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What I Wish I'd Known About Equity Before Joining a Unicorn

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Re: What I Wish I'd Known About Equity Before Joining a Unicorn

#41

Post by bluejekyll »

Someone1234 wrote: post #20
fermigier wrote: post #10

Should have been titled "... in the USA" as tax rules are very different in other countries. For instance, in France, you only owe money to the taxperson when you sell your shares, for a profit. If you sell for a loss, this is tax-deducible.

The US really does have a lot of problems with their tax system to be honest. For a country whose citizens outwardly hate tax, you'd think they would have one of the best, most straightforward, and fair tax systems in the world. But instead you have one of the most convoluted, loopholey, broken systems in the world. Whereas in countries where taxes aren't as "hated" (Europe, Canada, etc) they don't pay a cent to file…

> Why does it still cost money to file taxes anyway?

It doesn't, but because of the complexity of the tax system most people either use a tool like TurboTax or an accountant, to file for them; that costs money.

And the reason it exists, the lobbying of special interest groups for exceptions to taxes. If you can convince people in government that you deserve a break b/c what you're doing benefits society somehow, there's a tax loophole waiting for you too!

And now, there is the multi billion dollar industry that depends on this complexity and doesn't want it simplified. This is a huge waste, we waste money individually that could be spent on actual goods, and the IRS/government waste money needing to audit all the people who decided that maybe they did deserve a tax credit that perhaps they did not.

Re: What I Wish I'd Known About Equity Before Joining a Unicorn

#42

Post by apercu »

Ixiaus wrote: post #17
equalarrow wrote: post #8

Great post and I totally agree. I recently talked to my financial advisor about my current company and we went through all the numbers for various pricing scenarios (of a public offering) over the next 4-6 year, at various valuations. From his point of view, he encourages me to stay the course - quite the opposite from most of the tech friends I know (most usually don't stick around after a few years). On a side note…

JIRA is not that bad. It was pretty stagnant for a while but they've been improving it. I think JIRA is an invaluable knowledge capture tool, particularly when you're tracking down a difficult root cause and you want to keep a bunch of people in the loop.

Functionally, it's fine. The user experience is awful though.

Re: What I Wish I'd Known About Equity Before Joining a Unicorn

#43

Post by BatFastard »

econner wrote: post #24
jaymzcampbell wrote: post #5

As always the main rule you need to live by is value the equity at zero and you'll be (maybe) happy. Short of being a founder (and thus not really being offered equity) I have never treated these things as anything beyond a minor on paper "bonus". Given you'd be lucky to get anything more than 1% even as a first employee I find them next to worthless as early stage motivators. Which is how everyone seems to play it -…

This advice is often given but it's easier said than done. Let's say you work at a unicorn for 3 years and in that time it goes up 10x in VC fantasy land valuation. On paper you have a lot of money and the company reasonably might go public a couple years after you leave. Let's say you're granted about a year's salary in shares when you first join so you've vested $100K for a round number. When you leave that equity…

Don't take the risk.

Treat is as a lottery ticket. A good friend joined a late startup company in 1999, and in 2000 he was worth 40 million, of which he managed to cash out 10 million before the stock crashed. But that was in the days of IPOs, now the investors prefer to keep the rise in equity to themselves. So you chances of winning the lottery are much less.

Re: What I Wish I'd Known About Equity Before Joining a Unicorn

#44

Post by jaymzcampbell »

econner wrote: post #24
jaymzcampbell wrote: post #5

As always the main rule you need to live by is value the equity at zero and you'll be (maybe) happy. Short of being a founder (and thus not really being offered equity) I have never treated these things as anything beyond a minor on paper "bonus". Given you'd be lucky to get anything more than 1% even as a first employee I find them next to worthless as early stage motivators. Which is how everyone seems to play it -…

This advice is often given but it's easier said than done. Let's say you work at a unicorn for 3 years and in that time it goes up 10x in VC fantasy land valuation. On paper you have a lot of money and the company reasonably might go public a couple years after you leave. Let's say you're granted about a year's salary in shares when you first join so you've vested $100K for a round number. When you leave that equity…

For me personally, if I was in that position I would stick it out for however long it takes. I cannot imagine having enough liquid assets to be happy to risk $100k like that. I am also of the opinion that even if I did amass such value in equity that there's a high chance I'm going to get screwed on whatever the book value of it today is tomorrow when I actually cash out. If it's so bad that I need to run not walk out of the building then I'd have to just make peace with binning it off.

For most of us where startup equity comes with a real valuation of zero (i.e. anything but the Uber or AirBnBs of this world) - I think you're a lot better off ignoring it entirely.

> to walk away from this situation with nothing

This is where I think you are healthier having at least a market rate salary. Then you've not walked away with nothing - you've been a regular employee and happy with your lot and ready to move on.

Re: What I Wish I'd Known About Equity Before Joining a Unicorn

#45

Post by apercu »

JonFish85 wrote: post #33
chris_7 wrote: post #19

> fixed PTO Why on earth is this a downside? "Unlimited vacation" is a scam.

If you ever wanted confirmation of this, suggest to your company that instead of "unlimited vacation", which is really vague and hard to understand, the company give 8 weeks vacation that doesn't accrue or roll over year to year.

That's what we did, at my partnership. Except that was 1998-2006 and we only provided 5 weeks that don't roll over. I used 4 weeks one year. The rest of the years I barely got over 3. Personal choice though.

Re: What I Wish I'd Known About Equity Before Joining a Unicorn

#46

Post by lukejduncan »

There's a lot of advice to value your options at $0. I'm curious how people do the math when considering moving from a big company with RSUs that are liquid at vest to a startup (doesn't have to be a unicorn). Big company RSUs can be a big part of your annual total compensation. Do thinking about a "fair market salary" do folks consider that their base + risk adjusted RSUs? Seems like the best advice I've seen here that might be applicable would be to negotiate down equity in favor of base comp. especially if you consider that equity will likely be granted as bonuses during your tenure.

Re: What I Wish I'd Known About Equity Before Joining a Unicorn

#47

Post by battlebot »

econner wrote: post #24
jaymzcampbell wrote: post #5

As always the main rule you need to live by is value the equity at zero and you'll be (maybe) happy. Short of being a founder (and thus not really being offered equity) I have never treated these things as anything beyond a minor on paper "bonus". Given you'd be lucky to get anything more than 1% even as a first employee I find them next to worthless as early stage motivators. Which is how everyone seems to play it -…

This advice is often given but it's easier said than done. Let's say you work at a unicorn for 3 years and in that time it goes up 10x in VC fantasy land valuation. On paper you have a lot of money and the company reasonably might go public a couple years after you leave. Let's say you're granted about a year's salary in shares when you first join so you've vested $100K for a round number. When you leave that equity…

This reads like a Faustian bargain. I've seen this sort of stuff happen over and over to my colleagues, it was worst in the late '90s and early '00s. As much as I wanted to work for a startup once in my life, I learned that the only way to do "startup" is if you are the founder. Practically everyone else is along for the ride.

The US used to have a steady IPO market but that has dried up in recent years. I have read that 2017 might brighten things a bit, but we'll see.

Re: What I Wish I'd Known About Equity Before Joining a Unicorn

#48

Post by ryanbrunner »

chris_7 wrote: post #19

> fixed PTO Why on earth is this a downside? "Unlimited vacation" is a scam.

IMO, the amount of vacation you're actually permitted to take culturally is completely orthogonal to the vacation policy. I've worked in places with a fixed # of vacation days where it was absolutely unacceptable to actually take those days.

Re: What I Wish I'd Known About Equity Before Joining a Unicorn

#49

Post by Vinkekatten »

BoorishBears wrote: post #18
equalarrow wrote: post #8

Great post and I totally agree. I recently talked to my financial advisor about my current company and we went through all the numbers for various pricing scenarios (of a public offering) over the next 4-6 year, at various valuations. From his point of view, he encourages me to stay the course - quite the opposite from most of the tech friends I know (most usually don't stick around after a few years). On a side note…

I hate it because it feels incredibly crusty. Nothing seems to update without hitting F5, there's annoying amount of jargon and poorly named fields everywhere, and in my company it's also tied into everything from client billing to asset management, presumably because it's sold as something that does everything including breakfast, and all that noise seems to permeate into every ticket type (I can't search for a tick…

We have a few tie-ins too, but only for Bitbucket stuff like feature branches and occationally Confluence.

What's a better alternative to Jira though?

Re: What I Wish I'd Known About Equity Before Joining a Unicorn

#50

Post by hedora »

I'd add a few things:

- You probably won't have a 10 year horizon if you are joining a company that is now a unicorn. You likely will if you found a company that later becomes one.

- Sarbanes-Oxley is a big villian here. It pushes the cost of legal compliance through the roof for public companies, forcing companies to delay IPOs until revenue is higher. In addition to delaying liquidity events, it prevents small traders from owning stock in companies that are ramping from ~100m valuation to ~1b, which is why there are so many unicorns now. This hurts normal investors big time, and helps people with access to private markets. (source: friendly neighborhood VC)

- the article doesn't go into AMT, where the IRS forces you to knowingly overpay tax when you exercise ISOs, then (slowly) pays it back over the years.

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