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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

#411

Post by [deleted] »

danielweber wrote: post #387
jasode wrote: post #171

Earlier quoted context omitted.

>I was promised that more options would be issued and we wouldn't get diluted from future rounds, I understand you're only relating your previous misunderstanding but to others reading this, they need to realize that it's unrealistic for employees not to be diluted. The founders' ownership will get diluted. The investors also get diluted. Therefore, employees are not special in this regard. Getting diluted is suppose…

I've seen this scenario multiple times: 1. Company needs to raise money 2. Company issues new shares 3. Board realizes "oh shit, this is a lot of dilution" 4. Board decides "okay, who is important enough to keep around" and issues stock grants to those special people to undo their dilution. Founders and VCs have seats at the board table, and so are always important enough to get grants. Employees do not, especially a…

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

#412

Post by superqd »

This has caused me some level of sadness in the past. I worked for a startup (started 6mo after founding with only 20 people and stayed for 8 years to 200+ people and 50million in revenue). During a number of phases, I worked for months at a time giving up weekends, late nights, holidays and even vacation time to get product out the door and beat the competition. I racked up 50k options, mostly all for less than a dollar a share strike price. What was painful to me, was that when I left after 8 years (I grew weary of it all, especially management) I had 90 days to pay $34k to get my options or lose them. That was painful cause I didn't have the extra $34k I could just throw away (had no idea when they'd sell), but hated the fact that none of the thousands of extra hours I worked (I kept track) counted for anything. One could argue I was paid a decent salary. Only on paper though, since my effective hourly rate was 3/4 what I'd have made at a non-startup working a regular 40-50 hour work week (i.e., I had to work more hours to make the same pay I could have gotten for fewer hours at a non-startup).

After I left, 18 months later, the company sold and my options would have earned 10x the $34k of the strike price. I.e., I would have made $300k if I could see the future. I just find it painful that at that moment, all your time is effectively worthless, and only the $34k would have counted for anything, even though I gave far more than that in extra hours.

Needless to say, I am somewhat hesitant to put in too many extra hours anymore and almost never work weekends or holidays.

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

#413

Post by akras14 »

I remember interviewing at one of the biggest Unicorns and a recruiter told me "we pay lower salaries, but we make up for that with generous stock options" to me it sounded as, "we don't want to pay you much, so here is some over bloated Monopoly money to keep your dumb ass happy"

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

#414

Post by daave »

superqd wrote: post #412

This has caused me some level of sadness in the past. I worked for a startup (started 6mo after founding with only 20 people and stayed for 8 years to 200+ people and 50million in revenue). During a number of phases, I worked for months at a time giving up weekends, late nights, holidays and even vacation time to get product out the door and beat the competition. I racked up 50k options, mostly all for less than a do…

Did you consider using something like ESO Fund to finance the exercise of your options? If so, why did you decide not to use them?

Assuming they're willing to do the deal, if your alternative is letting the options expire worthless, it seems like a no-brainer to take a loan with no recourse unless there's a liquidity event. You wouldn't have made the full $300k, but at least a solid portion of it.

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

#415

Post by pyb »

michaelbuckbee wrote: post #161
adhambadr wrote: post #52

It has always baffled me the way founders treat employees and investors so vastly asymmetric. Ive been involved in rounds close enough to see how just the "hint" of a potential investment and all the numbers, financials, cap tables are sent in one big email to their analyst, while some early employees (who controversially have worked just as hard as the founders) have no clue who owns what and whats going on. I get i…

I think we need to coin a new term like: "early employee valley of death" [1] Post founding, there's this time period where the early employees are expected to work pretty much like founders (long hours, wildly high expectations), but with a greatly reduced salary and the promise of large option grants. This unfortunately places the employee in a really bad negotiating position with respect to salary increases, etc.…

Yes totally agree with this. I've been there, but with my eyes open. It's still a good experience being employee #1 or #2, as long as one doesn't expect any financial upside for it. Therefore, the key is to put a time limit on your involvement.

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

#417

Post by teen »

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 fun. The things about it that make it suck is that it's used for employee time tracking in a round about way. Most teams can get by on a simple issue tracker (like github issues or buganizer), but once you get bigger, you need something that manages everything like JIRA, which eventually becomes part of you justifying your existence at a big company.

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

#418

Post by logicallee »

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 -…

And if you consider every day of a romantic relationship as just a one-night stand with them (by coincidence the same person as the night before but no matter, that's just a coincidence), then you'll never be hurt if they cheat on you or even outright leave you. You can never be hurt!

To me, saying "always value the equity at zero" is exactly the same as that. Like, "always value the relationship at zero."

It's not sane advice in my personal experience, especially at the tiniest company sizes.

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

#420

Post by akras14 »

superqd wrote: post #412

This has caused me some level of sadness in the past. I worked for a startup (started 6mo after founding with only 20 people and stayed for 8 years to 200+ people and 50million in revenue). During a number of phases, I worked for months at a time giving up weekends, late nights, holidays and even vacation time to get product out the door and beat the competition. I racked up 50k options, mostly all for less than a do…

Thank you for sharing! Very helpful!
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