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The best solution I have heard is from Adam D’Angelo at Quora. The idea is to grant options that are exercisable for 10 years from the grant date, which should cover nearly all cases That is an awesome idea, and really classy on Adam's part.
Imagine a well to do company of 2 founders (in SF/Bay Area) and a team of 3-4 others that raised a seed at 10m cap. They want to grow their team headcount to 15 and are busy hiring, running servers, etc. They can offer a 100k salary (more than enough to live on) to a sort of senior engineer or PM and want to compete with Google on total comp. Let's say they need to make up the other 100k difference in comp & salary with options. Over 4 years, you're looking at a 4% equity chunk to one employee, the 6th person joining the company.
Not that I think numbers in line with this aren't realistic (I do agree with Sam that more generous equity grants are better), but for most companies that make a 15% option chunk for employees it's difficult to rationalize a number like that.
Edit: Also, that puts the equity comp of that 6th employee (or 10th, because in most cases you will have a similar equity bracket for those people) at about 1/8th of the founders, not the 1/200th that Sam mentioned. I wonder how many people have made offers to employees with a similar comp plan.
The best solution I have heard is from Adam D’Angelo at Quora. The idea is to grant options that are exercisable for 10 years from the grant date, which should cover nearly all cases That is an awesome idea, and really classy on Adam's part.
Having to keep track of "large" (unsure of how to quantify that) percentages of the company that might be purchased at a later date seems like a liability that the company wouldn't want to have to track, especially as a startup with other things to focus on. They're useless to the company, the only upside is for the employee.
Adding to Sam's post I'd like to see employees made aware about tools like 83(b) elections to decrease their tax liability.
I don't see any problem with restricted stock pre series A, when equity is the biggest consideration for employees. As long as financing is notes, the common hasn't yet been priced, so you can just use a very low value.
Willingness to issue refresher grants is easy for CEO and board to change.
I don't think you need to be as open as buffer, but being open with percentage ownership and financials seems obvious.
RSUs with a performance modifier already cover most of this for larger companies. Something like that for startups probably wouldn't work since so much of the risk is company-wide vs. individual.
I think employees would be more than happy to treat all of this as ordinary income, if that would make it more appealing to the IRS.
Regarding the question of knowing what percentage of total equity your stock grant represents, most companies that are not incredibly early stage will simply not tell you. Pushing the subject further will make you look like you're nosing around where you shouldn't, often leading to the offer being dropped (this has happened to me). Not to say it wasn't a not-so-great company to start with, but a dropped offer is a dr…
"Here are options to buy 10,000 shares"
"Umm. Thanks. Is that a lot ? Is it peanuts ?"
Without knowing the second number you might as well not be having that discussion.
The best solution I have heard is from Adam D’Angelo at Quora. The idea is to grant options that are exercisable for 10 years from the grant date, which should cover nearly all cases That is an awesome idea, and really classy on Adam's part.
The best solution I have heard is from Adam D’Angelo at Quora. The idea is to grant options that are exercisable for 10 years from the grant date, which should cover nearly all cases That is an awesome idea, and really classy on Adam's part.
From a company's point of view, wouldn't that really suck, having all of these outstanding shares in limbo? I'd imagine at least part of the 90-day thing is just so that the company knows the status of those shares. For an employee, the company is holding those out as a carrot for you: someday those shares might pay off, if you work hard. For a former employee, he/she gets 90 days to decide whether to pony up the cas…
It is indeed not useful to the company, and a great upside for the employee. Out of all suggestions in the article, this is probably the most employee-friendly. But that's not a bad thing if it helps recruit good employees, or otherwise seems like a fair thing to do.
The usual 90-day limit makes employee vesting almost meaningless. They either wait for an acquisition (and get all their options accelerated), or leave before that (and lose all of them). Few employees have enough spare cash to buy out their shares.