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Employee Equity

blog.samaltman.com

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101–110 of 342 posts

Re: Employee Equity

#101

Post by logfromblammo »

I can only speak for my own experience, but everyone I have ever known has always been screwed by options. As such, I automatically assign a value of $0 to any options attached to an employment offer. You can pretend that yours are worth more thanks to your unique structuring as much as you like, but thanks to everyone else in the industry, you will still have to convince your employee that you are not just spewing delusion at him.

While I can't prove it, I believe I was once fired just to prevent my options from vesting.

As an employee, you're really better off with zero options and a higher salary 99.9% of the time. But that means the owners have to sell more of their equity to make payroll.

If you want to be a nice guy and keep the early employees eligible for big payouts, take your share of the buyout/IPO and give them bonuses out of that. No one trusts the option plans any more.

Re: Employee Equity

#102

Post by jowiar »

jstrate wrote: post #69

I've worked at two startups, including one YC. Both were acquired by larger tech companies. I was employee #3 at one and rebuilt most of a broken codebase in the other. I got nothing out of either WRT options. I agree with the author on point 4 but I don't think more options are the answer, I should have just asked for a higher salary I would have been better off. Startup-bucks are even worse than a lottery ticket, b…

The other issue with startup-bucks is their value is tied to situations that may affect your continued employment - They're not just a lottery ticket, they're a lottery ticket where "losing the lottery" and "losing your job" are correlated events, whereas if you're liquid, you can buy lottery tickets without this correlation.

Re: Employee Equity

#103

Post by robot »

skrebbel wrote: post #83

Completely off topic, but I'm this post made me realise that Sam Altman went from programmer to enterpreneur to financial guy. This post has very little ado with what he once started doing. He's a partner (and president) of an investment fund now, a pretty odd career move once you take the pink Silicon Valley glasses off. This entire post is about finance. Not about business, not about products, not about customers,…

Being a founder means looking after your employees and that's what this post is about. Entrepreneurship is not solely about building and creating things. You have to lead, manage, and look after the company and its most valuable asset, the employees. Employees need to be compensated properly, and the devil is always in the details, so he is diving into financial details on how to achieve that. Financials are not the point of this post, it is the consequence of proper employee compensation.

Re: Employee Equity

#104

Post by lhnguyen09 »

Matt_Mickiewicz wrote: post #47
x0x0 wrote: post #20

Earlier quoted context omitted.

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.

Any insight into why a company wouldn't allow forward exercising? The legal/finance team at my company refused to do it, though I wasn't given an explanation why.

Re: Employee Equity

#105

Post by DavidWanjiru »

The thing I try to think about in the context of me being the owner of a successful business, and not necessarily in software, is profit sharing, as opposed to equity sharing. Profit is a degenerate case of equity, in the sense that a large (albeit not whole) part of why you want to own equity is to own a share of the profit. At any rate, at the level of employee options, you want own enough equity to play the decision making role that holding equity enables you to. Beyond that, the value a market assigns to equity you own is (should be!) ultimately dependent on the profit that will accrue to that equity. At the same time, profit sharing is a lot less messy and much more rewarding to employees than equity. Sure, you're not getting a share of this asset that you've helped build, but from what I'm hearing, the story is the same with options. And profit should be easier to "give away" than equity from the founders' perspective, I think. I realize that sharing profit is complicated when businesses are in the red, but on the whole, I suspect there might be better value in the idea for all involved. Not that I have any idea about how exactly to go about sharing this profit, assuming it exists, I don't. I just happen to think it might be a more satisfactory path to take, assuming the fork on the road reads "Equity Sharing" this way, "Profit Sharing" that way.

Re: Employee Equity

#106

Post by msoad »

DavidWanjiru wrote: post #105

The thing I try to think about in the context of me being the owner of a successful business, and not necessarily in software, is profit sharing, as opposed to equity sharing. Profit is a degenerate case of equity, in the sense that a large (albeit not whole) part of why you want to own equity is to own a share of the profit. At any rate, at the level of employee options, you want own enough equity to play the decisi…

How many of YC startups are profitable in their first five year?

Re: Employee Equity

#107

Post by michaelochurch »

OmarIsmail wrote: post #94
jstrate wrote: post #69

I've worked at two startups, including one YC. Both were acquired by larger tech companies. I was employee #3 at one and rebuilt most of a broken codebase in the other. I got nothing out of either WRT options. I agree with the author on point 4 but I don't think more options are the answer, I should have just asked for a higher salary I would have been better off. Startup-bucks are even worse than a lottery ticket, b…

As a potential future founder what strategy will you employ in regards to compensation?

Different person from GP.

He could try this: http://michaelochurch.wordpress.com/2013/03/26/gervais-macle...

Re: Employee Equity

#108

Post by Iftheshoefits »

prostoalex wrote: post #73
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.

In that case odds are the startup doesn't have sufficient funds to pay for the talent it (thinks it) needs. I'd argue that this means the startup is: a) mistaken about its needs; b) poorly run; or c) a bad idea (e.g. the price the target market is willing to pay is insufficient to support even the optimally efficient startup's costs to provide service).

Re: Employee Equity

#109

Post by [deleted] »

msoad wrote: post #96
jstrate wrote: post #69

I've worked at two startups, including one YC. Both were acquired by larger tech companies. I was employee #3 at one and rebuilt most of a broken codebase in the other. I got nothing out of either WRT options. I agree with the author on point 4 but I don't think more options are the answer, I should have just asked for a higher salary I would have been better off. Startup-bucks are even worse than a lottery ticket, b…

I had similar experience with startups. With current conventions in startup labor market, only being a founder or or being at Facebook as number Both are off my list because I'm not lucky enough to join the next Facebook and I'm not capable of founding a company myself at the moment. Getting sweet $170k salary with some bonus, massage, free food and shuttle is good enough for me.

[deleted]

Re: Employee Equity

#110

Post by prostoalex »

enjo wrote: post #87
prostoalex wrote: post #74

Earlier quoted context omitted.

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?

We solve that through careful hiring, and not being afraid to part ways with folks who can't get the job done satisfactorily. Interestingly we decouple the two precisely because of what you're describing. When you start singling out specific people, other folks who are also doing very good work pretty quickly become disinterested in their job. That's bad. Even worse, measuring ACTUAL value to the company is really re…

Do you then have a flat compensation that's known to everybody in the company?
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