Startup Stock Options – Why a Good Deal Has Gone Bad • Hacker News Board

Re: Startup Stock Options – Why a Good Deal Has Gone Bad

#271

Post by Taniwha » Wed, Apr 10, 2019, 9:12 PM UTC

defen wrote: post #267

matthewowen wrote: post #257

Earlier quoted context omitted.

2+ hours per day commuting? BART from Berkeley to Powell St station is 30 minutes. You have last mile for sure, but this totally works for most SF based startup jobs. But either way... doesn't this prove my point? This does not sound like a difficult way to live, _and_ it factors in luxuries (I for one definitely do not spend $10k/year on car ownership).

> 2+ hours per day commuting? BART from Berkeley to Powell St station is 30 minutes. 1 hour on/waiting for BART + ~40 minutes walking between your house and BART + ~20 minutes walking between BART and your job gets pretty close to 2 hours. Car cost is indeed high, but if you have a kid you'll probably need one and then you have to factor in the cost of childcare... $2k/month?

rent a bike locker at the station, bike to BART - 10 minutes

Re: Startup Stock Options – Why a Good Deal Has Gone Bad

#272

Post by nostrademons » Wed, Apr 10, 2019, 9:13 PM UTC

matthewowen wrote: post #265

nostrademons wrote: post #118

Earlier quoted context omitted.

You pay for it in commute time, though. I just checked Zillow; the houses that are anywhere within walking distance of BART go for $1.7-$2.8M, with the $1M homes clustered near the freeway. Driving across the Bay Bridge into SF can easily take an hour; hell, I know people who've been stuck on the bridge for over an hour.

I checked this before I posted to make sure things hadn't changed. Here's an example: https://www.redfin.com/CA/Berkeley/2333-Sacramento-St-94702/... BART is a 20 minute walk, five minute bike ride (and with the weather and topography cycling is a great option).

That's still an hour+ commute: 20 minute walk + 5 minute wait + 35 minute BART ride. Plus however long the walk/connection is on the SF side. If you're working at Embarcadero it could be a few minutes shorter; if you're where a bunch of the post-2010 tech companies are clustered at 7th street in SOMA, it's another 25 or so via bus or light rail connection.

Re: Startup Stock Options – Why a Good Deal Has Gone Bad

#273

Post by acjohnson55 » Wed, Apr 10, 2019, 9:13 PM UTC

seibelj wrote: post #3

Valid reasons to work for a startup: - You are a cofounder. - You have little experience and you are using this to break into the industry, and get experience on many different technologies ("wear many hats"). - They are working on a very specific problem or using a specific technology that you strongly desire to work on and it's difficult to do it anywhere else. - You want to work a certain way (remote, on the beach…

I've had great work / life balance at the last couple startups I've been at. I think you can find the full range at both startups and big companies.

Re: Startup Stock Options – Why a Good Deal Has Gone Bad

#274

Post by autotune » Wed, Apr 10, 2019, 9:14 PM UTC

kabdib wrote: post #183

I made a bunch of money from ISOs at large, established companies. I made zero (well, negative, really) from startup stock options, even before things got really shifty in the 2000s. One startup that I left, that is now a billion dollar company, simply decided to "extinguish" the shares I bought a few years after I resigned. I was probably cheated, but it's not worth the effort to go after them and they know it. Trea…

I got enough cash from stock options at the last small business to afford to job search for a few months without too much worry, so there is that.

Re: Startup Stock Options – Why a Good Deal Has Gone Bad

#275

Post by pickle-wizard » Wed, Apr 10, 2019, 9:19 PM UTC

rhizome wrote: post #179

enjo wrote: post #129

Earlier quoted context omitted.

Yes startups will give you more responsibility, but that comes at the cost of far less mentorship. I often wonder if people only feel like they're growing faster at startups because the results are a bit more visible. It is true that it's easier to be stagnant as an associate at a larger company. If you're not interested in taking on new challenges you can generally sort of fall through the cracks. However, folks who…

* If you're not interested in taking on new challenges you can generally sort of fall through the cracks.* BigCo titles are much more narrowly defined, so most of the time you can't even see the parts that might have new challenges...or cracks.

It depends. When I was at IBM I worked on a small team and we had about 4000 VMs/systems I was the Network Guy, the Storage Guy, the VMware Guy, the Windows Guy, the Linux Guy, the AIX guy, the AS/400 guy, and the Security Guy. Gees now that I think about it, no wonder I was so stressed out back them.

I learned a lot from that job and it opened a lot of doors for me in my career.

Re: Startup Stock Options – Why a Good Deal Has Gone Bad

#276

Post by sokoloff » Wed, Apr 10, 2019, 9:19 PM UTC

kabdib wrote: post #183

I made a bunch of money from ISOs at large, established companies. I made zero (well, negative, really) from startup stock options, even before things got really shifty in the 2000s. One startup that I left, that is now a billion dollar company, simply decided to "extinguish" the shares I bought a few years after I resigned. I was probably cheated, but it's not worth the effort to go after them and they know it. Trea…

It seems fairly rare for large, established companies to issue ISOs (preferring to issue NQSOs or RSUs).

Re: Startup Stock Options – Why a Good Deal Has Gone Bad

#277

Post by Taniwha » Wed, Apr 10, 2019, 9:24 PM UTC

andrew311 wrote: post #25

save_ferris wrote: post #10

Why don't startups offer actual equity grants instead of options? It seemed strange to me when I was starting out in my career that I needed to take a lower salary and options to exercise upon my exit, which wound up costing me thousands of dollars from that lower salary. Two years later, one founder forced out his two other cofounders, started a new company in the exact same space, and poached his best employees, es…

Share grants would be seen as income by the IRS and most states and taxed at their Fair Market Value. Options on the other hand usually qualify as Incentive Stock Options that aren’t taxed at grant time and “when exercised, it isn't necessary to pay ordinary income tax. Instead, the options are taxed at a capital gains rate.” [1] Options are better up front because there is no outlay for the employee. They are a hass…

You are taxed at your marginal rate on the value between when they are offered and you exercise, and on the capital gains rate (provided you hold them long enough) between when you exercise them and sell them

In practice you either buy them the day they are offered (but before they vest, so a gamble) to switch to the CGT rate asap, or exercise and sell in the same process which means you pay at your marginal rate. You tend to do the former if you are early series A (penny a share or so so low financial risk - for example I once paid $1000 for 100k founder's shares), and the latter otherwise. Doing something in between means a largish tax liability with no matching liquidity event to pay for it - during the first dotcom bubble a lot of people did this, got a huge unexpected tax liability at the end of the year (and AMT) AND lost their jobs as things crashed and their stock became worthless (they could write that off in the next year, but owed the IRS lots of money while unemployed) ... so be careful here, make sure you know what you are doing if you're exercising in a situation that's not one of those first two I listed.

Re: Startup Stock Options – Why a Good Deal Has Gone Bad

#278

Post by fatnoah » Wed, Apr 10, 2019, 9:26 PM UTC

kabdib wrote: post #183

I made a bunch of money from ISOs at large, established companies. I made zero (well, negative, really) from startup stock options, even before things got really shifty in the 2000s. One startup that I left, that is now a billion dollar company, simply decided to "extinguish" the shares I bought a few years after I resigned. I was probably cheated, but it's not worth the effort to go after them and they know it. Trea…

>Treat startup options as wastepaper. You might get lucky, but it's really, really unlikely.

I have a similar story. I've been a part of three startups (two exited, one still going) and the options in all were only worth an eventual capital loss. For my last company, I owned nearly a percent of shares, but they were still worth zero. The only money I got was a cash bonus and stock from the acquiring company as a retention mechanism (I was an executive of the company, rank and file got much smaller amounts). Startups are good for experience, being a big fish in a small pond, etc. but it's marginally better than a lottery ticket if you're looking for a big financial reward.

Re: Startup Stock Options – Why a Good Deal Has Gone Bad

#279

Post by matthewowen » Wed, Apr 10, 2019, 9:29 PM UTC

matthewowen wrote: post #262

deanmoriarty wrote: post #102

Earlier quoted context omitted.

Unless you mean both spouses should earn around 200k and thus bringing in a FAANG-equivalent income of 400k, I really don't know how you could afford what you are saying on a single 150k-200k salary (and perhaps another 50k for your spouse's salary, since not everybody works in tech). After paying for CA taxes, fed taxes, kids' schools, rent, car expenses, 401k contributions, I really don't know how you would come up…

Yes, based on my own experience and that of my peers, I think it's very plausible that you would have accumulated savings to get you 20% down on a $1MM place over the course of (say) spending the last six to eight years in San Francisco with household income in the 150 to 200k range. You might have to make a tradeoff of (eg) not maxing your 401k contributions if you're on the lower end. I mean, we're talking probably…

also, self reply to observe: not saying this means you should or should not work at a startup. just that the idea that you can't live a decent lifestyle at startups is not true.

Re: Startup Stock Options – Why a Good Deal Has Gone Bad

#280

Post by nfriedly » Wed, Apr 10, 2019, 9:36 PM UTC

thesausageking wrote: post #21

He glosses over an important point: it's now typical for founders to take money off the table as part of financing rounds, sometimes as early as the A round. Founders will request it as part of a funding round and, there's so much competition to invest in the top startups, that VCs go along with it. Decades ago, this wasn't the case. Founders waited for the IPO like employees. If you're an engineer sitting on $5m of…

It's not impossible for private companies to allow employees to sell stock in funding rounds. Tanium basically follows the recommendations in the article - employees get RSUs, and have been allowed to sell in every recent funding round.