DoorDash removing 1-year cliff for equity grants • Hacker News Board

Re: DoorDash removing 1-year cliff for equity grants

#181

Post by thrwn_frthr_awy » Thu, Jul 08, 2021, 1:44 AM UTC

jamiequint wrote: post #158

kerng wrote: post #141

This is good progress. Just two months ago I declined an offer from a known and well funded startup because of a one year cliff on equity. The recruiter didn't seem to be able to discuss this matter and I asked them to make sure to bubble this sort of thing up their food chain. I never heard back afterwards. As an "old timer" in the industry a one year cliff makes absolutely no sense to me. Its like working for credi…

"I declined an offer from a known and well funded startup because of a one year cliff on equity" You might as well not bother interviewing at any startups if this is a deal-breaker for you. Whether you think it's fair or not this is an extremely standard term and no company is going to alter their employee stock grants on a one-off basis.

It is standard at FAANGs as well.

Re: DoorDash removing 1-year cliff for equity grants

#182

Post by patothon » Thu, Jul 08, 2021, 1:46 AM UTC

mancerayder wrote: post #178

adoxyz wrote: post #2

Good, pro-employee move. Next, I'd like to see pre-IPO startups offer longer periods to exercise shares when you leave. 90 days being standard is way too low.

Naive question here. Given that there's a long-term cap gains consideration, if the company has a strong likelihood (call it greater than 50% chance) of IPO isn't it better to exercise ASAP so the shares are kept more than 12 months in time for the IPO+lockup event? What's the real advantage of waiting to exercise, to make sure that the stock will be worth something versus wasting your call option costs? How high are…

the question is often do you have the means to acquire that pre ipo stock. except if you join very early, it's too expensive to buy your stock with the level of risk associated.

as an example, I joined an early stage startup as an exec (potential good deal!), but I would've had to shore 300k to exercise my stocks, pay taxes on it (minimal, that's the huge advantage here), and more than probably see it fail.

now let's play the opposite scenario: you join as an engineer late stage, each ISO might be valued at 10 dollars each. how do you exercise.

this game is skewed towards founders.

in my example, I had to quit for personal reasons and the company was later acquired. however I wan't able to afford, so I got got of $100ks at the time of acquisition.

removing these 90 days time would have let me gain what I was owed.

no hard feelings, because I knew the game, but it was the moment I decided no more startups that have this 90 days BS.

Re: DoorDash removing 1-year cliff for equity grants

#183

Post by jshen » Thu, Jul 08, 2021, 1:50 AM UTC

whimsicalism wrote: post #160

jshen wrote: post #152

Earlier quoted context omitted.

We do, but that’s not the point. Someone suggested that new comp sci grads are having a very hard time finding work. I don’t believe that given how hot the market is right now. If anyone is having real trouble, then they are either being selective (won’t move to a big city, have high demands, etc), OR something is wrong. Maybe their resume is terrible, maybe they are bad at interviews, etc.

There are many companies where I don't get past the resume screen as a new grad, meanwhile the companies I do get interviews with will come back with an offer >$200k. But I have to apply to 20-30 companies to get 1 interview, so there is clearly a problem at the resume-screening stage for new grads.

That’s because a recruiter or HR person screens resumes at most big companies. I always tell them to send me all the resumes so I can screen them myself.

Have to find a way to get past the HR screen until you have experience. Somethings that work: go to meetups. Often times the hiring manager or a tech team member is there and you can meet them directly. Apply at startups that don’t have a recruiting department yet. Email the tech team directly if you can figure out who they are.

Re: DoorDash removing 1-year cliff for equity grants

#184

Post by chris11 » Thu, Jul 08, 2021, 1:51 AM UTC

readams wrote: post #145

fallmonkey wrote: post #30

With Google doing front loading(33/33/22/11) and other companies also shifting away from conventional 25% per year vesting to make first few years more attractive, they gotta catch up to stay competitive. Uber recently did the same of removing cliff.

The Google front loading is because you'll get annual refresher grants after the first year (and no "big refresh" after four years), and it makes the total comp more even overall as a result.

I'm not convinced. A salary drop from a cliff isn't great, but cliffs are overall good for employees. A front loaded offer arrives at that even comp by baking future stock growth into the offer. A normal four year equity grant arrives at even comp with no movement on equity. I'd much rather have a normal grant and get a cliff if the company does really well.

Re: DoorDash removing 1-year cliff for equity grants

#185

Post by throwaway2048 » Thu, Jul 08, 2021, 1:55 AM UTC

RussianCow wrote: post #94

Beaver117 wrote: post #35

Earlier quoted context omitted.

Reward? They only join in the first place because of the expected total compensation.

But it's not like the one year cliff is a hidden detail that you don't find out until you join; employees have all the information up front. If you choose to take the job anyway, you know that your compensation will be lower if you leave within the first 365 days, so if you still choose to leave, that's on you.

Its less that you choose to leave, and more that the company has a major incentive to fire you before one year.

Re: DoorDash removing 1-year cliff for equity grants

#186

Post by danielheath » Thu, Jul 08, 2021, 1:56 AM UTC

brutus1213 wrote: post #170

spotman wrote: post #159

Earlier quoted context omitted.

Not really true. Have achieved multiple companies removing the 1 year cliff for me.

The one year cliff is not that problematic to me since I would expect I am getting paid market, and the options are like a hiring bonus (which you often must return if you quit within a year). What am I missing? Is people really worried that a startup whose stock has risen will fire a productive employee? That said, I have seen 5 year vesting (which seemed like a red flag to me), and have heard of Amazon's schedule w…

I feel like amazon-style vesting helps remove some perverse incentives.

It makes "stay 53 weeks and cash out" less appealing, it makes "stay 6 more months to hit the next cliff" less appealing, and it rewards long-haulers (who are underpaid almost everywhere else in tech).

Re: DoorDash removing 1-year cliff for equity grants

#187

Post by joshuamorton » Thu, Jul 08, 2021, 1:58 AM UTC

danielheath wrote: post #186

brutus1213 wrote: post #170

Earlier quoted context omitted.

The one year cliff is not that problematic to me since I would expect I am getting paid market, and the options are like a hiring bonus (which you often must return if you quit within a year). What am I missing? Is people really worried that a startup whose stock has risen will fire a productive employee? That said, I have seen 5 year vesting (which seemed like a red flag to me), and have heard of Amazon's schedule w…

I feel like amazon-style vesting helps remove some perverse incentives. It makes "stay 53 weeks and cash out" less appealing, it makes "stay 6 more months to hit the next cliff" less appealing, and it rewards long-haulers (who are underpaid almost everywhere else in tech).

To be fair, they're also underpaid at amazon.

Re: DoorDash removing 1-year cliff for equity grants

#188

Post by crooked-v » Thu, Jul 08, 2021, 2:00 AM UTC

davidgay wrote: post #176

crooked-v wrote: post #167

Earlier quoted context omitted.

While this isn't much of a company relationship thing: If you're getting paid every 2 weeks, sometimes you'll get paid the first/third week of the month and sometimes the second/fourth, which can be a pain if you're trying to keep a consistent amount in a checking account while also having bill pay and auto-transfers to savings/investment accounts. Or, tl;dr, it makes it easier to automate money without leaving a lar…

And in other parts of the world, they just pay monthly. Avoids that problem...

That would be good too when it comes to that predictability.

Re: DoorDash removing 1-year cliff for equity grants

#189

Post by avalys » Thu, Jul 08, 2021, 2:01 AM UTC

mancerayder wrote: post #178

adoxyz wrote: post #2

Good, pro-employee move. Next, I'd like to see pre-IPO startups offer longer periods to exercise shares when you leave. 90 days being standard is way too low.

Naive question here. Given that there's a long-term cap gains consideration, if the company has a strong likelihood (call it greater than 50% chance) of IPO isn't it better to exercise ASAP so the shares are kept more than 12 months in time for the IPO+lockup event? What's the real advantage of waiting to exercise, to make sure that the stock will be worth something versus wasting your call option costs? How high are…

Let's say you accept a lower salary from a startup, because they offer you 100,000 options with a standard 4-year vest/1-year cliff/90 days to exercise at a strike price (409a valuation) of $1 / share, and claim that an exit at $10 / share looks likely if growth stays on track.

You stay for three years. The exit hasn't come yet because the VCs want to see a higher valuation, but the company has grown and the 409(a) valuation is now $5 / share. You've now vested 60,000 options that would cost you $60,000 to exercise, plus you will have an AMT adjustment of $240,000 because of the difference between the strike price and the current 409(a) valuation. So, exercising those options will cost you $120,000 (ballpark, IANA accountant) in exercise cost and taxes.

Keep in mind you've accepted a lower salary for the past three years because of this stock, so you might not have that kind of cash lying around. And even if you do - are you willing to throw $120,000 into a bet that the company will one day have an exit? Keep in mind that the company may have debt, preferred stock, liquidation preferences, etc. and most companies won't share all their past financing terms with ordinary employees, so it may be hard to estimate what a realistic exit even looks like for your stock. And if you're leaving, maybe you're a little disillusioned with how things are going in the first place? You have 90 days to make this decision after leaving the company and then you lose the stock forever.

For many people, the answer at this point is that they don't want to take the bet - and they get screwed out of a large part of what was supposed to be their compensation.

It's a shitty and exploitative system. I worked at a startup where this exact thing happened to many people who contributed immense value to the company. We had a bumpy year, some management turmoil, etc. and many people left before the IPO and got nothing out of their years of hard work other than a shitty, uncompetitive salary. I will never work for another startup under these terms.

Re: DoorDash removing 1-year cliff for equity grants

#190

Post by glenngillen » Thu, Jul 08, 2021, 2:02 AM UTC

brutus1213 wrote: post #170

spotman wrote: post #159

Earlier quoted context omitted.

Not really true. Have achieved multiple companies removing the 1 year cliff for me.

The one year cliff is not that problematic to me since I would expect I am getting paid market, and the options are like a hiring bonus (which you often must return if you quit within a year). What am I missing? Is people really worried that a startup whose stock has risen will fire a productive employee? That said, I have seen 5 year vesting (which seemed like a red flag to me), and have heard of Amazon's schedule w…

Disclaimer: Ex-Amazonian, so discount as you see fit based on whatever brainwashing you might assume I’ve been subjected to ;)

The rear weighted AMZN approach made sense to me in terms of both optimising retention and some proxy for reward to contribution. I say this also as someone who left after 2 years and as a result left most of their stock unvested. It definitely made the choice to leave much harder so I’d expect it to skew more heavily toward retention benefits than a typical schedule. A typical schedule has a linear growth of what you’ve vested. I’d expect the value of contribution of a person to grow over time though. More context, more experience, more everything. Hopefully that means the you 3 years from now is making a more significant contribution than the you they hired. Typical schedules hope that the increase in valuation accounts for that compounding return. AMZN have shifted it to the vesting schedule.

That said they always talk about “total compensation”. So for the stock you’re not getting in the first two years you typically get as cash via a “hiring bonus” anyway. You could always just use that cash to go buy the equivalent amount in stock, no vesting required.