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If you have startup stock options, check your option plan

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Re: If you have startup stock options, check your option plan

#31

Post by tedyoung »

tieTYT wrote: post #29

The last two companies I've gotten offers from gave me very, very heavy pushback when I tried to figure out what % of equity they were giving me. They told me they were giving me 5,000 shares (for example). OK... 5,000 of how many? What % of all the shares is 5,000? My understanding is you need this information to know if the equity is worth something or nothing. Yet, they really don't want to give me this informatio…

You are completely reasonable. I've turned down offers because of this exact reason (and it was the only problem with the offer). I tell them that if they won't give me the denominator of the equation, I'll assume it's pretty close to infinity, and value the options aspect of the offer at $0. I think it's shady and manipulative to not provide such details ("but we're giving you 50,000 options!"). What are they trying to hide?

Re: If you have startup stock options, check your option plan

#32

Post by chrisabrams »

tieTYT wrote: post #29

The last two companies I've gotten offers from gave me very, very heavy pushback when I tried to figure out what % of equity they were giving me. They told me they were giving me 5,000 shares (for example). OK... 5,000 of how many? What % of all the shares is 5,000? My understanding is you need this information to know if the equity is worth something or nothing. Yet, they really don't want to give me this informatio…

No, they did something wrong: not be honest. It sounds like you didn't go there - why work for someone who can't be upfront?

Re: If you have startup stock options, check your option plan

#33

Post by chrisabrams »

tedyoung wrote: post #31
tieTYT wrote: post #29

The last two companies I've gotten offers from gave me very, very heavy pushback when I tried to figure out what % of equity they were giving me. They told me they were giving me 5,000 shares (for example). OK... 5,000 of how many? What % of all the shares is 5,000? My understanding is you need this information to know if the equity is worth something or nothing. Yet, they really don't want to give me this informatio…

You are completely reasonable. I've turned down offers because of this exact reason (and it was the only problem with the offer). I tell them that if they won't give me the denominator of the equation, I'll assume it's pretty close to infinity, and value the options aspect of the offer at $0. I think it's shady and manipulative to not provide such details ("but we're giving you 50,000 options!"). What are they trying…

Also, why do these companies think that engineers won't try to find a way to bring math into the equation?

Re: If you have startup stock options, check your option plan

#34

Post by nadeemk »

tieTYT wrote: post #29

The last two companies I've gotten offers from gave me very, very heavy pushback when I tried to figure out what % of equity they were giving me. They told me they were giving me 5,000 shares (for example). OK... 5,000 of how many? What % of all the shares is 5,000? My understanding is you need this information to know if the equity is worth something or nothing. Yet, they really don't want to give me this informatio…

It's not only reasonable but very crucial for you to ask the total number of outstanding shares. I have made it a point to ask every company this question and have gotten an answer out of them. Also, and this is me, I don't trust a word recruiters say. Not a single word. Ask to talk to the VP (or if possible CEO directly) if the recruiter is being cagey about it.

Re: If you have startup stock options, check your option plan

#35

Post by chrisabrams »

paulhauggis wrote: post #18

This is why I never take equity. It's just a way to dangle a carrot in front of an employee to make them think they will get a big pay day. Many times, the employee doesn't want to quit because this pay day is seemingly right around the corner. My previous employer gave me stock options on top of my salary. I never really cared about the stock options too much. A few months ago, I found out the owner created a new LL…

a good employment contract would cover this scenario...best to make friends with an attorney in the field :)

Re: If you have startup stock options, check your option plan

#36

Post by srathi »

ausjke wrote: post #14

Is there any generally reasonable 101 on how to do equity/share/stock-option in an early stage start-up? Tried to google for it and never found any general guidance for that. If you're paying a full salary/benefit for them, the options etc is really just trying to keep them from jumping around? I'm open to all ideas but would like to find some common/typical silicon valley way to do this for startups.

I found this very helpful.

http://www.fairmark.com/execcomp/index.htm

Re: If you have startup stock options, check your option plan

#37

Post by chrisabrams »

efuquen wrote: post #4
joshkpeterson wrote: post #2

Ideally before you accept the offer :)

True, but in the current hiring climate and if you're still at an early stage you should definitely still have leverage.

Yes, if the company is early stage, then nothing should be out of the question.

Re: If you have startup stock options, check your option plan

#38

Post by chrisabrams »

paulhauggis wrote: post #18

This is why I never take equity. It's just a way to dangle a carrot in front of an employee to make them think they will get a big pay day. Many times, the employee doesn't want to quit because this pay day is seemingly right around the corner. My previous employer gave me stock options on top of my salary. I never really cared about the stock options too much. A few months ago, I found out the owner created a new LL…

Also, did you sign an employment contract with the new LLC? If not, then you own the IP you create, not the new LLC, assuming the old entity was dissolved.

Re: If you have startup stock options, check your option plan

#39

Post by cj »

triplesec wrote: post #23
AndrewKemendo wrote: post #11

I read a lot about how employees get screwed over with stock options, so what we decided to do was to just give employees vesting stock straight up as a buy through. Basically the way this works is that we give new employees an up front lump sum in the amount of how much it costs to purchase the shares of the company. The employee then purchases those shares from us in line with a vesting agreement. All warrants and…

I wish more companies were so transparent and decent as yours. Why do others prefer not to do it this way, if it's not just sheer greed and obfuscation?

> Why do others prefer not to do it this way

Mostly because they don't have experience with option plans, and lawyers tend to recommend what's best for the company (not what's best for the employees).

I granted my early employee founder's stock (same as mine), mainly because I was screwed by stock options in the past. But I had to actively request this from our lawyer (the default is for lawyers to suggest stock options).

Re: If you have startup stock options, check your option plan

#40

Post by cedsav »

This advice should be directed to entrepreneurs.

As a founder, it's good to know what terms are "standard" and what terms are more pro-employee or more pro-management. Then you can use that information when setting up the option plan with your lawyer, and push back if you feel the lawyer is overzealous in protecting your own interest.

Once the plan is in place, it's unfortunately too late for the employee to seek more favorable terms.

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