5 ms·

I still meet a ton of engineers, who while being surprisingly analytical in other aspects of their life, think their worthless equity packages are worth somethi

by ditonal 11y ago

I still meet a ton of engineers, who while being surprisingly analytical in other aspects of their life, think their worthless equity packages are worth something. Some people don't even know what percentage their shares represent. They definitely don't give enough thought to dilution, liquidation preference, lack of voting rights. I'll say it over and over again - if you're asked to take a total compensation cut i.e. turn down public stock or salary from an established company to take options at a startup you are an investor. In fact a bigger portion of your net worth and income is invested then the typical VC's portfolio. And yet you don't get voting rights, you get screwed by liquidation preference etc, and the standard response is "well, you're not an investor, so you don't get preferred shares." Engineers are often hilariously bad at finance and even worse at negotiation.

rjbwork 11y ago
I asked about the value of my shares. They're subject to dilution, and the company won't tell me what % of the company they represent, nor the board-evaluated value of the company. Thus I have to consider them entirely worthless until proven otherwise.
- potatolicious 11y ago
  I think sama had something good to say about this: https://twitter.com/sama/status/628713105824964608 https://twitter.com/sama/status/628713105824964608 I would walk away from that situation. Any startup that's unwilling to do everything Sam outlined above is IMO not worth my time. Hell, refusing to answer something as simple as "what percentage are these shares worth"?! I'd run, not walk, away from that one. If you want to encourage workers by making them investors in the company, then treat them like it.
  - rjbwork 11y ago
    Meh. I generally enjoy what I'm getting to do here, and the options were unexpected when I accepted the offer, so I'm not really upset at it, per se.
    - potatolicious 11y ago
      If the work is interesting and such, sure, but my take is that beyond simply being unable to value your own equity, behavior like this suggests lack of maturity in the founders and implies amateur-ishness. Having been around the startup block a few times now, there are some tells that are definitely warning signs for me. The most ridiculous are things like demanding a NDA to even discuss the company. If a founder asks for a NDA just to have coffee, I am out - in my experience it's a 100% indicator of someone who has no idea what the fuck they're doing. Secrecy around valuation, options pool, etc, are less damning but still very much a yellow flag when it comes to how they treat employees and how much experience the founders have. In general I find that inexperienced and immature founders tend to focus on secrecy in the wrong places (and conversely, lack of secrecy where it matters).
      - dasil003 11y ago
        > If a founder asks for a NDA just to have coffee, I am out - in my experience it's a 100% indicator of someone who has no idea what the fuck they're doing. Indeed. I've seen this countless times, even occasionally in SV where people should know better. Starting a company is really really hard. It's fundamentally about deciding where to channel your energy when you have a completely green field but only enough resources to execute on 0.01% of your ideas. The focus must be pinpoint and relentless to even have a chance. The idea that the risk of someone stealing your idea is worth devoting any mental energy to indicates that you don't have your priorities straight. Hell, even in a worst case scenario where you have a great non-obvious idea, and someone steals it, if you want an NDA so you can sue them then you're essentially betting on their superior execution capability. Run don't walk from this kind of hot air balloon.
        potatolicious 11y ago
        Yeah. Personally it feels like people who are obsessed with the security of their idea are also the ones who over-value ideas over execution. And ultimately a startup is nothing but relentless, on-point, highly competent execution. But in any case that may be ascribing psychology where there is none. Invariably though the founders I meet who are like that are also very inexperienced and 100% of the time have never built a product before, which is probably why they value idea over execution.
- nerfhammer 11y ago
  > company won't tell me what % of the company they represent, nor the board-evaluated value of the company This is totally unacceptable
  - marme 11y ago
    at least 50% of companies will refuse to tell you when making an offer to you. It is insane that they tell you about these shares and play it up like it is great compensation then when you turn around and ask a very simple questions "how many outstanding shares are there?" they will refuse to answer. Once i hear this i immediately assume the shares are worthless. I cant understand people who put any value to made up numbers they tell you, companies deliberately create more and more shares so they can give away more shares to employees that are even more worthless but people hear a big number and think it is great
    - nerfhammer 11y ago
      then that's a list of 50% of companies that you shouldn't work for
- thoman23 11y ago
  Without a denominator, that's like being told your salary will be "X". As in, they literally say the letter X. How could anyone accept that?
geebee 11y ago
Perhaps so, but this may reflect a lack of power rather than a lack of awareness. I was in a startup once where a new CEO talked about allocation of shares - he referred to the number of shares with no extra context. I asked, in the meeting, how we could calculate our ownership under the exit scenario he described, and clearly there was an uncomfortable vibe in the room after I did that. The disinclination to ask about this may reflect a lack of power rather than cluelessness. Also, it does need to be stated, many of the employees were H1B workers with green card sponsorship. I'd say that they were behaving rationally by sticking with the company, especially since a couple of them were close to completing the process. This and many other experiences have convinced me that while I generally look on immigration positively, I believe that workers need to be free and full agents in a labor market (this includes there right to change fields entirely, not just jobs, and it also includes the right to go without a job for a while). I'm convinced that a great part of the appeal of the H1B is that it creates a class of engineers who lack this freedom. Truth is, you don't need all your workers to lack freedom of movement, as long as the percentage is high enough to set a standard.

by ditonal 11y ago

rjbwork 11y ago

I asked about the value of my shares. They're subject to dilution, and the company won't tell me what % of the company they represent, nor the board-evaluated value of the company. Thus I have to consider them entirely worthless until proven otherwise.

potatolicious 11y ago
I think sama had something good to say about this: https://twitter.com/sama/status/628713105824964608 https://twitter.com/sama/status/628713105824964608 I would walk away from that situation. Any startup that's unwilling to do everything Sam outlined above is IMO not worth my time. Hell, refusing to answer something as simple as "what percentage are these shares worth"?! I'd run, not walk, away from that one. If you want to encourage workers by making them investors in the company, then treat them like it.
- rjbwork 11y ago
  Meh. I generally enjoy what I'm getting to do here, and the options were unexpected when I accepted the offer, so I'm not really upset at it, per se.
  - potatolicious 11y ago
    If the work is interesting and such, sure, but my take is that beyond simply being unable to value your own equity, behavior like this suggests lack of maturity in the founders and implies amateur-ishness. Having been around the startup block a few times now, there are some tells that are definitely warning signs for me. The most ridiculous are things like demanding a NDA to even discuss the company. If a founder asks for a NDA just to have coffee, I am out - in my experience it's a 100% indicator of someone who has no idea what the fuck they're doing. Secrecy around valuation, options pool, etc, are less damning but still very much a yellow flag when it comes to how they treat employees and how much experience the founders have. In general I find that inexperienced and immature founders tend to focus on secrecy in the wrong places (and conversely, lack of secrecy where it matters).
    - dasil003 11y ago
      > If a founder asks for a NDA just to have coffee, I am out - in my experience it's a 100% indicator of someone who has no idea what the fuck they're doing. Indeed. I've seen this countless times, even occasionally in SV where people should know better. Starting a company is really really hard. It's fundamentally about deciding where to channel your energy when you have a completely green field but only enough resources to execute on 0.01% of your ideas. The focus must be pinpoint and relentless to even have a chance. The idea that the risk of someone stealing your idea is worth devoting any mental energy to indicates that you don't have your priorities straight. Hell, even in a worst case scenario where you have a great non-obvious idea, and someone steals it, if you want an NDA so you can sue them then you're essentially betting on their superior execution capability. Run don't walk from this kind of hot air balloon.
      - potatolicious 11y ago
        Yeah. Personally it feels like people who are obsessed with the security of their idea are also the ones who over-value ideas over execution. And ultimately a startup is nothing but relentless, on-point, highly competent execution. But in any case that may be ascribing psychology where there is none. Invariably though the founders I meet who are like that are also very inexperienced and 100% of the time have never built a product before, which is probably why they value idea over execution.
nerfhammer 11y ago
> company won't tell me what % of the company they represent, nor the board-evaluated value of the company This is totally unacceptable
- marme 11y ago
  at least 50% of companies will refuse to tell you when making an offer to you. It is insane that they tell you about these shares and play it up like it is great compensation then when you turn around and ask a very simple questions "how many outstanding shares are there?" they will refuse to answer. Once i hear this i immediately assume the shares are worthless. I cant understand people who put any value to made up numbers they tell you, companies deliberately create more and more shares so they can give away more shares to employees that are even more worthless but people hear a big number and think it is great
  - nerfhammer 11y ago
    then that's a list of 50% of companies that you shouldn't work for
thoman23 11y ago
Without a denominator, that's like being told your salary will be "X". As in, they literally say the letter X. How could anyone accept that?

geebee 11y ago

Perhaps so, but this may reflect a lack of power rather than a lack of awareness. I was in a startup once where a new CEO talked about allocation of shares - he referred to the number of shares with no extra context. I asked, in the meeting, how we could calculate our ownership under the exit scenario he described, and clearly there was an uncomfortable vibe in the room after I did that. The disinclination to ask about this may reflect a lack of power rather than cluelessness. Also, it does need to be stated, many of the employees were H1B workers with green card sponsorship. I'd say that they were behaving rationally by sticking with the company, especially since a couple of them were close to completing the process. This and many other experiences have convinced me that while I generally look on immigration positively, I believe that workers need to be free and full agents in a labor market (this includes there right to change fields entirely, not just jobs, and it also includes the right to go without a job for a while). I'm convinced that a great part of the appeal of the H1B is that it creates a class of engineers who lack this freedom. Truth is, you don't need all your workers to lack freedom of movement, as long as the percentage is high enough to set a standard.