Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

How to Choose a Startup to Work for by Thinking Like an Investor

triplebyte.com

Post reply on HN
Print view View original

31–40 of 154 posts

Re: How to Choose a Startup to Work for by Thinking Like an Investor

#31

Post by ryandrake »

joshe wrote: post #28
dawhizkid wrote: post #19

Earlier quoted context omitted.

IMO there's only two paths that really makes sense now when considering a private co. Either a) join super early (e.g. penny strike price) with a meaningful % of total company (at least 10 bps) OR b) join late stage growth co that offers RSUs over options (e.g. "Softbank" stage cos). Joining a "middle" stage co where you are offered expensive options is the worst, since you've missed out on the early upside and you t…

Sorry have to delete these, not comfortable with these comments sitting on the internet forever.

But public company RSUs are as good as cash because you usually can sell them the day they vest. Rule of thumb I think is to favor options from private companies and RSUs from public companies.

Re: How to Choose a Startup to Work for by Thinking Like an Investor

#32

Post by microtherion »

qaq wrote: post #27

Even top VCs need a portfolio of companies to produce a return. If you asked a VC to bet a whole fund on a single company :) and these are people who's full time job is to pick companies

Yeah, a key strategy for investors is to diversify, and that's exactly what startup employees cannot meaningfully do.

Re: How to Choose a Startup to Work for by Thinking Like an Investor

#33

Post by techslave »

joshe wrote: post #28
dawhizkid wrote: post #19

Earlier quoted context omitted.

IMO there's only two paths that really makes sense now when considering a private co. Either a) join super early (e.g. penny strike price) with a meaningful % of total company (at least 10 bps) OR b) join late stage growth co that offers RSUs over options (e.g. "Softbank" stage cos). Joining a "middle" stage co where you are offered expensive options is the worst, since you've missed out on the early upside and you t…

Sorry have to delete these, not comfortable with these comments sitting on the internet forever.

Either your explanation is unclear, or you do not understand RSUs.

> RSUs [...] evaporate if you leave or are fired from the company. You can not purchase them like stock options.

RSUs do not evaporate. Vested RSUs are yours outright. You cannot purchase them because they are already "purchased".

> So you have to stick around until the company becomes public.

In both cases, the RSU or the stock underlying an option, it is equally worthless until there is a liquidity event.

> Oh they also expire in five years

Companies don't even offer RSUs until they are close to being public. Once you reach a certain threshold of stockholders, you have to report financials. Since this is typically undesirable for private companies, they don't want to jump the gun on issuing RSUs instead of options. If the 5 years does pass without IPO, companies re-issue new grants. (Please: name one company that has actually expired RSUs and what happened)

OTOH most stock option grants expire in 90 days upon termination. This is a real expiry, and actual money out of your pocket (and tax liability) to exercies them, and usually a difficult decision. There are some places doing 10-year expiry but those are still the exception.

> The odds of stock options working out is low, but for RSU's they are much, much lower.

It's the opposite. For a private company, RSUs are much much closer to money in the bank than are options.

Re: How to Choose a Startup to Work for by Thinking Like an Investor

#34

Post by ryandrake »

qaq wrote: post #27

Even top VCs need a portfolio of companies to produce a return. If you asked a VC to bet a whole fund on a single company :) and these are people who's full time job is to pick companies

Start up employees take on far more risk than startup investors. Investors can diversify over 10s or 100s of companies but an employee has to pick just one and bet their career on it.

Re: How to Choose a Startup to Work for by Thinking Like an Investor

#35

Post by dawhizkid »

ryandrake wrote: post #29
dawhizkid wrote: post #19

Earlier quoted context omitted.

IMO there's only two paths that really makes sense now when considering a private co. Either a) join super early (e.g. penny strike price) with a meaningful % of total company (at least 10 bps) OR b) join late stage growth co that offers RSUs over options (e.g. "Softbank" stage cos). Joining a "middle" stage co where you are offered expensive options is the worst, since you've missed out on the early upside and you t…

And really, only a) offers a meaningful shot at “getting rich”. A late stage growth company is not going to 100X its equity value in 5 years. No rank and file employees are getting f-you money there. If there’s one thing I’ve learned after two decades in the industry it’s if you care about earning good money, you can either 1) gamble on the 0.01% chance that you picked the right startup or 2) get on to the Senior Exe…

Even with (a) it's tough. If you're employee 1-13 you're getting maybe 10-20bps. At a unicorn valuation that is $1-$2m before you take into account dilution, liquidation preferences, taxes, etc etc etc.

Re: How to Choose a Startup to Work for by Thinking Like an Investor

#36

Post by icedchai »

dawhizkid wrote: post #19
sharkweek wrote: post #5

I worked at three startups before taking the current break I'm on - one I left before my stock was worth anything (would have paid out a small amount in an acquisition), another, the stock is now worth zero, and the third has a shot at being worth about a year's salary if current late-stage valuation is to be representative of a potential buyout/IPO (I'd say odds are alright this will happen). While I try not to thin…

IMO there's only two paths that really makes sense now when considering a private co. Either a) join super early (e.g. penny strike price) with a meaningful % of total company (at least 10 bps) OR b) join late stage growth co that offers RSUs over options (e.g. "Softbank" stage cos). Joining a "middle" stage co where you are offered expensive options is the worst, since you've missed out on the early upside and you t…

I wouldn't consider 10 bps (0.1%) meaningful. Early stage is very, very risky.

Re: How to Choose a Startup to Work for by Thinking Like an Investor

#37

Post by ryandrake »

jacquesm wrote: post #15
davidw wrote: post #9

Earlier quoted context omitted.

How likely is it that you as a potential employee get to see the books and know what's going on like that these days? Honest question; seems like it's a tougher thing to get access to than for a VC, but maybe I'm wrong.

That depends on what the company is looking for in you. If you're going to do mission critical stuff or they want you for an important role they might even enjoy showing you their internals. And if they don't want to show you then that's a pretty good indication that you are probably better off elsewhere. Transparency in an early stage start-up is good for everybody, including the founders. If founders are not willin…

No private company I have ever worked for as an employee has agreed to let me look at their balance sheet or income statement. Most would not even discuss valuation in terms other than # of shares in my offer, which is meaningless.

One CEO I recall even laughed when I asked at the interview (that should have been a red flag in retrospect). I later learned he gossiped about how inappropriate it was for a candidate to ask about company financials.

Re: How to Choose a Startup to Work for by Thinking Like an Investor

#38

Post by dawhizkid »

icedchai wrote: post #36
dawhizkid wrote: post #19

Earlier quoted context omitted.

IMO there's only two paths that really makes sense now when considering a private co. Either a) join super early (e.g. penny strike price) with a meaningful % of total company (at least 10 bps) OR b) join late stage growth co that offers RSUs over options (e.g. "Softbank" stage cos). Joining a "middle" stage co where you are offered expensive options is the worst, since you've missed out on the early upside and you t…

I wouldn't consider 10 bps (0.1%) meaningful. Early stage is very, very risky.

unless you are a founding engineer, that is not out of the norm even for the earliest employees (unfortunately)

nothing is "very very risky" unless you are taking your entire salary in equity. if you are making a competitive base I think you'll survive any misstep choosing the wrong early stage co in the long run.

Re: How to Choose a Startup to Work for by Thinking Like an Investor

#39

Post by icedchai »

dawhizkid wrote: post #38
icedchai wrote: post #36

Earlier quoted context omitted.

I wouldn't consider 10 bps (0.1%) meaningful. Early stage is very, very risky.

unless you are a founding engineer, that is not out of the norm even for the earliest employees (unfortunately) nothing is "very very risky" unless you are taking your entire salary in equity. if you are making a competitive base I think you'll survive any misstep choosing the wrong early stage co in the long run.

I was employee #5 at a startup and I got 0.5%.

Another startup offered me 0.1% and a mediocre salary. I had to put the phone on mute while I laughed.

Post reply on HN