6 ms·

If not being able to buy the options when leaving is the only thing keeping your employees you are in a very bad place. Options usually have cliffs in the firs

If not being able to buy the options when leaving is the only thing keeping your employees you are in a very bad place. Options usually have cliffs in the first year and vest monthly. So no-one would get more than they deserve.

abalone 11y ago
It's not about what one "deserves", it's about protecting infant startups from high turnover. One year is extremely high, potentially fatal turnover rate for companies with <30 employees.
- st3v3r 11y ago
  "It's not about what one "deserves", it's about protecting infant startups from high turnover." Why should any of us care about that? High turnover is a very good signal that the company is a bad one. If the company dies because of it, it was probably for a good reason.
  - harryh 11y ago
    If you remove all financial incentives to stay after hitting a one year cliff there is a pretty strong force towards diversification that seems like it would lead to higher than desirable turnover. You can't just ignore that incentive.
    - jacobr1 11y ago
      If the company is more valuable a year later, with good prospects, then the size of the low price of the original grant (which will now vest monthly via standard terms) provide an incentive for staying. So could an additional performance grant, or salary increase.
    - solidsnack9000 11y ago
      Companies should pool equity with one another to address this.
      - solidsnack9000 11y ago
        I guess people hate this idea. But it'll probably only hurt a few founders, who would have been losers anyway; VCs and employees will ultimately be better off.
    - x0x0 11y ago
      The financial incentive to stay is continued vesting of presumably more-valuable options, about which you have inside knowledge -- the state of development, the sales pipeline, high performance from founders, a deeper understanding of the industry, etc. It doesn't take much job hunting to realize as an employee you're taking a bigger risk than the company. There's some crazy people out there and some really terrible bosses. The same way it's really difficult to evaluate an employee in an interview it's just as hard to evaluate a working environment, a boss, whether the ceo is a meddler with the attention span of a hummingbird, etc. A sane boss with a solid development process that doesn't encourage late nights or lead to incredibly fragile software and/or heroic, stressful ops efforts is worth a hell of a lot. You just want to leverage golden handcuffs to retain employees... I think honesty all around is the best method. Unfortunately, that further devalues the (already low imo / in my advice) value of options and suggests people are much better off going to established companies.
    - st3v3r 11y ago
      No, there isn't. Someone who job hops every year is going to start having trouble finding work.
      - mahyarm 11y ago
        TBH, many resumes have people who change companies every year or two. It's pretty rare to find a resume where someone stays at a company for many years unless they have a very good reason to.
  - abalone 11y ago
    It is only a good signal currently, because in order to voluntarily leave the employee would have to give up their options. That means they're really unhappy and don't believe in the company. However if you change it so that early stage employees can take their options with them, then it becomes a question of "do I triple down on this one company or do I spread myself out over three." And most investment advisors will tell you to diversify your portfolio. So there is a real risk that this will lead to high turnover, even among happy employees.
    - deleted 11y ago
      [deleted]
    - x0x0 11y ago
      That investment advice is for when you don't have inside information. Presumably for teams of fewer than 30 employees most employees should have a good idea of the financials and a lot of knowledge about company performance.
    - st3v3r 11y ago
      I don't buy that. Maybe one or two people will, but the vast majority of people won't. If they're happy, they're not going to want to risk that by going to a new company where they might be miserable, unless they're severely underpaid and are getting a huge pay bump.
      - abalone 11y ago
        There is a huge financial incentive in the form of diversification. You'll own stock in 3 potential unicorns instead of 1, tripling your chances of getting rich. Because it's early stage, even just one year's vesting is enough to get you rich if the company makes it. So do you stay and triple down on one stock or spread it out? Especially when equity is such a large component of your compensation at that stage of company? Investment diversification is a rational economic decision that a lot of smart people will make. The current system forces teams to stick together until IPO/acquisition, maximizing the chances of the options ever being worth something. It should be made more explicit, but it's not necessarily a bad thing (for employee options holders who want them to be worth something).
- poof131 11y ago
  Really? How about early startups protect themselves by treating employees fairly and not trying to lock them in with equity tricks many don’t understand. The fact you suggest this course seems to indicate a certain level of disdain for employees. Try the carrot, not the stick.
- losvedir 11y ago
  What? This is so backwards. Would you feel okay with an employment contract like this: "Your salary is $150k, but if you leave in less than ten years there will be a fee of $50k/yr." That'll lock them to the company, too, and prevent turnover.

abalone 11y ago

It's not about what one "deserves", it's about protecting infant startups from high turnover. One year is extremely high, potentially fatal turnover rate for companies with <30 employees.

st3v3r 11y ago
"It's not about what one "deserves", it's about protecting infant startups from high turnover." Why should any of us care about that? High turnover is a very good signal that the company is a bad one. If the company dies because of it, it was probably for a good reason.
- harryh 11y ago
  If you remove all financial incentives to stay after hitting a one year cliff there is a pretty strong force towards diversification that seems like it would lead to higher than desirable turnover. You can't just ignore that incentive.
  - jacobr1 11y ago
    If the company is more valuable a year later, with good prospects, then the size of the low price of the original grant (which will now vest monthly via standard terms) provide an incentive for staying. So could an additional performance grant, or salary increase.
  - solidsnack9000 11y ago
    Companies should pool equity with one another to address this.
    - solidsnack9000 11y ago
      I guess people hate this idea. But it'll probably only hurt a few founders, who would have been losers anyway; VCs and employees will ultimately be better off.
  - x0x0 11y ago
    The financial incentive to stay is continued vesting of presumably more-valuable options, about which you have inside knowledge -- the state of development, the sales pipeline, high performance from founders, a deeper understanding of the industry, etc. It doesn't take much job hunting to realize as an employee you're taking a bigger risk than the company. There's some crazy people out there and some really terrible bosses. The same way it's really difficult to evaluate an employee in an interview it's just as hard to evaluate a working environment, a boss, whether the ceo is a meddler with the attention span of a hummingbird, etc. A sane boss with a solid development process that doesn't encourage late nights or lead to incredibly fragile software and/or heroic, stressful ops efforts is worth a hell of a lot. You just want to leverage golden handcuffs to retain employees... I think honesty all around is the best method. Unfortunately, that further devalues the (already low imo / in my advice) value of options and suggests people are much better off going to established companies.
  - st3v3r 11y ago
    No, there isn't. Someone who job hops every year is going to start having trouble finding work.
    - mahyarm 11y ago
      TBH, many resumes have people who change companies every year or two. It's pretty rare to find a resume where someone stays at a company for many years unless they have a very good reason to.
- abalone 11y ago
  It is only a good signal currently, because in order to voluntarily leave the employee would have to give up their options. That means they're really unhappy and don't believe in the company. However if you change it so that early stage employees can take their options with them, then it becomes a question of "do I triple down on this one company or do I spread myself out over three." And most investment advisors will tell you to diversify your portfolio. So there is a real risk that this will lead to high turnover, even among happy employees.
  - deleted 11y ago
    [deleted]
  - x0x0 11y ago
    That investment advice is for when you don't have inside information. Presumably for teams of fewer than 30 employees most employees should have a good idea of the financials and a lot of knowledge about company performance.
  - st3v3r 11y ago
    I don't buy that. Maybe one or two people will, but the vast majority of people won't. If they're happy, they're not going to want to risk that by going to a new company where they might be miserable, unless they're severely underpaid and are getting a huge pay bump.
    - abalone 11y ago
      There is a huge financial incentive in the form of diversification. You'll own stock in 3 potential unicorns instead of 1, tripling your chances of getting rich. Because it's early stage, even just one year's vesting is enough to get you rich if the company makes it. So do you stay and triple down on one stock or spread it out? Especially when equity is such a large component of your compensation at that stage of company? Investment diversification is a rational economic decision that a lot of smart people will make. The current system forces teams to stick together until IPO/acquisition, maximizing the chances of the options ever being worth something. It should be made more explicit, but it's not necessarily a bad thing (for employee options holders who want them to be worth something).
poof131 11y ago
Really? How about early startups protect themselves by treating employees fairly and not trying to lock them in with equity tricks many don’t understand. The fact you suggest this course seems to indicate a certain level of disdain for employees. Try the carrot, not the stick.
losvedir 11y ago
What? This is so backwards. Would you feel okay with an employment contract like this: "Your salary is $150k, but if you leave in less than ten years there will be a fee of $50k/yr." That'll lock them to the company, too, and prevent turnover.