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Understanding Startup Offers

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Re: Understanding Startup Offers

#91

Post by dpeck »

_moof wrote: post #90

Don't early exercise. Here's why. Yes, there are potential tax advantages; you avoid having to deal with AMT, which is significant. But the tradeoff is that you've thrown away the essential advantage that an option gives you: the ability to travel back in time and purchase stock with perfect knowledge of what it will do in the future. Why on earth would you give that up? An option lets you wait years with zero risk a…

this is highly dependent on the strike price.

Though if you're an early enough employee to be getting a strike price that you can exercise without any worry (on the order of $x00) then you probably should be getting stock directly vs options anyway.

Re: Understanding Startup Offers

#92

Post by m0zg »

Having been through this meat grinder, people do please run the numbers on that "equity" you're getting. Founders make it sound like 0.1% is a windfall, but it most certainly isn't, even in the unlikely event the startup succeeds.

That said, in my estimation people go to startups to do interesting things, not for the money per se. BigCo (even a FAANG) is a depressing, high politics, low productivity morass, and a lot of people (myself included) find it difficult to tolerate it for long, in spite of the higher paycheck.

As to running the numbers, there's an excellent essay by @luu that you need to read: https://danluu.com/startup-tradeoffs/

Re: Understanding Startup Offers

#93

Post by thoughtpeddler »

_moof wrote: post #90

Don't early exercise. Here's why. Yes, there are potential tax advantages; you avoid having to deal with AMT, which is significant. But the tradeoff is that you've thrown away the essential advantage that an option gives you: the ability to travel back in time and purchase stock with perfect knowledge of what it will do in the future. Why on earth would you give that up? An option lets you wait years with zero risk a…

I think this applies in most cases. That said, many more startups are now bootstrapped, and don't go on to raise beyond a Seed or Series A, if at all.

If you're an early employee at one of those startups (with a very low strike price), and know that the company has a strong balance sheet, I would early exercise to lock in the long-term capital gains tax rate.

This is even more true if the startup has novel IP, which could be worth a healthy sum even if the business were to go kaput.

Also, as others have said, if startups weren't lucrative, VC as an asset class wouldn't exist at all. It's rare, but making millions as an early employee is something that definitely happens.

Re: Understanding Startup Offers

#94

Post by throw123123123 »

siruncledrew wrote: post #80
qqtt wrote: post #3

It would be interesting to see some analysis comparing pre-IPO offers versus standard FAANG-style engineering offers and see what the monetary difference actually is. In the not-so-distant past, start ups were pretty much the only avenue to secure a multiple-million dollar personal liquidity event, in the off chance you join a successful start up, work your tail off, and the company gets to a point where that exit ha…

IMO you have be lucky in both cases to really strike it rich. Choosing a startup with this kind of potential is insanely hard to do, and if you get lucky then the explosive growth of immediately becoming wealthy is what redeems it. But the key is choosing the needle in the haystack. It's harder than being an investor. An investor can make 100 bets hoping one works out, but an employee is only deciding on 1 place. Wor…

I dont think the rewards of the corpo ladder make a lot of sense. An L9 at Google, someone with 15+ YOE and rocking the perf game for over a decade makes less than what any series B to Series E SWE makes.

Re: Understanding Startup Offers

#95

Post by throw123123123 »

esonderegger wrote: post #46
qqtt wrote: post #3

It would be interesting to see some analysis comparing pre-IPO offers versus standard FAANG-style engineering offers and see what the monetary difference actually is. In the not-so-distant past, start ups were pretty much the only avenue to secure a multiple-million dollar personal liquidity event, in the off chance you join a successful start up, work your tail off, and the company gets to a point where that exit ha…

One of the things I rarely see mentioned when discussing career prospects of startups vs large corporations is how different their hiring filters are. If you are self-taught, lacking credentials, and don't live in a major market, it can be difficult to get in the door at a FAANG. Whereas start-ups can be much more likely to take a chance on someone with a non-conventional background. So for some of us, large corporat…

This has reverted in the last decade. Albeit the competition for companies with big names like hard makes it virtually impossible to pass the filter without a referral.

Re: Understanding Startup Offers

#96

Post by lostcolony »

throw123123123 wrote: post #94
siruncledrew wrote: post #80

Earlier quoted context omitted.

IMO you have be lucky in both cases to really strike it rich. Choosing a startup with this kind of potential is insanely hard to do, and if you get lucky then the explosive growth of immediately becoming wealthy is what redeems it. But the key is choosing the needle in the haystack. It's harder than being an investor. An investor can make 100 bets hoping one works out, but an employee is only deciding on 1 place. Wor…

I dont think the rewards of the corpo ladder make a lot of sense. An L9 at Google, someone with 15+ YOE and rocking the perf game for over a decade makes less than what any series B to Series E SWE makes.

Uh...what? In base maybe, but after bonus and equity you're looking at $1M+ per year even at an L8 - https://www.levels.fyi/company/Google/salaries/Software-Engi...

The average SWE working at a series B to series E startup is nowhere close to that. Even if the company exits successfully, it's after a few more years, further dilutions, and you might, MIGHT walk away with a million or two...which you have to amortize over the years you worked there.

Am I missing something?

Re: Understanding Startup Offers

#97

Post by lostcolony »

pram wrote: post #72
joshuamorton wrote: post #50

Earlier quoted context omitted.

This, I've basically never felt external pressure from management or deadlines in my job. I have however, on more than one occasion, found myself up far too late (or in the pre-pandemic times having nearly missed the last bus home) because I just want to figure out what is causing this damn bug . It could wait until tomorrow, no one would care if I waited until tomorrow, there is no pressure for me to fix it today. B…

Yeah same. Once I’m on a certain train of thought I can’t stop. Those are the days where I have 5am commits because I never went to bed lol No one is demanding I do that though. They’d probably think I’m crazy tbh

Crazy? Maybe. Shooting yourself in the foot? Definitely.

The number of times I stepped away from a problem after hammering at it for a couple of hours, took a break, got some sleep, and came back to it and solved it in You may find yourself better served forcing yourself to step away; you may find you get an answer with less work, and take better care of yourself.

Re: Understanding Startup Offers

#98

Post by bibabaloo »

I recently joined a series B startup valued at ~$200M with ~100 staff and was granted what amounts to be ~0.015% over 4 years. (So if I had all my options now they'd be worth ~$28k). Seems like that might be a bit low comparatively, have I been fleeced?

Re: Understanding Startup Offers

#99

Post by jdavis703 »

bibabaloo wrote: post #98

I recently joined a series B startup valued at ~$200M with ~100 staff and was granted what amounts to be ~0.015% over 4 years. (So if I had all my options now they'd be worth ~$28k). Seems like that might be a bit low comparatively, have I been fleeced?

That seems on the low end, but not unreasonable. What’s your cash salary, how many years of experience do you have, will you get annual refreshers and what do you think are the odds you’ll exit with a unicorn valuation? Now, do the same math except with an established company to compare with. Which one pays you more? And how much do you value startup culture vs. big co culture?

Re: Understanding Startup Offers

#100

Post by jdavis703 »

destitude wrote: post #68

What happens to those that run into the 10 year limit for exercising their options? If there is no hope for liquidation event and you've been their for 9 years and haven't exercised your options it seems like you might as well leave, especially if there will be a huge tax burden to exercise them.

A good place to start is asking your supervisor or HR person what can be done. For example you might be able to take out a loan or the company might be able to repurchase the stock.
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