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What I Wish I'd Known About Equity Before Joining a Unicorn

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Re: What I Wish I'd Known About Equity Before Joining a Unicorn

#141

Post by mmsmatt »

econner wrote: post #24
jaymzcampbell wrote: post #5

As always the main rule you need to live by is value the equity at zero and you'll be (maybe) happy. Short of being a founder (and thus not really being offered equity) I have never treated these things as anything beyond a minor on paper "bonus". Given you'd be lucky to get anything more than 1% even as a first employee I find them next to worthless as early stage motivators. Which is how everyone seems to play it -…

This advice is often given but it's easier said than done. Let's say you work at a unicorn for 3 years and in that time it goes up 10x in VC fantasy land valuation. On paper you have a lot of money and the company reasonably might go public a couple years after you leave. Let's say you're granted about a year's salary in shares when you first join so you've vested $100K for a round number. When you leave that equity…

> "Or do you end up locked in for a few more years of handcuffs while waiting it out?"

The golden cuffs _will_ click if you stick around any time at all and have even slightly bad luck: Maybe you burn out before vesting, or the company blows an acquisition that would've fit your schedule and your payout/life goals.

Waiting around after you hear the click becomes a losing game. Find another one to play, it's a big world.

Re: What I Wish I'd Known About Equity Before Joining a Unicorn

#142

Post by damnfinecoffee »

maverick_iceman wrote: post #123
jaymzcampbell wrote: post #5

As always the main rule you need to live by is value the equity at zero and you'll be (maybe) happy. Short of being a founder (and thus not really being offered equity) I have never treated these things as anything beyond a minor on paper "bonus". Given you'd be lucky to get anything more than 1% even as a first employee I find them next to worthless as early stage motivators. Which is how everyone seems to play it -…

Assuming equity is worthless the base salary has to be north of 200K to match the market rate (for low level software engineers) for public tech companies. In most Unicorns that's definitely not the case. In fact when I interviewed for Uber they explicitly said that their base salary is low compared to Google/FB but they make it up in equity.

By "low level software engineers" do you mean low level in the sense of relatively low experience or low level in the sense of working on embedded systems etc?

Re: What I Wish I'd Known About Equity Before Joining a Unicorn

#143

Post by rrhyne »

roadnottaken wrote: post #84
rrhyne wrote: post #78

Really surprised how few people know about this legislation to fix the tax laws that cause one of the biggest issues with options. https://www.gop.gov/better-way-startups/ It made it through the house and was approved by senate finance committee but is now stuck in a bill about retirement savings legislation. Even finding information about the bill on the web or twitter is incredibly difficult. Please tweet, blog, et…

Wow, did not know about that. What do you think the chances are it gets passed in the forseeable future?

No idea. It's so hard to find information on and no one, especially the valley rags are interested in reporting on it. I'm curious as to why the community thinks that is.

Re: What I Wish I'd Known About Equity Before Joining a Unicorn

#144

Post by djb_hackernews »

econner wrote: post #24
jaymzcampbell wrote: post #5

As always the main rule you need to live by is value the equity at zero and you'll be (maybe) happy. Short of being a founder (and thus not really being offered equity) I have never treated these things as anything beyond a minor on paper "bonus". Given you'd be lucky to get anything more than 1% even as a first employee I find them next to worthless as early stage motivators. Which is how everyone seems to play it -…

This advice is often given but it's easier said than done. Let's say you work at a unicorn for 3 years and in that time it goes up 10x in VC fantasy land valuation. On paper you have a lot of money and the company reasonably might go public a couple years after you leave. Let's say you're granted about a year's salary in shares when you first join so you've vested $100K for a round number. When you leave that equity…

The whole premise of a startup in any stage hiring a technical employee and granting them $100k worth of stock options will never happen.

Typically you are granted X number of options. You are never told what the outstanding # of shares are and typically the shares themselves are valued in pennies. The idea is you think to yourself "well, it's 10k shares worth about $5k at the current valuation, but if they IPO and it does what google does...I'll be a millionaire!" You never take in to account that the likelihood of you joining a unicorn like google is near 0% and not taking in to account the time frame of such an adventure, the opportunity cost, dilution and other tricks companies play on their employees before IPOs and acquisitions like reverse stock splits.

And the likelihood of a startup valuation increasing 10x in 4 years (typical vesting schedule) after dilution is extremely extremely unlikely to the point that it is time wasted even entertaining the outcome of such a scenario.

Re: What I Wish I'd Known About Equity Before Joining a Unicorn

#145

Post by rrhyne »

vslira wrote: post #117
rrhyne wrote: post #78

Really surprised how few people know about this legislation to fix the tax laws that cause one of the biggest issues with options. https://www.gop.gov/better-way-startups/ It made it through the house and was approved by senate finance committee but is now stuck in a bill about retirement savings legislation. Even finding information about the bill on the web or twitter is incredibly difficult. Please tweet, blog, et…

That seems incredibly relevant to the HN crowd. Maybe someone* could post it as it's own thread? *Not me, I'm not in the U.S. =p

It has been and spent a very short time on the front page.

Re: What I Wish I'd Known About Equity Before Joining a Unicorn

#146

Post by ronald_raygun »

econner wrote: post #24
jaymzcampbell wrote: post #5

As always the main rule you need to live by is value the equity at zero and you'll be (maybe) happy. Short of being a founder (and thus not really being offered equity) I have never treated these things as anything beyond a minor on paper "bonus". Given you'd be lucky to get anything more than 1% even as a first employee I find them next to worthless as early stage motivators. Which is how everyone seems to play it -…

This advice is often given but it's easier said than done. Let's say you work at a unicorn for 3 years and in that time it goes up 10x in VC fantasy land valuation. On paper you have a lot of money and the company reasonably might go public a couple years after you leave. Let's say you're granted about a year's salary in shares when you first join so you've vested $100K for a round number. When you leave that equity…

So I never understood - it seems like it would cost you 200k to buy something worth a million. Arent there people/institutions out there that would cover the 200k cost in exchange for maybe 300k worth of stock?

Re: What I Wish I'd Known About Equity Before Joining a Unicorn

#147

Post by taternuts »

> The working conditions at Silicon Valley companies are often the best in the world

I'd take regular, sane hours and the ability to have a life over worthless perks like ping pong/foozeball tables and customized snacks. I can bring my own snacks, buy my own lunches with as long as I have a decent salary and that really doesn't bother me. The only real perks in a startup are more control over what you are building as a team, the challenges you get (or have to, depending on your outlook) to face, and the ownership you feel in the immediate product and it's future development. You sacrifice everything else for that.

Re: What I Wish I'd Known About Equity Before Joining a Unicorn

#148

Post by rrhyne »

justin66 wrote: post #82
rrhyne wrote: post #78

Really surprised how few people know about this legislation to fix the tax laws that cause one of the biggest issues with options. https://www.gop.gov/better-way-startups/ It made it through the house and was approved by senate finance committee but is now stuck in a bill about retirement savings legislation. Even finding information about the bill on the web or twitter is incredibly difficult. Please tweet, blog, et…

What's the name of the bill it's attached to right now?

Retirement Enhancement and Savings Act of 2016

Re: What I Wish I'd Known About Equity Before Joining a Unicorn

#150

Post by psranga »

Someone1234 wrote: post #20
fermigier wrote: post #10

Should have been titled "... in the USA" as tax rules are very different in other countries. For instance, in France, you only owe money to the taxperson when you sell your shares, for a profit. If you sell for a loss, this is tax-deducible.

The US really does have a lot of problems with their tax system to be honest. For a country whose citizens outwardly hate tax, you'd think they would have one of the best, most straightforward, and fair tax systems in the world. But instead you have one of the most convoluted, loopholey, broken systems in the world. Whereas in countries where taxes aren't as "hated" (Europe, Canada, etc) they don't pay a cent to file…

> Why does it still cost money to file taxes anyway?

https://www.propublica.org/article/how-the-maker-of-turbotax...

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