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Joining public or late stage pre-IPO companies, equity provides the possibility of real wealth. There is a great Wealthfront article about this -- that if you l
by encoderer 11y ago
Joining public or late stage pre-IPO companies, equity provides the possibility of real wealth. There is a great Wealthfront article about this -- that if you live in the bay area and have a normal nuclear family, you need equity if you hope to pay for a house, college, etc.
I've seen this in my own life and in many colleagues, friends, and people I've hired. It's not a guaranteed paycheck, but in the bay area getting a healthy equity grant is part of the standard comp package. Without luck, it can be a nice bonus. With some luck it can really move the needle. And with ISO's especially you can choose when to pay taxes on the income.
I know that outside the bay area comp packages are structured differently -- and often less lucratively.
- Avshalom 11y agoThe problem here is that "the possibility of real wealth" is not "real wealth". Not being dead provides "the possibility of real wealth" to approximately the same degree as the equity offered to anyone past double digit employee count. Even before that it's only factor unity above the baseline of "not yet dead"
- encoderer 11y agoIt's a subjective term. But IMO, a few hundred grand after-taxes is real wealth to somebody making $150k a year. It can bend the net-worth growth curve of your life -- a huge home downpayment, elimination of your student loans, etc. Be smart, take an educated risk, and IMO don't listen to people who say equity is worthless.
- Avshalom 11y agoA few hundred grand net absolutely is real wealth. To anybody really. But how many people are seeing a few hundred grand after-taxes (after taxes!)?
- encoderer 11y agoOver a 4 year grant? This is just a guess, I don't have the IRS database at my hands. Maybe $200-300k after-tax sounds more reasonable? Like I said above -- "with some luck"
- Avshalom 11y agoYou have not yet actually made a guess you've just kept asserting that "a lot of money" is "a lot of money" and I agree. A lot of money is a lot money. I just think that modulo nobody is actually seeing a lot of money from start-up employee equity.
- encoderer 11y agoThe problem is that it's not an easy thing to estimate. I know I've had equity grants that I thought were worth $x but turned out to be worth $x * 4. But you don't sell all of it at once, and you don't pay all of the tax bill when you sell, so it's a very hard thing to know. $200-300k after taxes is, I'm sure, not a rare outcome over a 4-year vest.
- ryandrake 11y agoI'd love to see real data on what percentage of tech workers who receive equity ACTUALLY end up cashing out for over, say, $100K. Not a HN Survey, because of course everyone here has $10MM in equity, a mansion on the Peninsula, and a supermodel spouse. But a real survey across the huge tech company landscape, in and out of Silicon Valley.
- ajsharma 11y agoWealthfront article mentioned (i think) https://blog.wealthfront.com/college-vs-retirement-savings-silicon-valley/ https://blog.wealthfront.com/college-vs-retirement-savings-s...
- hkmurakami 11y agoNot exactly true since select bigcos pay quite well these days.
- untog 11y agoif you live in the bay area and have a normal nuclear family, you need equity if you hope to pay for a house, college, etc. Then holy hell am I glad I don't live in the Bay area. Because, as the article demonstrates, there is zero guarantee that the equity you have will be worth anything. That you'd depend on such a thing to pay your mortgage and send your kids to college? Madness.
- encoderer 11y agoIt's not like you sign a contract that says you must remain here for 20 years. Read the Wealthfront article linked in a sibling comment.