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Employee Equity

blog.samaltman.com

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331–340 of 342 posts

Re: Employee Equity

#331

Post by crasshopper »

tptacek wrote: post #206
marvin wrote: post #119

Earlier quoted context omitted.

Has anyone stopped to think what a massive failing of the startup part of the industry this is? Practically everything I read online indicates that if you consider your stock options to have any value at all even in a moderately successful company, you are a major sucker and about to get exploited. Surely this must reduce the quality of the talent pool available to new startups, as the experienced developers conclude…

First of all, if you go looking for market inefficiencies in tech hiring (across the board, not just at startups), you will find lots of them. Software development hiring is folkloric; traditions handed down from Sr. Mgr Software Developer to Associate Developer tracing back to the beginning of time (1982 or so). Second, regarding the talent pool available to employers, two factors confound the analysis: the first an…

> market inefficiencies

In other words, you're telling me both people and organisations are imperfect?! Shocking.

Sarcasm aside: really, it is shocking how SW engineers could come to think that any of the inexact, data-free, human-judgement-driven sides of business are optimal--simply from the theoretical argument that a market is involved. A little economics is a dangerous thing.

I suggest starting from the assumption that everything can be improved, unless proven otherwise.

Re: Employee Equity

#332

Post by maaku »

bane wrote: post #308
jknightco wrote: post #290

Earlier quoted context omitted.

Maybe I'm mistaken, but I believe you only have 90 days after leaving a company to purchase vested options. I may be wrong, however.

Mine have a 2016 expiration date. It just depends on the grant agreement.

Be careful, there are laws which govern this, not just the grant agreement. Caveat emptor.

Re: Employee Equity

#333

Post by socialist_coder »

tptacek wrote: post #257
username223 wrote: post #255

Earlier quoted context omitted.

If your Human Resources people don't play a significant role in purchasing your human resources, something has gone wrong.

Give me a break. In most companies, "human resources" exists primarily to cut people's health insurance benefits.

I've worked for 2 large technology companies. The first was a big one down in Southern California and HR there was as you describe.

The other was a big one in San Francisco, and their HR was insanely powerful... for some reason. It was quite a shock to me but to a lot of others used to Bay Area startups they made it seem like the norm.

So I guess my point is that not all HR is alike and there is probably some truth to this HR negotiating business.

Re: Employee Equity

#334

Post by Iftheshoefits »

karmelapple wrote: post #172
Iftheshoefits wrote: post #89

Earlier quoted context omitted.

You've identified one of the reasons I hesitate to put myself in the "startup labor market" for any startup that isn't well-funded. Even well-funded startups give me pause. I'm not interested in putting in founder-like work for entry-level employee-like compensation plus a lottery ticket. Unless the equity is meaningful and imbues the recipient with an actual, real voice in the direction of the company it's just a wa…

I'm curious: what is "founder-like work" to you? Is it 50–80 hour work weeks? Or does it mean 40 hours but making the initial, architectural decisions of a new piece of software? Serious question.

Either.

In the first case, it's unreasonable to put in more than a couple of hours of overtime here and there for even market rate wages at any company, whether it's a startup or not. "Uncompensated (comp time doesn't count) overtime" is a euphemism for "exploitation."

In the second, the employee is effectively creating at least one of the revenue generating engines of the business. He deserves to reap the rewards of his labor. That means more than below-market wages plus "startup bucks"/lottery tickets.

The entire issue, as I see it, can be distilled to this: founders want employees who are taking significant risk, who will work for and treat the business like the founders themselves would, but who considers below-market wages plus "startup bucks" as great compensation, even when it is historically not.

Re: Employee Equity

#335

Post by mikeg8 »

dang wrote: post #311
mikeg8 wrote: post #301

Earlier quoted context omitted.

Damn dude, I think you forgot to take your Midol today.

Personal attacks are not allowed on Hacker News, regardless of how wrong you think someone is. Mixing in a gender slur makes it worse. This is the kind of thing we ban people for, especially when they don't have a history as a positive contributor on the site.

Understood. Will not be commenting like this again. Thanks for the warning dang.

Re: Employee Equity

#336

Post by jasonlotito »

jbkp wrote: post #60

You know, it's funny, I read things like this from time to time: "so if I have 0.5% of company and it gets acquired tomorrow for $100 million dollars, will I get $500,000?" and I remember that I am in this exact scenario, and have no idea what the answer is. I've been an employee at a startup for 2 years now. I joined when I was young, naive, and broke — I don't even remember if I read the paperwork before signing it…

> I am embarrassed to have to ask

No reason to be embarrassed. You don't know something. There is always something you aren't going to know. Also, the smartest people are the ones that always ask questions. They are not satisfied accepting things, they seek to understand. And that means saying "I'm ignorant of this. Teach me."

Anyways, I'd ask whoever handles this for your company. Whether it's your founder, CEO, HR, or whatever department depending on the size. Someone is handling this for them, and I guarantee if you don't understand it, someone else doesn't either.

And, if the company hasn't made clear the value of what you have, then they aren't benefiting from it. After all, if you knew that if the company succeeded, you'd get $500k for it, you might want to work harder. What's the point of an incentive if it doesn't incentivize.

Re: Employee Equity

#337

Post by jonnathanson »

birken wrote: post #19

The problem with the 10%/20%/30%/40% thing is that if the company shoots way up in value, an employee could theoretically be fired after two years and not capture much of the value they helped to create. It also doesn't necessarily need to be malicious [1], sometimes companies change and a person's skills aren't as valuable anymore. If I were a prospective employee I would never take a deal like this, because it is r…

It's important to note that Sam also suggested an increased equity grant on top of the 10/20/30/40 schedule. The expected value of 10/20/30/40 only matches 25/25/25/25 if the overall equity grant under 10/20/30/40 is higher to begin with. Depending on the time value of money, and upon one's personal opportunity costs year over year, that equity award might need to be significantly higher. Alternatively, as Sam suggests, there are compensating mechanisms (new grants, vesting acceleration based on performance, etc.).

All things being equal, I wouldn't take a 10/20/30/40 over a 25/25/25/25, because it would be economically irrational to do so. But all things aren't supposed to be equal under the two structures.

Re: Employee Equity

#338

Post by darkarmani »

x0x0 wrote: post #124
jbkp wrote: post #60

You know, it's funny, I read things like this from time to time: "so if I have 0.5% of company and it gets acquired tomorrow for $100 million dollars, will I get $500,000?" and I remember that I am in this exact scenario, and have no idea what the answer is. I've been an employee at a startup for 2 years now. I joined when I was young, naive, and broke — I don't even remember if I read the paperwork before signing it…

I've exercised before. Typically, you email hr and say, "I want to exercise"; they send you some paperwork which you fill out; you write the company a check. DO NOT DO THIS BEFORE UNDERSTANDING TAX CONSEQUENCES. You will typically pay tax on the spread between strike (your price per option) and the fair market value (fmv) which is set by the board and often updated quarterly. This can also be a backdoor way of a boar…

> Typically, you email hr and say, "I want to exercise";

What happens when they ignore all emails related to exercising? I had this problem and I even followed up by CCing the controller and CFO. It turns out they didn't want anything on "paper" so they just ignored me. My offer had the options in it, but they never gave me the option paperwork. I hear they finally granted the options a year ago to people still there. I think they were playing games trying to lower the FMV or something. I'm not sure it was all legit.

Re: Employee Equity

#339

Post by darkarmani »

aetherson wrote: post #45

I don't understand why options are taxed at exercise. You aren't getting money out of the transaction. If you have an option to buy a share at $1 (when the share is valued at $10), and later you sell at $50, why isn't the tax treatment just that you have a $49 capital gain? Why do we instead do a $1 -> $10, and then a $10 -> $50 tax thing?

I think there is so way to abuse the shares by using them as collateral without having to sell them. I'm not sure of the details, but I'm pretty sure people found ways to take advantage.
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