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Employee Equity

blog.samaltman.com

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71–80 of 342 posts

Re: Employee Equity

#71

Post by keithwarren »

diziet wrote: post #22

It'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…

100K is not more than enough to live on, if you live in the Valley and have a family (say 3 kids) then 100K barely buys you a comfortable lifestyle. I know that is not the point of this thread but so much focus of these discussions seems to pivot around a 22 year old college dropout who lives with roommates in a shared apartment.

When you reach a certain point, say your mid-30s and you have kids your financial obligations can extend far beyond what people think is necessary to 'live on'. You have retirement contributions, savings for college, long term care for family (most people believe it or not, have to help their parents out at some point).

Re: Employee Equity

#72

Post by gohrt »

zacharycohn wrote: post #54
awicklander wrote: post #31

There's another option that people never seem to talk about. Treat people well, give them a good working environment, and give them a fair salary based on the fact that they don't have any equity. Most engineers I know with stock options and a discounted salary would have been much better with a higher annual salary and no stock options at all.

Sometimes there is not money to do that.

If the idea can't get angel funding or a bank loan, then perhaps the idea isn't good enough to build.

Re: Employee Equity

#73

Post by prostoalex »

awicklander wrote: post #31

There's another option that people never seem to talk about. Treat people well, give them a good working environment, and give them a fair salary based on the fact that they don't have any equity. Most engineers I know with stock options and a discounted salary would have been much better with a higher annual salary and no stock options at all.

This is attractive for someone out of college, but if you're trying to attract someone senior with a YouTube/Google/LinkedIn/Facebook/Twitter exit in their resume (and sometimes multiple of those, not that uncommon in the Valley), your fair salary is likely to be less than the total package they can get elsewhere.

Re: Employee Equity

#74

Post by prostoalex »

enjo wrote: post #57
ChuckMcM wrote: post #38

I am a fan of giving options every year with a performance multiplier. That way the high performers are rewarded with more options and your available options are more accurately divided amongst the employees who have made the most impact. When you are not yet cash flow positive as a startup you can give 'bonuses' in options rather than in cash. I don't know if we could figure out a portion that employees could contri…

How do you define performance? It's a fantastically difficult thing to define. In my experience every attempt at this (at least for engineers) ends up in a situation where people are putting their effort into maximizing metrics as opposed to furthering business goals. We completely decouple performance reviews from compensation. Full stop.

What? Why? Don't the overachievers then become bitter knowing that the guy next desk to them is making more by working less, just because he was better at negotiating at some point?

Re: Employee Equity

#75

Post by prostoalex »

johnrob wrote: post #27

The easiest would be if the IRS would agree to not tax illiquid private stock until it gets sold, and then tax the gain from the basis as long-term capital gains and the original value as ordinary income. 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.

Why? Worst-case AMT rate is 28%, worst case income tax rate is 39.6%. If you have a choice and means, you want to pay AMT.

Re: Employee Equity

#76

Post by ska »

keithwarren wrote: post #71
diziet wrote: post #22

It'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…

100K is not more than enough to live on, if you live in the Valley and have a family (say 3 kids) then 100K barely buys you a comfortable lifestyle. I know that is not the point of this thread but so much focus of these discussions seems to pivot around a 22 year old college dropout who lives with roommates in a shared apartment. When you reach a certain point, say your mid-30s and you have kids your financial obliga…

And that's why in the latter case, an early stage startup may not be for you. You join later, with a higher salary, when it has stabilized and looks to be going somewhere. And without the risk, you don't expect the equity to offset it. Pretty simple, really.

Re: Employee Equity

#77

Post by prostoalex »

spo81rty wrote: post #41

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.

How many startups with $1 bln+ valuation are there in KC?

Re: Employee Equity

#78

Post by lightsidelabs »

larrys wrote: post #64
spo81rty wrote: post #41

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.

I'm curious why the people who are not in the valley don't go to the valley. Is it because they: a) aren't motivated to b) don't know what the potential is there may not even know what is going on. May not even know about YC or VC's etc. c) don't think there is potential there (think it's all over hyped and focuses on a few people who win). d) have family obligations which prevent them from moving to the valley e) Ot…

Some cities are really nice places to live with unique resources of their own. In Pittsburgh, for instance, there are fewer interesting software jobs but a beautiful city with a lot of exciting non-technical things going on, a healthy ecosystem around Carnegie Mellon, and very nice 1-BR apartments in the best, most central and walkable parts of town for $800/month. Not everything needs to circulate around the moonshot opportunities of the VC ecosystem.

Re: Employee Equity

#79

Post by prostoalex »

rdl wrote: post #26

I don't think the 4/1 aspect of vesting is a particularly big problem. If you are enjoying your job at 4 years, the job has probably changed substantially, and you can renegotiate for a refresher grant. 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 valu…

Most people don't know how to renegotiate, and by the time they need to do it, they've negotiated their compensation at some other place and are giving a 2-week notice.

Founders/management need to be proactive about this. Good school of thought on this is Andy Rachleff of Benchmark / Wealthfront https://blog.wealthfront.com/the-right-way-to-grant-equity-t...

Re: Employee Equity

#80

Post by grimlck »

spo81rty wrote: post #41

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.

Private company valuations of companies based in VC are far than companies outside the valley, even with the same revenue/profit/growth potential.

It sucks and doesn't make economic sense, but that is what I observe

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