This is where having a startup outside of the valley is nice. Nobody where we are (KC) really even expects stock options. We just pay a good competitive salary and don't have to compete with someone like Google paying 2x as much. We have given some people stock incentives but because we pay well and competitively it isn't the primary compensation. The costs of running a startup are so much lower here.
Employee Equity
41–50 of 342 posts
Re: Employee Equity
#42The problem with the 10%/20%/30%/40% thing is that if the company shoots way up in value, an employee could theoretically be fired after two years and not capture much of the value they helped to create. It also doesn't necessarily need to be malicious [1], sometimes companies change and a person's skills aren't as valuable anymore. If I were a prospective employee I would never take a deal like this, because it is r…
The scenario is little different from any other where someone lacks a controlling interest. Controlling interests can sell the company to another company they control at a price that suits their interests. They can issue shares to dilute equity and use the shares to acquire a company which they also control. Any legal action agaist such practices can be defended on the company's dime.
In other words, if scumbags control the company, scumbags control the company. Fortunately, most people aren't scumbags.
Re: Employee Equity
#43Regarding 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…
That really makes no sense. "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.
Yeah, it's crazy. But it's super-common. I always ask how many shares are outstanding, and nobody ever has the information at hand. It's like they said, "We're going to give you 10,000 units of some currency. But we won't tell you whether it's a Zimbabwe dollar (current value: $0.002) or a Euro (current value: $1.38)."
Re: Employee Equity
#44The 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.
It's a great idea, and Adam is classy for a number of reasons, but having just left Quora, I only have 90 days to exercise my options, so it's not something Quora is doing right now, which is what the article seems to imply.
I think you should hit up Adam and see if he can provide you with a 9-year 9-month extension. If not, you should let Sam know so he can provide an update clarification on the article.
There is also a precedent for such type of clarification updates in YC family. YC founding partner, Jessica Livingston, provided a clarification with respects to Sabeer Bhatia of Hotmail vs. DFJ ventures based on the statements Bhatia made in an interview with her for the book "Founders at Work".
Re: Employee Equity
#45I don't understand why options are taxed at exercise. You aren't getting money out of the transaction. If you have an option to buy a share at $1 (when the share is valued at $10), and later you sell at $50, why isn't the tax treatment just that you have a $49 capital gain? Why do we instead do a $1 -> $10, and then a $10 -> $50 tax thing?
Re: Employee Equity
#46It's quite difficult to compete with Google and their revenue/cash hordes when it comes to salary / total comp. Especially if you price the options at the last round's price and discount them some more. 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 offe…
The 100k number isn't engraved in stone, to stay the same for 10 years. If there is a talent shortage and big houses raise salaries to pull it in, VC will have to follow up.
Re: Employee Equity
#47Earlier quoted context omitted.
Ask to forward exercise when joining. From what I understand, there isn't a negative impact on the employer, you are just being granted RSU's that they have an option to buy back for $0 before your cliff, and then convert to ISO's at your cliff. You can file that 83b election immediately, which will substantially drop your tax burden.
right right, but I have to (1) come up with $50k in cash (in my example), and (2) if the job isn't working out, I want the fraction of my initial payment back upon leaving and it isn't clear this happens...
Early exercise makes the most sense for seed stage companies where the exercise price is still low... at companies where you have to spend $50K or more to exercise, I've seen loans being handed out by the company to its executives to make it possible for them to take advantage of it.
Re: Employee Equity
#48I don't understand why options are taxed at exercise. You aren't getting money out of the transaction. If you have an option to buy a share at $1 (when the share is valued at $10), and later you sell at $50, why isn't the tax treatment just that you have a $49 capital gain? Why do we instead do a $1 -> $10, and then a $10 -> $50 tax thing?
The stock is an asset that has value. This view makes a lot more sense when the stock is liquid and you can go and get rid of it right after you exercise your option.
I agree that this totally sucks if there is no easy/public market for the stock.
Re: Employee Equity
#49I've been thinking of putting together something simple to analyze employee option paperwork and add some plain English annotations to help employees understand exactly what they're signing. Based on my experience, there's something like 5 or so templates that cover 90% of the startups in the valley, so shouldn't be too hard. Is there any interest in something like this?
I agree that a resource like this would be incredibly valuable for startups and employees outside of the valley too. Even though they may not have the same details, the annotations may help explain general concepts and terms which are important.
I had a comment on another thread recently proposing something in a similar vein to help employees understand what their stock options mean/are worth: https://news.ycombinator.com/item?id=7584320
Re: Employee Equity
#50[deleted]