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Employee Equity

blog.samaltman.com

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171–180 of 342 posts

Re: Employee Equity

#171

Post by DanielRibeiro »

Great post by Sam. For employees, I'd also refer to Alex MacCaw's An Engineer’s guide to Stock Options[1]. Alex used to work at Stripe, and at the end of his article he shares some intersting bits of stock tax alternative not covered by Sam:

If you can’t afford to exercise your right to buy your vested shares (or don’t want to take the risk) then there’s no need to despair – there are still alternatives. There are a few funds and a number of angel investors who will front you all the cash to purchase the shares and cover all of your tax liabilities

And he goes further:

If you’re interested in learning more about financing your stock options then send me an email[2] and I’ll make some introductions. I’ve set up an informal mailing list, and have a group of angel investors subscribed who do these kinds of deals all the time.

[1] http://blog.alexmaccaw.com/an-engineers-guide-to-stock-optio...

[2] the link is to alex at alexmaccaw.com

Re: Employee Equity

#172

Post by karmelapple »

Iftheshoefits wrote: post #89
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…

You've identified one of the reasons I hesitate to put myself in the "startup labor market" for any startup that isn't well-funded. Even well-funded startups give me pause. I'm not interested in putting in founder-like work for entry-level employee-like compensation plus a lottery ticket. Unless the equity is meaningful and imbues the recipient with an actual, real voice in the direction of the company it's just a wa…

I'm curious: what is "founder-like work" to you? Is it 50–80 hour work weeks? Or does it mean 40 hours but making the initial, architectural decisions of a new piece of software? Serious question.

Re: Employee Equity

#173

Post by korzun »

dalef wrote: post #159

Great article, but I am still not really understand some of the part of the whole picture. Can someone help here? I am now working in a series A company, taking 0.13% of the company, 13,000 shares (options). At the other side, Pinterest offers me 30,000 RSUs which I turned down because I thought Pinterest was already a late stage company. But after I did these researches (including this post), I am wondering if I mad…

Number of shares you have does not mean much, if they close another round your shares will be diluted.

Re: Employee Equity

#174

Post by pyrrhotech »

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…

Can't like this one enough. Very similar experience over my career here

Re: Employee Equity

#175

Post by pyrrhotech »

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…

200k is nowhere close to total comp for a lot of engineers at google. 300-400k for anyone with 7+ years experience who is worth a damn, and some are topping million+. Startups simply cannot compete with google compensation, period. No matter how much equity you give.

There may be valid reasons to work for a startup, but thinking you will be paid to the best of your ability or god-forbid, thinking you will get rich is not a valid reason.

Re: Employee Equity

#176

Post by johngalt »

redmaverick wrote: post #126
michaelochurch wrote: post #111

Earlier quoted context omitted.

Now I work at a large tech company in SV and wont be involved in another startup unless I'm a founder. You're making the right call. I'm probably older than you and I've done two startups. My career hasn't recovered from the lost time. Total waste. Most startups (by startup, I mean "company focused on such rapid growth that VC investment is mandatory") are pure shit. They fuck up your finances, drain your emotional r…

overperformance is far more dangerous (in large companies) than underperformance. Why? Can you explain.

The curse of competence.

In your next family gathering people will ask you to fix their computer. You say 'Sorry I'm not IT, I'm a programmer'. Suddenly they dislike you. Do they dislike your cousin who waits tables for not fixing their computer? No, just you.

Similar themes play out in a business setting. If you're competent everyone will want you to do everything important. Which will result in:

1. You get stretched too thin and start making mistakes -> fired.

2. You refuse to take more than your share of work. This is seen as a slight to whomever you refuse. Similar to the above anecdote.

No one gets upset with the person who can't help them. They get upset when the person who can help them doesn't. Additionally people tend to focus on what you haven't done yet, not what you've already accomplished. The more that you are able to do, the larger the unfulfilled expectations become. Suddenly a large portion of the projects are complaining that they would be further 'if only we could get Redmaverick to help'. Now you're seen as the bottleneck for not helping, rather than the asset because your skills apply in so many areas.

If you are a skilled person who can execute tasks, it is vital that you always frame yourself by your accomplishments. By default your capabilities will be used to create a long string of perceived obligations.

Re: Employee Equity

#177

Post by coffeemug »

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?

Pick a market where you can get to significant traction in less than a year with a founding team of 3-5. Split equity evenly between all founders, but do pick one CEO. Then work like hell to get to significant traction. Don't hire until series A.

(If my current company doesn't work out, this is how I'll do it next time around)

Re: Employee Equity

#178

Post by emmett »

pyrrhotech wrote: post #175
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…

200k is nowhere close to total comp for a lot of engineers at google. 300-400k for anyone with 7+ years experience who is worth a damn, and some are topping million+. Startups simply cannot compete with google compensation, period. No matter how much equity you give. There may be valid reasons to work for a startup, but thinking you will be paid to the best of your ability or god-forbid, thinking you will get rich is…

It's easy for a startup to compete with google on compensation: just be a huge success. If you sell for $10 billion, a typical engineer with 0.1% equity will do well. A first employee with 2% equity will do very well indeed.

But yeah, on average, it's not going to be as good as Google. Pick your startup carefully.

Re: Employee Equity

#179

Post by semerda »

Mary Russell & Chris Zaharias are trying to do that here http://stockoptioncounsel.com/ with a bill of rights endorsement by educating folks on stock options and their rights. There are all sort of clauses and tax implications around given options that confuse people. Most end up believing the % they got will make them a millionaire.

This is a great opportunity for Freakonomics to dig into the state of stock options in startups.

When I was in my 20s I was more gullible by all the talk of stock options and becoming a millionaire from them. However I never stopped investing in property and after 10 years I am happy I continued investing into tangible assets that I was in control of. Stock options is a lottery at best. And as you get older, and learn the value of money and your time, you see the opportunity costs clearer.

As a side note, I've been through an IPO and fed all the brain wash leading up to it. Reality is always far from the dream. Many people don't like to talk about their failures only successes hence you hardly ever hear about this.

Now saying all that, there are the minority that strike it rich either by being an early employee of a startup that goes big (small % of something large) or are a founder of a successful startup when the stars align.

Employee compensation in startups will need to change as more folks start to realize the opportunity costs.

My word of advise, invest in yourself and stuff "you are in control of".

Re: Employee Equity

#180

Post by STRML »

I'm starting to see companies tossing around the idea of "Phantom Stock Options"; that is, shares kept purely on paper that are never issued to the employee. Upon a liquidity event, the employee can exercise the shares and be paid their value as regular income.

This has some tradeoffs, some of them positive, some of them negative, but I am far from an expert I would love some input from somebody who knows more.

It does appear to be vastly simpler for all parties, and completely eliminates any possibility of a tax trap. However it seems to guarantee that you will be paying income tax on the sale, which can be quite sizable. And the specifics of what happens after you leave, voluntarily or otherwise, is incredibly important considering that you are never granted any actual stock.

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