We need to rethink employee compensation • Hacker News Board

Re: We need to rethink employee compensation

#241

Post by varelse » Wed, Jun 24, 2015, 10:11 PM UTC

mbesto wrote: post #223

totalrobe wrote: post #146

Earlier quoted context omitted.

$250 - $500k? Got anything to back up this claim?

Netflix: http://data.jobsintech.io/companies/netflix-inc/2015 I know Google, Facebook, etc. also do but those salaries are probably reserved for the van Rossum's (Google/Dropbox) and the Lerdorf's (Etsy) of the world.

No, they're not. Google paid me well to be the equivalent of an NCG python script kiddie. I'm the one that got bored and failed to convince them they ought to be making using of the skills that made them notice me in the first place.

I'm no van Rossum, but I'm pretty good at the thing I do.

Re: We need to rethink employee compensation

#242

Post by justonepost » Wed, Jun 24, 2015, 10:11 PM UTC

drivingmenuts wrote: post #5

Jemaclus wrote: post #3

In this market, I tend to think of options as incentives, and not as replacements for salary. Salary gets me in the door and work hard, great people and culture make me want to be there and evangelize, and options incentivize me to work my ass off. (I'd work my ass off without options, but the options really make it easy to say "I will do everything in my power to make this succeed" instead of "I'd rather go spend ti…

I tend to think of options as worthless, until they vest. Which is too far in the future to count on. Pay me money. That's actually useful.

This is waaay over simplifying things. How much options are we talking about? 10% of the company? That's hardly worthless. Public company? Private? What stage is the company at? Secondary markets exist all over the place.

Re: We need to rethink employee compensation

#243

Post by justonepost » Wed, Jun 24, 2015, 10:12 PM UTC

bcheung wrote: post #145

kelnos wrote: post #99

Earlier quoted context omitted.

I used to also believe this, and would parrot it every chance I got, but I've since changed my tune. It's hard to value options. Really, really hard. Saying they're worthless, though, is lazy and counterproductive. If you're joining a seed-stage private company, then yeah, it probably makes sense to so heavily discount the options package that maybe it is close to worthless. But if you're joining a series C that's on…

At series C you are not likely to get a significant enough position to make it worthwhile. If they do indeed have revenue then they should be able to pay you a decent salary. This is the way I look at it: A 50% chance to make $100K in 5 years with an interest rate of 5% is worth: ($100K * 0.5) / (1.05 ^ 5) = $39K And if you have credit card debt then you should be discounting at something closer to 15%.

50% is a huge over estimation unless there already exists a liquid secondary market / the stock is public. 10% is more accurate.

Re: We need to rethink employee compensation

#244

Post by eastbayjake » Wed, Jun 24, 2015, 10:12 PM UTC

Jemaclus wrote: post #3

In this market, I tend to think of options as incentives, and not as replacements for salary. Salary gets me in the door and work hard, great people and culture make me want to be there and evangelize, and options incentivize me to work my ass off. (I'd work my ass off without options, but the options really make it easy to say "I will do everything in my power to make this succeed" instead of "I'd rather go spend ti…

> I'd work my ass off without options, but the options really make it easy to say "I will do everything in my power to make this succeed" instead of "I'd rather go spend time with my friends tonight"

Just curious: are you under 25? Not meant as ad hominem -- I know tons of engineers who have this attitude from 22-25, but the closer I get to 30 the more I realize on a deep level that I'm going to die someday and I have a finite amount of time to love others, watch sunsets, laugh, meet interesting people, etc. It's gotten to the point where I have trouble relating to newly-minted engineers because they seem stoked to work until 9 PM in exchange for Nerf guns and the illusory promise of a liquidity event.

Re: We need to rethink employee compensation

#245

Post by mjbellantoni » Wed, Jun 24, 2015, 10:12 PM UTC

As a hiring manager I have found that this adjustment already started occurring about two years ago.

Firstly, the market for technical talent is so competitive right now, that cash is an easy way to compete for people and salaries have been driven up.

More importantly, people have become far more sophisticated about options and what a payoff is likely to look like. Ten years ago I would never be asked a question like "how many shares are there outstanding on a fully diluted basis" but now I hear it essentially all the time.

edit: grammar

Re: We need to rethink employee compensation

#246

Post by justonepost » Wed, Jun 24, 2015, 10:13 PM UTC

djb_hackernews wrote: post #118

kelnos wrote: post #99

Earlier quoted context omitted.

I used to also believe this, and would parrot it every chance I got, but I've since changed my tune. It's hard to value options. Really, really hard. Saying they're worthless, though, is lazy and counterproductive. If you're joining a seed-stage private company, then yeah, it probably makes sense to so heavily discount the options package that maybe it is close to worthless. But if you're joining a series C that's on…

Saying they are worthless is being a realist. If you are coming on after a series C you won't be getting any significant equity unless you are joining as leadership, and even then you are in the club and going to be well compensated anyway.

Saying they are worthless shows that you have zero skills at probability. A way to look at options is the way a good poker player tries to play when the bad beat pot is particularly high.

Re: We need to rethink employee compensation

#247

Post by ryandrake » Wed, Jun 24, 2015, 10:18 PM UTC

MCRed wrote: post #226

harryh wrote: post #120

Earlier quoted context omitted.

Startups aren't a roll of the dice where they are all the same with equal probabilities of success. Make good decisions. Join the right team.

Here's what 20 years of experience working for startups has taught me: -- Either be a founder if you want to be there in the early days. -- Or join a "sure thing". EG: Google, Twitter, Facebook about a couple years before they went public were already household names and really well known. I don't know how much upside you get joining a sure thing like that, but that's how you make sure your options will come into mon…

This seems like good advice. There's definitely a "valley" where low (but not "Founder-low") employee numbers get all the risk and disproportional reward. But, I wonder, really how much someone hired at Google, Twitter or Facebook a couple of years before IPO _really_ got. We're still probably talking "nice bonus" money rather than "life changing windfall" money. And, for "nice bonus" money, it makes more sense to go for the security of a public BigCorp.

Re: We need to rethink employee compensation

#248

Post by yarrel » Wed, Jun 24, 2015, 10:18 PM UTC

Jemaclus wrote: post #3

In this market, I tend to think of options as incentives, and not as replacements for salary. Salary gets me in the door and work hard, great people and culture make me want to be there and evangelize, and options incentivize me to work my ass off. (I'd work my ass off without options, but the options really make it easy to say "I will do everything in my power to make this succeed" instead of "I'd rather go spend ti…

Options are deferred wages.

If you're lucky.

Re: We need to rethink employee compensation

#249

Post by justonepost » Wed, Jun 24, 2015, 10:19 PM UTC

tptacek wrote: post #202

MCRed wrote: post #200

Earlier quoted context omitted.

Don't be silly. Putting in 3 million and taking 15 million out in 2-3 years is not a "loss after banking fees". VCs can want $100M or $1B, but it was the VCs that chose to sell this company for $30M when it could have been $300B Here's the ground truth: VCs are idiots. Yes, that one too. They have money, though, so people pretend otherwise.

Here's the ground truth: if you build a company with someone else's money, they're going to get a huge chunk of the upside, and the original management is going to retain control only as long as they hit their numbers. Hopefully, nobody is saying employees shouldn't be wary of VC funded companies. They definitely should.

Employees should be wary of all employers. It's a dog eat dog capitalistic society out there, guys! That's hardly a clever insight.

Re: We need to rethink employee compensation

#250

Post by erichurkman » Wed, Jun 24, 2015, 10:19 PM UTC

mahyarm wrote: post #160

erichurkman wrote: post #53

Earlier quoted context omitted.

The vast majority of new option grants for VC-backed companies are under the 1/48 monthly with a one year cliff. More companies are now switching to converting ISO grants to NSO after you leave a company, and allowing a longer term to exercise. Pinterest famously allows, in some cases, employees to have up to 7 years to exercise vested shares after leaving [0]. Most companies do not do this (yet). Exercising an ISO g…

How are ISO grants better if your likely to hit AMT even after exercising a few thousand dollars of options?

If you're likely to hit AMT, the difference isn't as stark. It can be really easy to hit AMT especially if you've been at a firm long enough that your strike price is considerably lower than the current fair market value (latest valuation).

NSO also has a few other downsides. For employees, when you exercise an NSO, you actually have to pay tax at the time of exercise - the company withholds it and reports it as ordinary income tax (pay taxes in addition to the cost to exercise).

ISO grants can also have horrible tax implications, but you at least get a bit more flexibility as an employee -- this is also why November/December tend to have a disproportionally high number of exercises, as people get a full picture of their potential AMT liability caps.

When a company's valuation is skyrocketing and liquidation is highly likely (IPO or other M&A event), you'll often see companies offering early exercise, which can help avoid huge AMT hits, so employees are exercising when their strike price == the company's current fair market value.