4 ms·

You're going to get a lot of hate for this comment, but it's probably the smartest top level comment in the thread. I've struggled with this issue a lot. Person

by harryh 11y ago

You're going to get a lot of hate for this comment, but it's probably the smartest top level comment in the thread. I've struggled with this issue a lot. Personally I think it should be solved with creative vesting schedules. Instead of vesting evenly over 4 years, vest some shares over time but save a big chunk that vests at exit. Basically build in a big "you stayed until the end" equity bonus. Right now I think the problem is that people think of their vesting schedule as when their stock becomes theirs and that's not really true. And most startups encourage (or at least do not dissuade) this illusion. That's a problem worth fixing.

abalone 11y ago
Exactly. Be upfront. Ben Horowitz spoke critically on this topic, responding to Sam Altman's post on equity which is the genesis of all this. Really mandatory viewing. [1] Sam was in the room and added that he is "revising" his recommendation because "there needs to be more incentive to stay." (@26:00) I personally haven't seen Sam post about his revised position. Would be great if he did. [1] http://www.bhorowitz.com/one_management_concept_from_how_to_manage_startups http://www.bhorowitz.com/one_management_concept_from_how_to_...
- harryh 11y ago
  Ya, I saw the Ben/Sam exchange when it happened. And I have to say, as huge of an admirer of Ben as I am, I think he gets it a bit wrong here. As you said above, startups are staying private longer. Much longer. This creates some really bad situations that you really can't address merely by being upfront with people. I don't think Ben really acknowledges this fact. I think structural changes are necessary.
  - abalone 11y ago
    Yes, agreed. He identifies one things that has changed: securities law that now makes it possible to extend options exercise windows past 90 days, whereas previously it was practically impossible. But the bigger thing that's changed is companies are staying private longer. Ben's strongest point is in asking "Why now?" Options have been this way since the 80s. What's changed? Nobody is examining that as closely as they should. Maybe most of us are young and hubristic and tend to discount the past. But as engineers we should all possess a certain conservatism, a healthy skepticism to changing systems that have been stable for a long time. We must look closely to ensure there are no unintended consequences. I think it is very notable that Sam Altman said he has revised his position to require stronger incentives to stay. Early stage startups need incentives to stick together as a team. If you don't have any extra protections at the earliest stage, then you're going to have smart, happy employees face the powerful economic logic of leaving to diversify their options portfolio. And that's not good for the value of anyone's options.
    - harryh 11y ago
      You should have some information about who you are in your profile so I can follow you on the twitter (or anywhere else you happen to write). As I tend to do when encountering smart folks. :) Agreed on all counts btw.
    - amirmc 11y ago
      > Options have been this way since the 80s. What's changed? Nobody is examining that as closely as they should. ... we should all possess a certain conservatism, a healthy skepticism to changing systems that have been stable for a long time. The same argument could be applied to the way VCs used to do business with founders (with respect to tactics, terms sheets, etc). Arguably, that was stable for a long time too (but seems to have changed in recent years). It's just a reformulation of "We've always done it this way".
      - abalone 11y ago
        Except those terms were looked at very closely. I haven't heard anyone think through the impact of this on early stage startup turnover. This is introducing a massive incentive to leave that has never existed. It may promote shorter tours of duty.
- deleted 11y ago
  [deleted]
maerF0x0 11y ago
unfortunately the whole idea of unvested options actually gives companies incentives to fire engineers. If a big chunk comes around late in the 4 yrs, then "opps we outsourced your job 1 week before vesting 90% of your options." . I would love to think no one would do this, but its happened to me (and the rest of the team) 9 months into our vesting. As well people get funny when a lot of money is involved, nice people do abnormal things when millions/billions are on the line.
- harryh 11y ago
  Ya, that's a reasonable point. You could probably do something creative with vesting-on-termination clauses of some kind but at that point are we layering hack on top of hack? I dunno.

by harryh 11y ago

abalone 11y ago

Exactly. Be upfront. Ben Horowitz spoke critically on this topic, responding to Sam Altman's post on equity which is the genesis of all this. Really mandatory viewing. [1] Sam was in the room and added that he is "revising" his recommendation because "there needs to be more incentive to stay." (@26:00) I personally haven't seen Sam post about his revised position. Would be great if he did. [1] http://www.bhorowitz.com/one_management_concept_from_how_to_manage_startups http://www.bhorowitz.com/one_management_concept_from_how_to_...

harryh 11y ago
Ya, I saw the Ben/Sam exchange when it happened. And I have to say, as huge of an admirer of Ben as I am, I think he gets it a bit wrong here. As you said above, startups are staying private longer. Much longer. This creates some really bad situations that you really can't address merely by being upfront with people. I don't think Ben really acknowledges this fact. I think structural changes are necessary.
- abalone 11y ago
  Yes, agreed. He identifies one things that has changed: securities law that now makes it possible to extend options exercise windows past 90 days, whereas previously it was practically impossible. But the bigger thing that's changed is companies are staying private longer. Ben's strongest point is in asking "Why now?" Options have been this way since the 80s. What's changed? Nobody is examining that as closely as they should. Maybe most of us are young and hubristic and tend to discount the past. But as engineers we should all possess a certain conservatism, a healthy skepticism to changing systems that have been stable for a long time. We must look closely to ensure there are no unintended consequences. I think it is very notable that Sam Altman said he has revised his position to require stronger incentives to stay. Early stage startups need incentives to stick together as a team. If you don't have any extra protections at the earliest stage, then you're going to have smart, happy employees face the powerful economic logic of leaving to diversify their options portfolio. And that's not good for the value of anyone's options.
  - harryh 11y ago
    You should have some information about who you are in your profile so I can follow you on the twitter (or anywhere else you happen to write). As I tend to do when encountering smart folks. :) Agreed on all counts btw.
  - amirmc 11y ago
    > Options have been this way since the 80s. What's changed? Nobody is examining that as closely as they should. ... we should all possess a certain conservatism, a healthy skepticism to changing systems that have been stable for a long time. The same argument could be applied to the way VCs used to do business with founders (with respect to tactics, terms sheets, etc). Arguably, that was stable for a long time too (but seems to have changed in recent years). It's just a reformulation of "We've always done it this way".
    - abalone 11y ago
      Except those terms were looked at very closely. I haven't heard anyone think through the impact of this on early stage startup turnover. This is introducing a massive incentive to leave that has never existed. It may promote shorter tours of duty.
deleted 11y ago
[deleted]

maerF0x0 11y ago

unfortunately the whole idea of unvested options actually gives companies incentives to fire engineers. If a big chunk comes around late in the 4 yrs, then "opps we outsourced your job 1 week before vesting 90% of your options." . I would love to think no one would do this, but its happened to me (and the rest of the team) 9 months into our vesting. As well people get funny when a lot of money is involved, nice people do abnormal things when millions/billions are on the line.

harryh 11y ago
Ya, that's a reasonable point. You could probably do something creative with vesting-on-termination clauses of some kind but at that point are we layering hack on top of hack? I dunno.