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Employee Equity

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191–200 of 342 posts

Re: Employee Equity

#191

Post by htormey »

ritchiea wrote: post #134
jowiar wrote: post #102

Earlier quoted context omitted.

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.

There's not much job security elsewhere either

Sure, but you're less likely to be fired at short notice from a big company. Unless you do something stupid or illegal you will be put on a performance plan and have some time to get your act together. Lets say you're working at a startup on a h1b visa, if they decide to let you go with little notice you have a limited amount of time to line up another job or leave the country.

Re: Employee Equity

#192

Post by morgante »

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…

I'm in New York and don't intend to go to the valley any time soon. Four reasons:

a) The compensation game is less ridiculous here. With pressure from the finance industry, all companies (including startups) tend to offer decent salary and don't over-rely on equity compensation.

b) I don't like driving. From my limited experiences, it seems that it's necessary to (occasionally) drive in the Valley.

c) SV seems way over-hyped. Yes, people are building some cool things—but far more people are just making knock-off apps and it's all a bit of a bubble. When the tech bubble pops, SV will be hit the hardest.

d) I don't want to live in a (tech) monoculture. It's interesting interacting with people from other industries and living in a real metropolis.

Re: Employee Equity

#193

Post by michaelochurch »

zwegner wrote: post #145
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…

Speaking of "real autonomy", did you put any further thought into your idea of Autonomy Funds[0]? I thought it was very intriguing, if perhaps hard to get off the ground. Definitely would be a good antidote to the kind of SV craziness you describe, but of course not really in line with the status quo. I'd like to see some more discussion on this, and maybe get involved (though my business knowledge is near nil). [0]…

I don't think it's the right structure. I like the idea of open allocation (which is more defined) in a decent company better (although that, too, is rare). Paying typical young people to "do whatever" is not going to lead to the kind of performance that would sustain the fund. Also, I love the idea, but I feel like a lot of the best people are going to still go to YC. There isn't really room for more than one YC, because (like academia, which is all about reputation) most incubators are a reputation drag.

Also, I think "startups" generally suck. By startups, I mean companies built to become billion-dollar concerns (and willing to throw culture and people under the bus to get there). I'm starting to think of that as raving narcissism. People should want to do great work without that instant gratification and entitlement of Big Exitzzzzlol!!!!111

A better idea is this: http://michaelochurch.wordpress.com/2013/05/07/fixing-employ... . The idea is that people sell call options on their time, as a consultant. Let's say my fair market value is $200/hour now. I might sell a call option, struck at $150/hour, exercisable within 5 years. That's probably worth $100-150 because I'll be more skilled in the future. It lets people finance their career needs early, but it also makes the consulting market astronomically more efficient because the option-holders (who would tend to buy underpriced options) have an economic incentive to find work for talented people.

Re: Employee Equity

#194

Post by diziet »

paulbaumgart wrote: post #154
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…

15 employees on a ~$2M seed round would be very aggressive. Realistically you'd only want to hire around 5, so your runway lasts at least 18 months. Low-single-digit percent equity stakes vesting over 4 years for those employees is pretty in-line with what I've seen on https://angel.co/salaries .

It is not really aggressive if you are planning on growing your company. Typically, a high growth oriented venture funded startup is looking to get about 12-18 months of runway from their funding, hit some metrics and get funded for series A, repeat. 2M seed round at 5 employees means avg per employee spending of 260k / year. This is assuming you're not bringing any revenue in yourself.

Re: Employee Equity

#195

Post by fragsworth »

> startups try to have very small option pools after their A rounds, because the dilution only comes from the founders and not the investors in most A-round term sheets.

Why is this the case? If you try to align the interests of the investors with the interests of the founders, you'd find that this would put you at odds with your investors.

A company's total value might be quite a bit higher by having the ability to offer large amounts of employee options (just as an example, the ability to easily hire media personalities with a big followings without breaking your bank), which is good for both the founders and the investors.

I understand the investors are trying to protect themselves from the founders deciding to give a ton of shares to their friends (and then potentially back to the founders, in other ways), but I wonder if there is a better solution to this.

Re: Employee Equity

#196

Post by argonaut »

Iftheshoefits wrote: post #108
prostoalex wrote: post #73

Earlier quoted context omitted.

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).

This misses the point. Prostoalex's point is that a senior engineer can pull $300k+ at a place like Google/Facebook/etc., all while working less than 9 hours a day with lavish perks.

When a senior engineer goes off and tries to work at a startup, it is precisely because they want to try playing the lottery (with a very fat equity slice), not because they're going out to try and get a ultra-competitive cash salary.

Re: Employee Equity

#197

Post by webwright »

coffeemug wrote: post #177
OmarIsmail wrote: post #94

Earlier quoted context omitted.

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)

I feel like I remember PG telling me that large founding teams (more than 3) were highly correlated with failure.

If I were to guess why: The more relationships you have on the founding team, the more likely you are to have ONE of them blow up or have someone lose their nerve/interest. Early startups are fragile things.

Seems like you could go with a hybrid approach (start with 2-3 founders, raise a small amount or self fund to hire 1-3 stars for small salary/high equity comp who couldn't go without a paycheck).

Re: Employee Equity

#198

Post by paulbaumgart »

diziet wrote: post #194
paulbaumgart wrote: post #154

Earlier quoted context omitted.

15 employees on a ~$2M seed round would be very aggressive. Realistically you'd only want to hire around 5, so your runway lasts at least 18 months. Low-single-digit percent equity stakes vesting over 4 years for those employees is pretty in-line with what I've seen on https://angel.co/salaries .

It is not really aggressive if you are planning on growing your company. Typically, a high growth oriented venture funded startup is looking to get about 12-18 months of runway from their funding, hit some metrics and get funded for series A, repeat. 2M seed round at 5 employees means avg per employee spending of 260k / year. This is assuming you're not bringing any revenue in yourself.

By hiring 5 employees I meant a total headcount of 7 or 8 including founders, which will burn through nearly $2M in 18 months.

Re: Employee Equity

#199

Post by diziet »

paulbaumgart wrote: post #198
diziet wrote: post #194

Earlier quoted context omitted.

It is not really aggressive if you are planning on growing your company. Typically, a high growth oriented venture funded startup is looking to get about 12-18 months of runway from their funding, hit some metrics and get funded for series A, repeat. 2M seed round at 5 employees means avg per employee spending of 260k / year. This is assuming you're not bringing any revenue in yourself.

By hiring 5 employees I meant a total headcount of 7 or 8 including founders, which will burn through nearly $2M in 18 months.

Fair enough.

I suppose it depends on whether you're running a startup with revenues or not. I am operating from the assumption that by series A you're about at the 1m arr revenue level and your revenue + funding are funneling your growth. YMMV with companies with low/no revenue.

Re: Employee Equity

#200

Post by mikepurvis »

I'm curious about this bit:

"It causes considerable problems for companies when employees sell their stock or options, or pledge them against a loan, or design any other transaction where they agree to potentially let someone else have their shares or proceeds from their shares in the future in exchange for money today."

What are the problems with these schemes? I'm presently employee #1 at a startup, and 99.9% of my present net worth is tied up in illiquid paper there—the rest is a 10 year old station wagon and some Ikea furniture.

I'd really like to be able to pledge my options for a loan to buy a house, so I'm curious to know the issues which may arise from such an arrangement.

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