the options as confetti from then on.
Re: An Engineer’s guide to Stock Options
#5Very interesting - I was unaware of the financing options until I read this article. Seems like it could be a good idea if you're unsure if the company will be successful long-term, a way of hedging your bet. Though I would hate to give up 20-25% of the potential upside, I'd consider this if I was on the fence about exercising my options.
Re: An Engineer’s guide to Stock Options
#6I thought 83(b) only helps with RSU grants? For ISO grants I thought you can't do an 83(b) election?
Can anyone clarify?
Re: An Engineer’s guide to Stock Options
#7Taxes can be tricky depending what type of stock options you have. This recently found document tries to point out several strategies:
THE STOCK OPTION TAX DILEMMA FACED BY PRE-IPO COMPANY EMPLOYEES BY BRUCE BRUMBERG, ESQ., MYSTOCKOPTIONS.COM EDITOR-IN-CHIEF AND CO-FOUNDER
https://welcome.sharespost.com/system/resources/BAhbBlsHOgZm...
Re: An Engineer’s guide to Stock Options
#8Can you talk a bit more about the dilution an employee should expect if the company completes more funding? That could have a serious impact on your shares. Who usually gets diluted first? Founders? Previous investors? Employees? If you're an employee that received options and the company is doing another round of funding, should you be worried or on the front foot about finding out what will happen to your options?
Earlier investors usually have the option of reinvesting (at the new valuation) in order to maintain their proportion of the company. Typically, they also get the same terms (which tend to propagate to all the investors in the round.) This is why taking shitty terms early on can damage you, even if you think the 5x liquidation preference you took on that $1 million A round "shouldn't" matter. On its own, it's only $5 million, but you're likely to face MLP (and participating preferred, which is also horrible) in all future rounds.
Founders and employees do not get to reinvest. Typically, when a VC-funded company is allowing employees to buy more equity is the last time to take that deal (it means the company is cash-poor and in bad shape). General rule: unless you're a founder, avoid taking the other side of any deal with VCs in it.
Re: An Engineer’s guide to Stock Options
#9Two corrections: 1. OP says: Once you’ve cliffed, you have the right to buy shares in the company. "Cliffing", when used as a verb, refers to firing someone just before the cliff-- not an employee achieving it. It's something you'd rather avoid. 2. If the company isn't publicly traded, you should ask to see the cap table. If you're employee #30 and your share is 0.05%, that might be fair if it's a biotech that has al…
you should ask to see the cap table. I've asked that at every non-public company where I've had "options" and they've never complied. Just have to treat the options as confetti from then on.
Same here. I keep hearing that platitude, and have yet to come across a company that will cough up the numbers. I've decided it's one of those things that sounds good on the face of it, makes sense, but isn't really true.
But your final sentence is the best advice: treat the options as a potential windfall, but don't otherwise factor them into your decision.
Re: An Engineer’s guide to Stock Options
#10Two corrections: 1. OP says: Once you’ve cliffed, you have the right to buy shares in the company. "Cliffing", when used as a verb, refers to firing someone just before the cliff-- not an employee achieving it. It's something you'd rather avoid. 2. If the company isn't publicly traded, you should ask to see the cap table. If you're employee #30 and your share is 0.05%, that might be fair if it's a biotech that has al…
[deleted]