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Windsurf employee #2: I was given a payout of only 1% what my shares where worth

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Re: Windsurf employee #2: I was given a payout of only 1% what my shares where worth

#131

Post by toast0 »

naveen99 wrote: post #48
stouset wrote: post #40

Earlier quoted context omitted.

Vested is not exercised. Options vest, but you have to exercise them to purchase the underlying shares. This is nominally cheap, but from the IRS’ perspective you have just spent $1 to purchase a share worth $100, so that’s $99 of income. Multiply by a large number of options and you can easily have a real multimillion dollar tax bill even though you have no way to sell the shares to recoup their value. Worse, if the…

Doesn’t income happen when you sell the shares ? What is the cost basis of the shares you purchase if not the strike price of the option ?

AMT income happens when the option is exercised (vests and paid for), the difference between the value and the strike price is income at that time. The AMT cost basis is the value at that time ... or you can think of it as the strike price plus the amount of income.

At the same time, if it's an ISO option, there is no assessment of ordinary tax until the stock is disposed. If there's a merger and the proper forms are followed, you can be issued stock from the acquirer that retains the basis (the strike price) of the original shares. If the forms are not followed, the acquisition is a taxable disposition.

There's a credit for the difference between AMT tax and ordinary tax on ISOs, but it can take many years for that to fully work out, and you have to have paid the AMT in the meantime.

Early exercise with 83(b) at time of grant (or while the value hasn't changed) or exercise-and-sell make the taxes make the taxes simplest, but tax simplicity isn't always the best strategy.

Re: Windsurf employee #2: I was given a payout of only 1% what my shares where worth

#132

Post by lokar »

churchill wrote: post #126
lokar wrote: post #55

Earlier quoted context omitted.

They got paid out as well. Meta pulled the same thing recently. So, a new trend where big tech “buys out” a startup in a way that only early VCs, founders and top managers get any value.

>Meta pulled the same thing recently. Do you mean the Scale AI acquihire? I took it at face value that Alex Wang just joined Meta, but come to think of it now, the company's just a husk of itself, customers no longer trust them, etc. So, it seems you're referring to Scale.

Yeah, that must be the one. What did other employees get?

Re: Windsurf employee #2: I was given a payout of only 1% what my shares where worth

#133

Post by GuinansEyebrows »

mawadev wrote: post #71

I'm waking up personally to the unethical side of Software development as well. You can either do little and get paid pocket change or you can provide a ton of value for pocket change next to some promises lulling you in, where the value of your work exponentially increases, but you will see nothing of it and whatever you do: you are still a replaceable cell in excel to them and there will be ways where you get dragg…

how much change fits in your pockets?

Re: Windsurf employee #2: I was given a payout of only 1% what my shares where worth

#134

Post by kentonv »

swyx wrote: post #130
kentonv wrote: post #99

Earlier quoted context omitted.

Yeah, I used to hear all the time that "a startup is worth $1 million per engineer in a pure acquihire", but learned the hard way this is a myth. When we were talking to various companies about acquiring Sandstorm.io (my startup) in 2017, one of the companies told me, essentially: "We aren't interested in your IP, only the employees. We'll give you a set of job offers for them. We will then sum up the salary and equi…

sorry that happened to you. what taxes do you have to pay on a company making 0? just delaware franchise tax?

That and $800 CA franchise tax. But the money wasn't really significant. It was just annoying to have to prepare the returns every year.

Re: Windsurf employee #2: I was given a payout of only 1% what my shares where worth

#135

Post by BhavdeepSethi »

rhyperior wrote: post #110
BhavdeepSethi wrote: post #91

I went through an acquisition very early in my career, and for the longest time I believed it was the best outcome for everyone. Over time, I realized that my naive belief was purely due to the founders going way above and beyond to make sure each and every employee (including folks doing just data entry) got a good outcome (accelerated vesting, significant equity in new company, top of the band pay, etc.). It made m…

They must have had a strong position from which to negotiate those favorable terms, in addition to the experience to know to do so, and the integrity to actually do it. The type of people you should follow.

I don't believe they did. This acquisition was by Flipkart, the poster child startup in India, who had a very high bar for hiring. They wanted to interview the non-founders to make sure they met the standard. The founders said you get all or you get none. To be fair, it was a small team of 6-8 employees, so I doubt Flipkart cared. :)

Re: Windsurf employee #2: I was given a payout of only 1% what my shares where worth

#136

Post by mgfist »

georgemcbay wrote: post #127
gsibble wrote: post #94

Earlier quoted context omitted.

I've tried to ask dozens of companies that wanted to hire me just for how many shares were outstanding and/or authorized. They almost always refused to share. You can almost never get any info on equity until it's too late and you realize it's worth nothing.

> I've tried to ask dozens of companies that wanted to hire me just for how many shares were outstanding and/or authorized. Those questions are certainly worth asking but employees should also keep in mind that even if they do share that information your equity can still later be diluted away to worthlessness.

There's other gotchas too. Ratchets, liquidation preferences, restructurings (recapitalizations) etc etc

There's many opportunities for VCs and founders to screw you over. And that's assuming things go well enough for that to be an option lol

Re: Windsurf employee #2: I was given a payout of only 1% what my shares where worth

#137

Post by Muromec »

mawadev wrote: post #71

I'm waking up personally to the unethical side of Software development as well. You can either do little and get paid pocket change or you can provide a ton of value for pocket change next to some promises lulling you in, where the value of your work exponentially increases, but you will see nothing of it and whatever you do: you are still a replaceable cell in excel to them and there will be ways where you get dragg…

You do sometimes get the 0.31% of a relatively big number under a promise you tag along for two years and some more pocket change on top. Still better than just pocket change zo

Re: Windsurf employee #2: I was given a payout of only 1% what my shares where worth

#138

Post by djoldman »

stan_kirdey wrote: post #75

Engineers: always negotiate for higher base salaries. In the vast majority of cases—especially during acquihires—your equity will be worth little or nothing. Founders and VCs still get paid; employees rarely do. Don't just accept promises. Ask for the 409A valuation, liquidation preferences, and pay bands. If a company won’t provide transparency, that’s your signal. Equity is a lottery ticket. Salary is money in the…

Indeed. Likewise with non-guaranteed bonuses (gotta love the "plus a discretionary bonus!" commentary during offer discussions).

It's always worth offering to take equity as long as they agree in writing to not ever dilute your shares and vest them immediately. However, it's unlikely that any company will agree.

It's best to imagine compensation as exactly one's salary. Then (virtually) all surprises are good.

Re: Windsurf employee #2: I was given a payout of only 1% what my shares where worth

#139

Post by chambers »

JumpCrisscross wrote: post #100
chambers wrote: post #89

https://x.com/ahmaurya/status/1948491614160122308 Garry Tan posted "sounds like a tweet that cost $20M" which he later deleted. Smells like a strong bias against employees in favor of management and founders.

Could you expand what's going on there?

My read was that Garry Tan implied "you sacrificed a lot of money in order to grandstand". I felt that was a knee-jerk dismissal of a founding employee's legitimate concern.

Re: Windsurf employee #2: I was given a payout of only 1% what my shares where worth

#140

Post by scns »

CalChris wrote: post #106

This was just a preference cliff, plain+simple. Windsurf got paid maybe $3B for itself. But the investors and senior management got their cut first. How? Well, the preferences they negotiated. No one really knows how the game is played The art of the trade How the sausage gets made We just assume that it happens But no one else is in the room where it happens #2 wasn't in the room when it happened. In a very real sen…

> in the room where it happens

Great song from Hamilton. Sorry for being off topic.

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