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The four year vesting schedule doesn't make sense

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Re: The four year vesting schedule doesn't make sense

#31

Post by glimcat »

tptacek wrote: post #16

I don't invest in companies, but if I did, having nonstandard vesting schemes would be a no-deal red flag, at least for any team that didn't have a mile-long pedigree starting and successfully building companies. Vesting is one of the most important protections the operating team has against hiring (and foundational) mistakes, and anybody who has ever started a company knows those mistakes happen routinely. Some thin…

Just from an efficiency standpoint, you don't need other levers for new grads. A reasonable engineering salary will already be highly motivational for someone who is coming off a student's budget, probably with loans just kicking in.

Some percentage of them are going to flake. That happens when you take people who have spent their lives in an environment with one eval loop and place them in a new environment with differing expectations.

Of those who would flake, some of them can be made into great employees. But a bigger carrot is almost never effective at accomplishing this. The real need is generally along the lines of "effective mentorship" - which is far harder to implement than a revision to your employee benefits plan.

Re: The four year vesting schedule doesn't make sense

#32

Post by loceng »

tptacek wrote: post #17
Firehed wrote: post #10

Earlier quoted context omitted.

The idea is that the longer you stay with the company, the larger percent of your remaining equity you get per period. Hockey-stick equity, if you will ;) I think it's actually a pretty reasonable approach. I've had people straight-up tell me during interviews that they're leaving their current position because they've reached either their one-year cliff or their four-year package and want a new opportunity with pote…

I've had people straight-up tell me during interviews that they're leaving their current position because they've reached either their one-year cliff or their four-year package and want a new opportunity with potentially higher gains. The person who told you "I'm looking because I just hit my first-year cliff" actually told you "DO NOT HIRE ME". Listen harder. People do leave when they hit four years. Four years is a…

Makes me wonder how hard they worked those 4 years, or perhaps just that last year they didn't necessarily care to be kept on afterward.

Re: The four year vesting schedule doesn't make sense

#33

Post by ChuckMcM »

They make sense in the same way that dollar cost averaging makes sense. Whinging that a year is too long to wait for the vest is pretty shallow. Now if it didn't start vesting for a year, sure that would be something, but since your 25% vested on the day of the 'cliff' your good.

But the bottom line is that shares are compensation and compensation is money. A startup needs to extract the most mileage out of the money they've got, this vesting schedule has been shown to be a reasonable choice over the last 50 years.

Re: The four year vesting schedule doesn't make sense

#34

Post by ajdecon »

For someone who sees 1 year as a long time, the one year vesting cliff may be a reason to discount the equity portion of the compensation package altogether, especially at a small startup where the chances of cashing out are low anyway. After a couple of months at a company, a new grad may think “hey, this isn’t THAT great’, and not stick out the next 9, 10, 11 months, because that seems to them, an insanely long time.

1) From the employer perspective in a startup: do you actually want an employee who's going to stay longer than a few months, based on any reason except the company and the work?

2) From the employee perspective: unless you're an extremely early employee, discounting the equity portion of a startup compensation package is probably the correct thing to do...

Re: The four year vesting schedule doesn't make sense

#35

Post by mattmaroon »

I really don't think young people think/care much about equity until you're one of the hotter startups, at which point 1 year doesn't seem so long. If you're hiring on at Dropbox now, you're working that year. If you're hiring on at some company that's 6 months old that nobody has heard of, the equity is just a batch of lottery tickets.

Put another way, I doubt anyone has ever said "I would have worked there if the cliff was only 6 months".

Re: The four year vesting schedule doesn't make sense

#36

Post by ghaff »

wellthat wrote: post #19

Suppose someone (highly qualified, not from the startup world however) can tweak your marketing message for a couple of weeks (i.e. work on your startup for 80-150 hours intensively) and as a direct consquence get you an audience of millions, because your message is now awesome. This person doensn't care about startups. Say you are pre-money. How should you pay for this person's time? You would think, if this person…

And, if you're a consultant, with few exceptions, taking an equity stake rather than cash is not a good idea. Happened a lot in the dot com bubble. Not pretty. Sure, if you're looking for work and a genuinely intriguing opportunity that only takes a couple weeks comes along, why not? But bad idea as a business model.

Re: The four year vesting schedule doesn't make sense

#37

Post by j2labs »

loceng wrote: post #32
tptacek wrote: post #17

Earlier quoted context omitted.

I've had people straight-up tell me during interviews that they're leaving their current position because they've reached either their one-year cliff or their four-year package and want a new opportunity with potentially higher gains. The person who told you "I'm looking because I just hit my first-year cliff" actually told you "DO NOT HIRE ME". Listen harder. People do leave when they hit four years. Four years is a…

Makes me wonder how hard they worked those 4 years, or perhaps just that last year they didn't necessarily care to be kept on afterward.

If they were there four years without being let go, the company was clearly fine with the performance.

Re: The four year vesting schedule doesn't make sense

#38

Post by tossit1234 »

tptacek wrote: post #16

I don't invest in companies, but if I did, having nonstandard vesting schemes would be a no-deal red flag, at least for any team that didn't have a mile-long pedigree starting and successfully building companies. Vesting is one of the most important protections the operating team has against hiring (and foundational) mistakes, and anybody who has ever started a company knows those mistakes happen routinely. Some thin…

Treat everyone the same, but everyone should treat the company as an investment in time and effort...

Re: The four year vesting schedule doesn't make sense

#39

Post by tossit1234 »

loceng wrote: post #32
tptacek wrote: post #17

Earlier quoted context omitted.

I've had people straight-up tell me during interviews that they're leaving their current position because they've reached either their one-year cliff or their four-year package and want a new opportunity with potentially higher gains. The person who told you "I'm looking because I just hit my first-year cliff" actually told you "DO NOT HIRE ME". Listen harder. People do leave when they hit four years. Four years is a…

Makes me wonder how hard they worked those 4 years, or perhaps just that last year they didn't necessarily care to be kept on afterward.

Makes me wonder about how their investment in effort has carried out over that time. I'm sorry, but X shares over Y time with additional investments of A, B or C, usually means X means a lot less (percentage-wise) for a continuation of effort.
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