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Golden Handcuffs

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Re: Golden Handcuffs

#201

Post by enra »

sokoloff wrote: post #51
oogabooga123 wrote: post #43

Earlier quoted context omitted.

It’s as easy to imagine as it is to imagine a VC getting this kind of deal. The first employees are the ones who literally build the company and usually take far greater personal risk

VCs can somewhat commonly get pro-rata rights in future rounds. That's quite a bit different from a guarantee of never being diluted.

Pro-rata only usually applies once. The investor has an option to retain their ownership by investing more in the next round, but only that one round. If they use it, it’s gone. If they don’t use it, it’s gone. Then they have to negotiate it again for future rounds and usually you can’t get prorata unless you are the lead investor.

Re: Golden Handcuffs

#202

Post by alecbz »

dahart wrote: post #126
heavyset_go wrote: post #89

Earlier quoted context omitted.

> Employees deserve high-quality equity on par with investors. There is no reason that labor and time couldn't build equity, it's just that our current system favors those who use capital to build wealth over those who need to sell their time and labor to build wealth. A common reason I hear for the fact that investors get more equity is because of the "risk" they take on, as if losing some money is the only risk on…

> Sometimes, those workers are paid below market rate I like this justification above all the others; it seems both fair and easy to reason about. If I quit a $200k/yr job to work at a startup for $100k/yr in cash comp, then my time investment, or risk, is $100k/yr, and my stock compensation should reflect that financial value based on today’s valuation of the stock.

I'd be fine with it not matching exactly. I'm willing to pay some amount of opportunity cost in lost comp elsewhere as an investment in the company. I'd just like the ROI on that investment to not be like 5-10x worse than a VC's.

Re: Golden Handcuffs

#203

Post by lumost »

triceratops wrote: post #197
chris11 wrote: post #151

Earlier quoted context omitted.

I really agree with your point. I don't see how most startups could make competitive offers with unicorns/FAANG, unless it was for non-monetary reasons like a promotion.

Give out way more stock options, so that the pay is the same risk-adjusted.

Early stage startups should be showering employees with high risk equity and paying less cash compensation. This saves the company money and allows them to hire better talent. Having highly skilled engineers/bizops/designers/sales staff who are incentivized to make the company successful is a huge win.

Re: Golden Handcuffs

#204

Post by lumost »

rizzom5000 wrote: post #188
daveidol wrote: post #123

Earlier quoted context omitted.

> When a business goes under, the employees have just lost their abilities to feed themselves, keep a roof over their heads, see doctors, buy medicine and provide for their families. Yes, but that's always the risk of working at any company (and it's a risk the investor may also have if the company goes under). You can typically just get a new job and get these things back. I think an even more compelling argument he…

| Early startup tech employees not only invest their time but also lose out on real money they would have earned at another (bigger) company. Isn't that by design? With greater risk comes the potential for greater reward. If someone doesn't want the startup risk, they can choose to pursue a job at FAANG. If your goal is to minimize risk, then choose a job as a schoolteacher or the post office. That's the nice thing a…

This presumes that early employees are getting a fair shake. In many cases they are being sold a lottery ticket with a value of only a few thousand dollars even when the company sells/IPOs.

Re: Golden Handcuffs

#205

Post by sulam »

908B64B197 wrote: post #65
nineplay wrote: post #23

I've talked to two FAANG-level recruiters recently about remote openings, which are all the rage now. One was willing to give a base-salary range but absolutely refused to provide any comp information beyond that. Signing bonus? Equity? "We are still working out those numbers for remote employees, we'll negotiate when we give you an offer" The other - everyone at the same level at the same location gets the same comp…

Anything other than the rate at the main campus is not a serious offer.

I can see how you’d like that deal as a remote employee, but do you really think the company is going to hire you if they can hire someone locally for the same price? The only way this makes sense is if the local market is completely tapped out.

Re: Golden Handcuffs

#206

Post by alecbz »

om2 wrote: post #133
choppaface wrote: post #4

The C-level to IC comp ratio is still way too astronomical. If a VC is telling you he feels there’s a better way to comp, he has a financial interest in ensuring your loss. Do not support investor-focused comp models like backweighted vesting (Amazon) or outright fraud like a start-up giving you a stock offer with no percentage or no 409A. Employees deserve high-quality equity on par with investors. The OP’s suggesti…

What specifically is wrong with a comp model of one-year vesting (instead of 4-year) and no cliff? Whether it's better or worse for employees depends on how they size the grant and in general is very situational. If the company goes up in value a lot over 4 years, then yeah, the employee may lose out, even if grants are comparable in dollar terms at time of grant. If the company has more volatility than growth, or on…

I think the idea is that the size of the grants remains roughly the same (or, you know, it's 1/4 of the size but lasts only 1 year). You're right that if they increased it, you could see that as just doing a bit of a risk trade-off. But my impression is that they aren't? And so it's just a comp decrease (albeit a more minor one the more stable the company's stock is).

Of all things in the equity world this certainly doesn't seem especially evil, but what I can't stand is the half-hearted framings of this as good for employees. If you're deciding you want to keep more equity for yourselves, fucking say so.

Re: Golden Handcuffs

#207

Post by lumost »

As an employee this opens a few uncomfortable discussions. If your comp is heavy on equity, you may find yourself facing a paycut next year. For many engineers this could easily be a sudden 50% paycut during performance reviews. If a company chooses not to refresh your grant at the same level in 2-3 years time, then you'll have had plenty of warning to leave or for you and the company to figure things out.

The problem with a 1 year grant is that it provides an unstable compensation target, for a public company most employees will prefer cash to shares that may be up or down 15% at year end.

Re: Golden Handcuffs

#208

Post by alecbz »

chris11 wrote: post #152
om2 wrote: post #133

Earlier quoted context omitted.

What specifically is wrong with a comp model of one-year vesting (instead of 4-year) and no cliff? Whether it's better or worse for employees depends on how they size the grant and in general is very situational. If the company goes up in value a lot over 4 years, then yeah, the employee may lose out, even if grants are comparable in dollar terms at time of grant. If the company has more volatility than growth, or on…

> If the company goes up in value a lot over 4 years, then yeah, the employee may lose out This is horrible at pre-IPO unicorns like Stripe. One year vesting could cost normal employees millions if the company blows up. Sure, the stock might not move much, or it can go down. A temporary dip means good performers are more likely to get larger refreshers to get tc up to market rate. And if pay is your driving motivatio…

Stripe's last round was at like $100B. There's some growth being missed out on, sure, but I'm not sure for how many people that's gonna net out to be millions.

Re: Golden Handcuffs

#209

Post by alecbz »

solidasparagus wrote: post #83
choppaface wrote: post #55

Earlier quoted context omitted.

The Zoox acquisition offers are all back-weighted. There are several posts on Blind recently disclosing back-weighted new-hire grants. The mean tenure time at AMZ is 2 years and most engineers I know do NOT vest 50% at the 2 year mark.

The mean tenure time is a terrible measure for any company that is growing at the rate Amazon does. If you double your team every year, the average tenure is going to be really low even if not a single person quits.

You can look at attrition though, and I thought that was still pretty bad for amazon?

Re: Golden Handcuffs

#210

Post by lumost »

analyst74 wrote: post #122
conjecTech wrote: post #99

This is horrific for employees. Ben Kuhn already nailed the math here[1]. The optionality embedded in long-dated grants is a huge fraction of total comp at high-growth companies and represent almost the entire right tail of outcomes. It also requires assumptions about the future, which is why companies generally abstain from quantifying what it's worth. It seems like the companies doing this are trying to arb that un…

This is no different from how Amazon does targeted compensation, where rising stock price means you get less/no refresher and raises, or all-cash comp at Netflix. It's catering to more risk-averse candidate pool.

Amazon does targeted comp 2 years in the future. While in theory the company may act to make people whole in a given year. This will practically occur via dive and saves or truly exceptional circumstances such as the stock suddenly dropping 2-4x and new hire grants effectively becoming non-competitive.
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