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Employee Equity

blog.samaltman.com

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Re: Employee Equity

#131

Post by wwweston »

marvin wrote: post #119
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…

Has anyone stopped to think what a massive failing of the startup part of the industry this is? Practically everything I read online indicates that if you consider your stock options to have any value at all even in a moderately successful company, you are a major sucker and about to get exploited. Surely this must reduce the quality of the talent pool available to new startups, as the experienced developers conclude…

Clearly Sam Altman and a few other people in thread have stopped to think about this. :) Part of what he's telling people here is "look, your competition for the engineers who can help you deliver includes Google and Facebook, your expected value has to be comparable to what they can offer."

Of course, that's still talking about equity, which gets back to the fact that it really is best to treat your equity as little better than a lottery ticket -- something with the possibility of turning into a modest bonus and the remote chance of making you wealthy.

> experienced developers conclude that other options are a better use of their time.

Which I suppose is part of the reason the startup labor pool skews young. Occasionally, though, experienced developers get bored and need new opportunities too.

Re: Employee Equity

#132

Post by bri3d »

michaelochurch wrote: post #111
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…

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…

As a junior developer there's at least a chance that future engagements will give you a decent work-sample test where you can prove that your experience is worth more than the sum of your "intern" resume.

It's even bleaker for non-technical roles IMO: get hired as an "office manager," try to do everything asked to a high standard, and end up as a janitor, concierge, personal assistant, accountant, and collections manager for accounts receivable, all while getting paid as a receptionist.

Re: Employee Equity

#133

Post by dennisgorelik »

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…

As a software developer I worked and lived in multiple states. In spite of business appeal of the valley I never went to California.

Here are my reasons (in order of declining importance):

1) Crazy real estate prices (and as a result higher salaries do not compensate for higher cost of living).

2) Higher taxes. Income, sale, and excise taxes in California are high. In addition to that, federal income tax is higher, because in order to compensate for higher cost of living I need to earn more, which brings me into higher tax bracket.

3) Weather. Too cold for my taste.

Re: Employee Equity

#134

Post by ritchiea »

jowiar wrote: post #102
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.

There's not much job security elsewhere either

Re: Employee Equity

#135

Post by declan »

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…

e) Other reasons. Someone else replying to your question mentioned Pittsburgh.

In Pittsburgh the median sale price for a house is $129,000, according to Trulia.

In Palo Alto the median sale price is 17x higher, about $2.2 million, with significant yoy increases: http://www.paloaltoonline.com/news/2013/12/24/real-estate-ma.... "In

If you're making $100K in Pittsburgh, you're doing quite well. And you might want to increase your salary by a tremendous amount, perhaps 5x-10x because obviously some costs don't change, to justify moving to Palo Alto and buying real estate. (Yes, there are other places to live in Silicon Valley, but speaking as a homeowner here, there aren't any that are non-coastal cheap.)

Re: Employee Equity

#136

Post by dk8996 »

practicalpants wrote: post #92
dk8996 wrote: post #82

Earlier quoted context omitted.

A few points; .25% seems low but; a) How close is you hourly rate to what you would get normally? b) Are you learning tech that will set you up to make big money? c) Are you gaining insight about the industry that will set you up to be a co-founder?

Interesting points, thanks for your comment. a) It's actually about $15-20 an hour less going off of my last job. I do consider it extra compensation that they are remote friendly, because I got to do some world traveling while working and they were fine with it. But now I'm back home in the Bay (...but also considering traveling again to make it worth my while). b) Nope, just web stuff I'm already used to doing. The…

I think the working and traveling part is cool. I am not sure if you can put a price on that.

Re: Employee Equity

#137

Post by philovivero »

I worked as one of the very early founders of Digg. I bought my options. Obviously they're worth nothing, yet I owe the IRS about $120k. This threatens to destroy all my savings, retirement, and credit for 10 years.

ISOs are not only worthless 95% of the time, they're also actively EXTREMELY DANGEROUS 50% of the time if they're not simply worthless.

My suggestion: get a salary, and buy just-IPO'd stocks from companies you believe in.

If you find yourself ready to buy some ISOs, I further recommend you IMMEDIATELY sell them, as in have the buyer sitting there with you as you purchase the ISOs, and do the trade instantly thereafter. Take the short term capital gains hit. Do not hold onto them no matter what any CPA or tax attorney tells you unless they can talk at length about ISO+AMT Tax Trap and assure you you cannot possibly have that happen to you.

Re: Employee Equity

#138

Post by apta »

x0x0 wrote: post #113
lettergram wrote: post #29

Earlier quoted context omitted.

I think 180 - 365 days seems far more reasonable. It's ridiculous to have the company shares tied up with the inability to give them back to other employees.

And that's why options are (mostly) a scam. If you leave before a liquidity event for any reason (they may not come, they take a long time, life circumstances, poor career growth, employers like to give shitty raises), you're stuck either investing often tens of thousands of dollars into an illiquid investment while paying taxes on it right now, or giving up your options. Sweet deal for employers either way. So when…

> you're stuck either investing often tens of thousands of dollars into an illiquid investment while paying taxes on it right now

I am not really familiar about this area. It is a one time price to pay to purchase the stock options, is that correct? Furthermore, where does tax come into play? Don't you only get taxed if you decide to sell the stocks to generate income?

Re: Employee Equity

#139

Post by philovivero »

x0x0 wrote: post #124
jbkp wrote: post #60

You know, it's funny, I read things like this from time to time: "so if I have 0.5% of company and it gets acquired tomorrow for $100 million dollars, will I get $500,000?" and I remember that I am in this exact scenario, and have no idea what the answer is. I've been an employee at a startup for 2 years now. I joined when I was young, naive, and broke — I don't even remember if I read the paperwork before signing it…

I've exercised before. Typically, you email hr and say, "I want to exercise"; they send you some paperwork which you fill out; you write the company a check. DO NOT DO THIS BEFORE UNDERSTANDING TAX CONSEQUENCES. You will typically pay tax on the spread between strike (your price per option) and the fair market value (fmv) which is set by the board and often updated quarterly. This can also be a backdoor way of a boar…

And be sure the accountant knows what he's talking to. I did that and it was still fail, because they didn't understand ISO+AMT Tax Trap.

As someone who's lived through this, immediately (as in the same hour you purchase the ISOs) sell the ISOs. All of them. Take the short-term capital gains hit. The alternative can and will destroy you.

Re: Employee Equity

#140

Post by otterley »

philovivero wrote: post #137

I worked as one of the very early founders of Digg. I bought my options. Obviously they're worth nothing, yet I owe the IRS about $120k. This threatens to destroy all my savings, retirement, and credit for 10 years. ISOs are not only worthless 95% of the time, they're also actively EXTREMELY DANGEROUS 50% of the time if they're not simply worthless. My suggestion: get a salary, and buy just-IPO'd stocks from companie…

Don't you get to credit AMT charged against worthless ISOs in later tax years?
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