381–390 of 396 posts
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Also worth noting that in today's market a company like Stripe isn't paying significantly below market rates, so there's not huge downside in that regard.
Companies like stripe today or companies like stripe just after its series B?
After Series A most should be paying competitive salaries.
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Yeah, but they would have had to have spent a lot more cash upfront, both in the bonus amounts and the payroll taxes on those amounts. ISOs are pretty ideal for early stage companies because they are very cash efficient and very light on taxes pre-liquidity. They begin to get more complicated when the company has non-negligible value. But they're still alright as long as you don't get to the point where the options a…
While it's true that cover-to-exercise is more cash-intensive, if it's only for the first 50 or so employees, it would seem viable for a company like Stripe that has strong cash flow. The problem with ISOs is they effectively halve the value of the award due to taxes, and furthermore can impose extremely risky tax situations on people who can't afford to lose much (e.g. employees who exercise before IPO). Performance…
The downsides of ISOs are: - They cost money out of pocket to exercise. - They have to expire within 90 days of separation from the company. - They get complicated when you can't simply early exercise+83b them.
As I said earlier, I think RSUs are ultimately probably better after the exercise cost becomes non-negligble. But ISOs have their perks under the current tax code.
Ultimately, I think the IRS should scrap the ISO. Just let employers award stock with a cash basis at vest time and gains realized at the point of liquidity. It would be much simpler for everyone to deal with.
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Companies like stripe today or companies like stripe just after its series B?
Both. After Series A most should be paying competitive salaries.
Are you saying the cash component of post series A offer should be competitive with $200k, $230k, $305k, or $330k?
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It does seems that unicorny startups are full of ex-FAANG though.
Is that surprising? They've probably already made lots of money at a large company and want to do something they consider more exciting albeit financially risky.
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> You dont have free healthcare If you’re going to use that sort of reasoning, then you don’t get free anything other than air. Yes, it’s paid for by taxes (or through insurance depending on country; yes we have cheap private insurance here). Thank you for bringing that to our attention, our feeble European brains were unable to deduce that on our own.
In Germany, my wife and I pay together about ~2,000 USD per month for public health insurance. It's not cheap!
Your public health insurance rate in Germany is based on your annual income up to €59,850 (i.e. you pay the same whether you make €59,850 per year or €200,000 per year). At the maximum rate, you usually pay €807.99 per month for health insurance (including the average extra fee of 1.6%, which varies slightly by insurer) if you're a salaried employee.
In addition to the public health insurance you also pay for public nursing care insurance, the rate of which depends on whether you have children or not and are older than 23. Assuming both of you are self-employed, have no children, are older than 23 and have not opted out of public sick pay (which for employed people giving birth includes a combined 14 weeks of pre and post-natal leave known as "maternity protection", or a combined 18 weeks for early births or twins) and assuming the same average of 1.6% for the extra fee, you indeed pay €977.50 or just above $1000 per month each.
For the record, if you're self-employed, the absolute minimum you have to pay for public health insurance is €158.43 (without sick pay) plus public nursing care insurance plus the variable extra fee. This basically assumes your income is at least €1131.67 in any given month even if you make less than that: you can't pay less than that as long as you're self-employed unless you switch to a private insurer instead.
Another issue for self-employed people is that because your insurance rate is paid by you in full (unlike salaried employees where 50% of it is paid by your employer and your rate is adjusted automatically if your salary changes in either direction) your rate is much less dynamic and will often have to be adjusted retroactively. Public health insurers are legally only allowed to adjust your insurance rate based on your tax returns which means even if you magically manage to file your taxes in January of the following year and the tax agency immediately processes it, you may end up having to backpay (or be refunded) the difference for an entire year if your rate changes. If you are self-employed and not incorporated, you can file quarterly tax advances and the insurers are allowed to use these to temporarily adjust your rate until the final tax return is available but once you incorporate you're stuck in the worst of both worlds.
As this hopefully illustrates, there are many problems with how the public health insurance system works, especially for self-employed people and founders (and especially people who can get pregnant as it's not common knowledge that "sick pay" includes "maternity protection" and self-employed people often opt out of sick pay because it's an easy way to cut costs), but pretending our public health insurance is "not cheap" is a bit dishonest.
To reiterate for emphasis: if you pay a combined 2000 USD together per month that means the two of you each make at least 60k USD per year and you will not pay a single cent more for health insurance no matter how much more money you make. Arguably this ceiling is the main problem and if it were abolished, the rates could be considerably lowered for everyone else. The insurance rate is very painful if you're self-employed and make less than 60k EUR per year. It becomes increasingly less painful the more you make beyond that and that doesn't seem very fair.
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It's pretty accurate: Employees don't have a few million in change, each, to turn the RSUs into plain stock. I don't think the issue is making employees wealthy or not: It's 10 year old RSUs, so most of them are owned by former employees. But consider the size: If the tax bill is 3.5B, the full size of the grants we are talking about here is over 10B! last valuations in the press are at something like 60b. So 1 in 6…
I don't understand why there's tax on unrealized gains there.
It's just the it realizes it into an illiquid asset whos price is imaginary nonsense. The problem of imaginary prices is one of the reasons that we don't tax unrealized gains, but it can still arise when the gain is realized if its realized into something illiquid.
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If you take a look at some of the examples in https://blog.pragmaticengineer.com/equity-for-software-engin... you see that you really don't have to be at a "first 50 at google" level of success to see 8 digit equity values. Bear in mind that even private companies have some level of liquidity for option holders via secondary sales.
Highly compensated employees handed grants aren’t startup employees taking risks they are well compensated employees getting deferred compensation. Even if the stock stays flat they still get the face value of the grant. That said, the double digit examples were 12M “software engineer 2” and 10M “first 10 employees”.
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How are they, if you're literally prevented from exchanging them to legal tender? It's like taxing lottery tickets on potential win prize.
Actually that's not a bad analogy but against your point: options are winning lottery tickets. As long as you don't exchange them for the prize (the actual stock) you are not taxed. When you do, you have to pay tax on the difference between how much the options cost and the value you get back.
They are not unless you exchange them for legal _money_. Not stock.
>As long as you don't exchange them for the prize (the actual stock) you are not taxed.
Stock is not the prize - it's worth nothing alone, especially if you can't exchange it for mone. For some reason you don't tax unrealized gains on a stock you already owned, yet do the same for illiquid ones.
>When you do, you have to pay tax on the difference between how much the options cost and the value you get back.
And if you just taxed "at the end" when someone sells the stocks, you'd gain the same amount of money - difference between stock value and 0 - just in a different moment of time.
What I propose is logical and it's how it works in Poland.
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In Germany, my wife and I pay together about ~2,000 USD per month for public health insurance. It's not cheap!
If you pay $2000 per month combined (which btw includes all children up to the age of 18 and all children not in full employment up to the age of 25) you're paying the maximum rate. Your public health insurance rate in Germany is based on your annual income up to €59,850 (i.e. you pay the same whether you make €59,850 per year or €200,000 per year). At the maximum rate, you usually pay €807.99 per month for health in…
My point is that the German system is not a magical system of free healthcare. Rather, it's financially backed by charging a considerable chunk of earnings.
As a side note, the idea that the employer pays 50% of the contribution is a political slight of hand - an employee's labor covers 100% of the health insurance payment.
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Both. After Series A most should be paying competitive salaries.
Just so I understand correctly, levels.fyi is saying that a Google L5 offer in a HCOL city is around $200k/$100k/$30k right now. If we are very conservative and value the RSUs at 75% that’s still $305k total. Are you saying the cash component of post series A offer should be competitive with $200k, $230k, $305k, or $330k?
Of course it's not a fair comparison because google stock is liquid