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How to Build an Iconic Company – Keith Rabois [audio]

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Re: How to Build an Iconic Company – Keith Rabois [audio]

#11

Post by jagged-chisel »

renewiltord wrote: post #9
ditonal wrote: post #7

To his point about finding undiscovered talent, VCs are obsessed with finding people they can underpay via selling them on their “vision” and “impact”. They claim they can’t compete with Google and Facebook on comp, but the truth is they don’t even try to do so by offering fair equity deals. Instead they use rigged instruments like common ISOs with liquidation preference and 90 day exercise windows to intentionally s…

Opendoor was founded by Rabois and has a 3-year-exercise window if you're there for 3 years.

Just to be clear: that's 3 years after leaving the company, they'll still honor your options agreement?

Re: How to Build an Iconic Company – Keith Rabois [audio]

#12

Post by logicslave »

ditonal wrote: post #7

To his point about finding undiscovered talent, VCs are obsessed with finding people they can underpay via selling them on their “vision” and “impact”. They claim they can’t compete with Google and Facebook on comp, but the truth is they don’t even try to do so by offering fair equity deals. Instead they use rigged instruments like common ISOs with liquidation preference and 90 day exercise windows to intentionally s…

Startups in some sense are risky financial vehicles aimed at transferring wealth generated by employees to founders and investors.

Re: How to Build an Iconic Company – Keith Rabois [audio]

#13

Post by emteycz »

logicslave wrote: post #12
ditonal wrote: post #7

To his point about finding undiscovered talent, VCs are obsessed with finding people they can underpay via selling them on their “vision” and “impact”. They claim they can’t compete with Google and Facebook on comp, but the truth is they don’t even try to do so by offering fair equity deals. Instead they use rigged instruments like common ISOs with liquidation preference and 90 day exercise windows to intentionally s…

Startups in some sense are risky financial vehicles aimed at transferring wealth generated by employees to founders and investors.

How much risk do the employees carry? If it is that easy, why don't the employees start a business too?

Re: How to Build an Iconic Company – Keith Rabois [audio]

#14

Post by arcticbull »

nickff wrote: post #10
ditonal wrote: post #7

To his point about finding undiscovered talent, VCs are obsessed with finding people they can underpay via selling them on their “vision” and “impact”. They claim they can’t compete with Google and Facebook on comp, but the truth is they don’t even try to do so by offering fair equity deals. Instead they use rigged instruments like common ISOs with liquidation preference and 90 day exercise windows to intentionally s…

There was a very good talk (which I can't find right now) by Ben Horowitz about why companies have to use certain instruments for equity-based compensation. There are a number of legal and 'fairness' (HR and morale) issues which limit what companies can and should do. edit: found it, starts about 16:30 in https://www.youtube.com/watch?v=uVhTvQXfibU

Not to mention ISOs are far better for employees than NSOs. Moving to RSUs actually reduces the risk and reward for employees as switching over, startups usually cut the grant size substantially (as they are issuing instruments that have intrinsic value at issue rather than no intrinsic value at issue).

tl;dr: Founder shares >>> ISO > NSO >> RSU in terms of risk and reward.

Re: How to Build an Iconic Company – Keith Rabois [audio]

#15

Post by ignoramous »

nickff wrote: post #10
ditonal wrote: post #7

To his point about finding undiscovered talent, VCs are obsessed with finding people they can underpay via selling them on their “vision” and “impact”. They claim they can’t compete with Google and Facebook on comp, but the truth is they don’t even try to do so by offering fair equity deals. Instead they use rigged instruments like common ISOs with liquidation preference and 90 day exercise windows to intentionally s…

There was a very good talk (which I can't find right now) by Ben Horowitz about why companies have to use certain instruments for equity-based compensation. There are a number of legal and 'fairness' (HR and morale) issues which limit what companies can and should do. edit: found it, starts about 16:30 in https://www.youtube.com/watch?v=uVhTvQXfibU

> There are a number of legal and 'fairness' (HR and morale) issues...

Whatever it was, thank goodness this guy didn't get the memo: https://news.ycombinator.com/item?id=11583480

Re: How to Build an Iconic Company – Keith Rabois [audio]

#16

Post by logicslave »

emteycz wrote: post #13
logicslave wrote: post #12

Earlier quoted context omitted.

Startups in some sense are risky financial vehicles aimed at transferring wealth generated by employees to founders and investors.

How much risk do the employees carry? If it is that easy, why don't the employees start a business too?

On an exit, its not uncommon for founders to have 20-50x the payout compared to the earliest employees.

Are you telling me the founders took 20-50x the risk/provided that much more in value?

Re: How to Build an Iconic Company – Keith Rabois [audio]

#17

Post by arcticbull »

jagged-chisel wrote: post #11
renewiltord wrote: post #9

Earlier quoted context omitted.

Opendoor was founded by Rabois and has a 3-year-exercise window if you're there for 3 years.

Just to be clear: that's 3 years after leaving the company, they'll still honor your options agreement?

Pinterest began this trend back in 2014-ish, with a 7 year exercise window post-departure. A few companies followed suit, but many more established startups switched to RSUs -- and earlier-stage startups stuck to their 90 day exercise window because it's the 'beaten path' and they didn't want to waste their capital paying lawyers to draft bespoke options agreements.

Re: How to Build an Iconic Company – Keith Rabois [audio]

#18

Post by arcticbull »

logicslave wrote: post #16
emteycz wrote: post #13

Earlier quoted context omitted.

How much risk do the employees carry? If it is that easy, why don't the employees start a business too?

On an exit, its not uncommon for founders to have 20-50x the payout compared to the earliest employees. Are you telling me the founders took 20-50x the risk/provided that much more in value?

50X the risk is a tough one, often founders aren't paid, and opportunity cost is just so high today.

If a 30-year old engineer is looking to make a jump, a senior IC role at $BIGCO pays $500-750K/yr starting, with significant refreshers each year, cash bonuses and promotion path to even more. The average time to liquidity for a successful startup is 7 years. Assuming the founders take small or negligible salary for the first 4-5 years then take market salaries, their opportunity cost is easily $5M.

So considering a $5M opportunity cost, and the fact the company wouldn't exist without them, they literally can't just up and quit whenever they want, and are working 100 hour weeks for years on end... yeah, I'd say that's fair.

tl;dr: $5M opportunity cost of guaranteed payout vs $100M maybe sometime in the future doesn't seem insane.

Re: How to Build an Iconic Company – Keith Rabois [audio]

#19

Post by renewiltord »

jagged-chisel wrote: post #11
renewiltord wrote: post #9

Earlier quoted context omitted.

Opendoor was founded by Rabois and has a 3-year-exercise window if you're there for 3 years.

Just to be clear: that's 3 years after leaving the company, they'll still honor your options agreement?

Yes, AFAIK

Re: How to Build an Iconic Company – Keith Rabois [audio]

#20

Post by mdon »

arcticbull wrote: post #14
nickff wrote: post #10

Earlier quoted context omitted.

There was a very good talk (which I can't find right now) by Ben Horowitz about why companies have to use certain instruments for equity-based compensation. There are a number of legal and 'fairness' (HR and morale) issues which limit what companies can and should do. edit: found it, starts about 16:30 in https://www.youtube.com/watch?v=uVhTvQXfibU

Not to mention ISOs are far better for employees than NSOs. Moving to RSUs actually reduces the risk and reward for employees as switching over, startups usually cut the grant size substantially (as they are issuing instruments that have intrinsic value at issue rather than no intrinsic value at issue). tl;dr: Founder shares >>> ISO > NSO >> RSU in terms of risk and reward.

ISOs are not universally better. They have a 24 month time requirement while NSOs only have a 12 month requirement.
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