Startup Stock Options – Why A Good Deal Has Gone Bad (2019)

Post by joshuamorton » Mon, Dec 21, 2020, 8:33 PM UTC

silentsea90 wrote: post #283

joshuamorton wrote: post #279

Earlier quoted context omitted.

> Slightly related, Stripe now gives fixed # RSUs to new hires, which limits both upside and downside significantly. Pretty much all companies start doing this once they get large-ish (snap, airbnb, lyft, uber, etc. all did essentially the same thing). At the valuation stripe has, I'm not seeing the downside, given that the upside of options is limited once you're the size of stripe today. > but to me it seems that t…

I reworded my comment - but I meant that you're guaranteed (say) $100k worth of stock every year, so the #RSUs will be calculated at the start of each year. If the valuation of Stripe is 70 Billion today and one gets granted 100k worth of stock this year (say 100 units), if valuation is 140 Billion next year, employees get 50 units next year (ignoring dilution etc), instead of 100 units each year. I meant that it is…

Post by Groxx » Mon, Dec 21, 2020, 8:46 PM UTC

joshuamorton wrote: post #290

Groxx wrote: post #268

Earlier quoted context omitted.

Lets say your company is valued at $100 and all stock is claimed for current employees. Now you want to raise money by selling 50% of your company to investors. So you create $100 more and now they own 50% (at $200 valuation). This means the investors either over-paid (2x what they were worth!), or you were strongly under-valuing the stocks that existed before. If you dilute , they get 50% at $50, and the existing st…

Let's imagine that there are two employees who each own half the company, so each has $50 of stock in the $100 company. You wish to raise money. You can sell 50% of each persons stake, or all of one person's stake, or something else. Without dilution, it would be a founders job to convince the other employees that giving up some of their shares was necessary (assuming the employee equity pool was the only source, but…

Post by JohnPrine » Mon, Dec 21, 2020, 8:51 PM UTC

jayd16 wrote: post #182

frockington1 wrote: post #133

Earlier quoted context omitted.

I think you are missing the scale and reaching for a political point where one does not need to be made. There are 500 CEOs in the SP500 and 164 million women in the US. The supply increase of 164 million women will have a far greater impact on the common persons salary than 500 CEOs getting paid more

Isn't that still like $7b[1] at the average 15m? Compare that to $45k[2] * for the 76k[3] women in the workforce, that's only ~$3.5b. Its US women vs the global S&P list, but it is interesting to compare, now that you mention it. [1] https://aflcio.org/paywatch [2] https://www.catalyst.org/research/womens-earnings-the-pay-ga... . [3] https://www.catalyst.org/research/women-in-the-workforce-uni... .

Post by s1artibartfast » Mon, Dec 21, 2020, 9:00 PM UTC

jariel wrote: post #128

cj wrote: post #40

Earlier quoted context omitted.

> Not if they just issue themselves more shares This doesn't happen in the real world. When more shares are issued, it's because you've raised another capital round and the new shares go directly to the new shareholders (new VCs) and future employees who haven't yet been hired. New shares wouldn't go to the founders. Yes, it's hypothetically possible, but it doesn't happen in the real world.

CJ it happens frequently enough that 'it's a thing' and it happens all the time. Usually in conjunction with a new round, but not always. The company will do a massive 'down round' - even lower than what they really want, bring on new investors. Then issue shares to current staff founders. That is de-facto like handing over equity from previous staff to new investors - you could almost do the math for how much 'old e…

Post by pjbk » Mon, Dec 21, 2020, 9:04 PM UTC

logicslave wrote: post #25

Startups are a financial vehicle created to transfer the value created by the employee to the founders and capitalists. Often the founders have done very little of value before hiring a team to actually build the company. These people toil away, a decade later, the founder makes 20-100 million, the first employee, a few hundred thousand. There are exceptions, but this is largely what it is.