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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

#561

Post by randy_lahey »

baursak wrote: post #203
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…

Or it's just a larger, systemic issue. Saw this post yesterday on Reddit, which I think is quite relevant here as well: https://www.reddit.com/r/LateStageCapitalism/comments/5oeiyy...

You're kidding right?

From that page: This subreddit is a safe space for Socialist discussion. Defending capitalism or capitalists is a bannable offense. Debating Socialism is also not allowed. Take this to /r/debatecommunism

Bigotry, ableism and hate speech will be met with immediate bans; Socialism is an intrinsically inclusive system.

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

#562

Post by pascalxus »

There's a simple solution to this. Just, don't take any salary that's below the highest market rate you can get. The second you start taking "equity" as compensation, you're putting yourself at extreme risk, needlessly. If you take a 10K salary cut for options, it's the equivalence of taking the higher salary and investing 10K in that single company. No self respecting financial advisor would ever tell you to take 10K or More per year and invest it in 1 single company - especially if it's the very same company your actually working for! That's just compounding High risk ontop of already high risk.

Even if you wanted to do this, you don't need to be an employee of a company to do that. Just join some venture Seed fund that you can invest your 10,20,30K per year, etc. Your chance of success is approximately the same, but at least you won't loose your job when it doesn't work out.

And, if your just out of school, or have no other options, then by all means go work for the start up. In this situation your not giving up a higher salary to do so.

And always make sure you have work/life balance - the company won't do that for you, you have to make it happen.

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

#563

Post by luckystartup »

01181008 wrote: post #325
luckystartup wrote: post #120

This is all true. I moved to San Francisco to join a startup as an early employee. The biggest surprise was when I had to empty my savings (and borrow a lot of money) to exercise my stock options. I filed an 83b election so that I didn't have to pay any taxes immediately, but $20,000 was (and still is) a huge amount of money. I had no idea it was so expensive to join a startup. At least, if you want to avoid golden h…

Sure, I can relate :). Have a few thoughts: $20k to $5-10m is incredible. That implies 250-500x valuation growth (for example you joined at series A with $20m valuation and the company is worth $10b), which means you hit a unicorn within the unicorns! Was the company QSBS-eligible when you exercised? There are huge potential tax savings there. Your shares were NSOs, correct? There are weird potential issues with 83bs…

Yes, I was very lucky. I was actually one of the first few employees, and I joined about a year before they raised their series A. Now they are a unicorn, and hopefully on their way to an IPO.

I don't know if I would say I joined a "unicorn within unicorns". Every unicorn has at least 10 early employees with the same story, and according to this list [1], that's at least 1,850 people.

I don't think the company was QSBS-eligible. At least, I've never heard that acronym while reading through all of the paperwork. And yes, the shares were NSOs.

I don't really have an investment portfolio, apart from these shares. I've been working as a part-time freelancer while I try to build my own startup ideas, so I'm not really saving for retirement. The IPO should only be a few years away, so I'm just going to wait and see what happens.

If everything falls apart, I'll try a few more startup ideas. If those fail, my backup plan is to spend 4 years working full-time, living frugally and saving as much money as possible, and then retiring in a country with a very low cost-of-living. I can save around $130k per year as a remote software engineer, and I only need $500k to retire comfortably.

[1] https://www.cbinsights.com/research-unicorn-companies

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

#565

Post by jacobush »

CalChris wrote: post #549
jacobush wrote: post #534

Earlier quoted context omitted.

Sorry it sounds like the Stockholm syndrome.

I don't recall the Stockholm captives being well paid, free to leave at any point, with medical benefits and stock options doing interesting work with some decently cool people. Gotta Wikipedia cite on that, skipper?

http://workingforwonka.com/5-signs-of-start-up-stockholm-syn...

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

#566

Post by amelius »

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 talk to a bank or someone who could lend you the $34k?

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

#567

Post by bb611 »

hedora wrote: post #50

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 trad…

> 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.

SEC compliance costs are significantly higher than SOX for public companies, why not complain about that instead?

Neither the few hundred thousand dollars for SOX compliance or the million dollars for SEC compliance are significant pressures on the IPO scene right now. Wider availability of VC cash, better strategies for repeatedly going to that well, and big investment deals for private companies with large public companies (i.e. the Uber/Lyft model) have changed the market pressures so that IPOing isn't as valuable as it once was.

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

#568

Post by iplaw »

superqd wrote: post #450
acalderaro wrote: post #446

Earlier quoted context omitted.

You do realize that this is the exact premise of risk and reward? That company could have been the next Google, Facebook, Amazon, etc, and in those 800-ish days you would have given up for weekends over 8 years you could have earned more than all of your ancestors probably have ever earned in their entire lives. All in a fraction of your single life. And yet, we still get posts like this one, and comments like yours,…

I realize I could have attempted to exercise sooner, but that isn't quite the point. The part that really bugs me is the fact that time is undervalued (or non-valued). If I have a high value asset, my time, that I contribute towards the success of a company, it's value goes severely underappreciated by management and the board. That's the problem. If person X puts in money, and person Y puts in time, the time is rega…

So were you the only one working longer hours? And if you felt so undervalued, why didn't you ask for a raise at any point over those 8 years? Perhaps your work ethic is why you were given the options in the first place?

It seems like you're whining about something that you had complete control over, and chose not to exercise.

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

#569

Post by bb611 »

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.

It should be noted that unlimited vacation is not expressly legal in CA, it's just never been challenged.

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

#570

Post by bb611 »

cbr wrote: post #124
ryanbrunner wrote: post #48

Earlier quoted context omitted.

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.

At least in that case you get the days paid out when you leave.

Any days you accrue past the cap disappear though.

If you accrue 15 days a year, work for 3 years, and never take a vacation day, you are paid for 3 weeks and lose 6 weeks of compensation, almost 4% of your pre-tax total over that period (assuming no raise for simplicity).

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