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Windsurf employee #2: I was given a payout of only 1% what my shares where worth

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Re: Windsurf employee #2: I was given a payout of only 1% what my shares where worth

#361

Post by Xylakant »

djoldman wrote: post #220
azinman2 wrote: post #184

Earlier quoted context omitted.

I don’t see how a company could promise this. Everyone gets diluted for every funding round, for example.

They can easily, they just don't.

Legally speaking, it’s probably possible. Practically speaking it almost certainly a guarantee that the company will never see outside investment. On every round someone would need to pony up the cash to fill that employees stock. Anti-dilution clauses exist, but they never work like that.

Such a privilege is also likely to be almost worthless - if the company succeeds and the round makes it worth more, you’ll win even with dilution. If the company doesn’t, then other clauses such as liquidation preferences will make your stock worthless, regardless of how much you own.

Re: Windsurf employee #2: I was given a payout of only 1% what my shares where worth

#362

Post by baq »

jjice wrote: post #296
stan_kirdey wrote: post #75

Engineers: always negotiate for higher base salaries. In the vast majority of cases—especially during acquihires—your equity will be worth little or nothing. Founders and VCs still get paid; employees rarely do. Don't just accept promises. Ask for the 409A valuation, liquidation preferences, and pay bands. If a company won’t provide transparency, that’s your signal. Equity is a lottery ticket. Salary is money in the…

I had some RSUs from a previous company (likely will not be worth anything) and some options at another, but I have no idea how to understand how dilution like this works. My understanding is surface level of that scene in The Social Network. I feel like I understand _what_ an RSU is and what options are, but are there any good resources for me to learn from?

RSUs are much better than options, they’re actually properly shares, will go to zero when the company is bankrupt and even then not necessarily.

Options go to zero much more often.

Re: Windsurf employee #2: I was given a payout of only 1% what my shares where worth

#363

Post by 0x00000000 »

ashdksnndck wrote: post #346
0x00000000 wrote: post #233

Earlier quoted context omitted.

anything within 45 minutes of your office in palo alto (where you are mandated to show up 5 days a week). this will get you a 1300sqft piece of shit built in 1964 with asbestos and lead paint and lead pipes and a cracked foundation (also some dipshit realtor had them paint all the original wood beams and paneling inside gloss white and replace the original wood and slate floors with grey vinyl) from some baby boomer…

Redwood City is 20 mins from Palo Alto and has a lot of houses for $1-1.5M. $3M means you are paying extra for something optional. It’s not the minimum requirement. Lots of people are paying millions extra just to live up winding roads on a hill, where the commute is longer, and you need a geotechnical engineer to design your patio.

it’s more like 30-50 min with traffic

Re: Windsurf employee #2: I was given a payout of only 1% what my shares where worth

#364

Post by baq »

usaar333 wrote: post #145
gsibble wrote: post #93

Earlier quoted context omitted.

I tell every engineer always to maximize their cash comp and every founder and investor always says "No, that's such a bad idea! Get more equity!" Yeah, because that is in your interests, not the engineer's.

Not everything is adversarial. More cash pressure on the company itself can be bad for the company which is bad for you too. I always take more equity. I wouldn't work for you in the first place if I didn't believe in your equity.

This may work for you, but in general isn’t good advice. You shouldn’t be confusing beliefs and risks. Risk should be managed - you should be comparing cash invested into the public market (or treasuries, or bitcoin, whichever you prefer) with equity in the startup, not with a savings account.

Re: Windsurf employee #2: I was given a payout of only 1% what my shares where worth

#365

Post by baq »

bagels wrote: post #66
KaiserPro wrote: post #60

I was aquihired by a FAANG. The headline "startup bought for x million" is almost always a lie, either direct or by omission. First, when a startup is bought, its generally not bought at the headline rate. So if you see a "bought for $45m" that doesn't mean People who own shares all got a % of 45m. That number is normally bullshit, but also a "total package" which include share offers for joining the new company. Thi…

1m isn't enough to really retire in in silicon valley

Don’t retire in Silicon Valley then

Re: Windsurf employee #2: I was given a payout of only 1% what my shares where worth

#366

Post by Nemo_bis »

AYBABTME wrote: post #351

So if one was to start a company today and wanted to enshrine employee-and-founder-friendly terms in their company, how should things be structured? Make the founders' shares be of the same class as the employees? Something special?

Make it a cooperative. https://tech-coops.xyz/

Re: Windsurf employee #2: I was given a payout of only 1% what my shares where worth

#367

Post by baq »

xvector wrote: post #301
karmasimida wrote: post #171

Earlier quoted context omitted.

Not contracting. Let’s do a simple math. Assume this employee gets 5% of the company (which is super unlikely, but let’s go with it), that is 150m for what could be worth if OpenAI deal went through. 1% of that would be 1.5m. That is still 7 figure. But this person spent 3 years in a startup, which turned out to be a unicorn and super highly successful, and he bagged a FAANG salary man pay at the end of the deal. Bas…

It's bizarre to see tech bros, YC, and megacorporations kill the startup talent pipeline that they rely on so much. Who is gonna want to work at a startup in a non-founder role after this and Scale AI? This continuing degradation of, and flagrant disregard for social norms is destructive for society.

the market doing what the market does: price discovery. yes, this is a cynical take, but so is the money in this market.

Re: Windsurf employee #2: I was given a payout of only 1% what my shares where worth

#369

Post by gwd »

djoldman wrote: post #220
azinman2 wrote: post #184

Earlier quoted context omitted.

I don’t see how a company could promise this. Everyone gets diluted for every funding round, for example.

They can easily, they just don't.

There is actually a sense to the dilution. If I have something I think is worth $10m, and I'm asking someone else to give me another $10m, doesn't it make sense for that person to own 50% of the company? Why would any investor give you $10m wile receiving no ownership of the company? How are you going to give these newer investors ownership, if you don't reduce the ownership of everyone else?

The claim in the tweet was that they got 1% of the value of the diluted shares: e.g., on paper they should own 1% of $100m, but somehow they only got $10k out of it. There does seem to be a culture of this going around now -- the VC version of "Hollywood accounting". In a lot of situations it doesn't make much sense to me -- is it really worth poisoning the well of startup talent for the VCs to get $95m instead of $85m?

Re: Windsurf employee #2: I was given a payout of only 1% what my shares where worth

#370

Post by ProfessorLayton »

stouset wrote: post #298
ProfessorLayton wrote: post #167

Earlier quoted context omitted.

I'm speaking from experience. Yes, it means buying in before there's clear evidence of success, that's the risk! The lower the risk the lower the reward. Waiting until the company is worth billions of dollars before buying its stock is one of several options available, and each has its own risk/reward profile.

My point is that exercising the company’s stock early is fraught with risk and is in almost all cases a -EV play. Yes, the option technically exists. But without perfect foresight it’s not a good option. It’s not even an okay one. It’s an exceedingly bad one in most cases. Acting like this employee was silly for not dumping a huge sum of money into company shares before it was in a position to succeed is flatly ridic…

> Acting like this employee was silly for not dumping a huge sum of money into company shares before it was in a position to succeed is flatly ridiculous.

Once again we’re talking about employee #2, exercising early would not have been that expensive! They had access to a strike price and low tax liability that the vast majority of later employees would ever see. You are correct in that most shares in startups are worthless, but that’s orthogonal to exercise price and tax consequences.

The calculus changes if/when the company becomes a unicorn, but by then the risk profile is much more favorable than when it was a scrappy startup, and returns are lower.

> I also say this from personal experience as employee. I was an employee ~#600 of a unicorn that went public. I ended up in something of the sweet spot of equity: most of the people who joined before me left before me and got less than I did in the end. Most people who joined after me got less equity at a worse strike price than I did.

Well one has to stay long enough to vest in order to keep the equity, being early isn’t enough.

I don’t know your specifics so maybe you did make it out better than earlier employees, but some tricks companies use once they hit unicorn status (and have hundreds of employees) is stock splits. They want to pad their share grants for newer employees to make it seem more attractive and make the strike price lower. Of course earlier employees that exercised and left get their shares multiplied too.

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