10 ms·

A better offer letter

152 points by rdl 11y ago

cpks 11y ago
1) I really like this, for transparency, clarity, and design. 2) The actual numbers there are a little bit scary. 0.03% equity grant? That's tiny. It's basically worthless. When did startup equity get so tiny? I'm not singling eShares out here -- just broadly speaking. That means that if eShares exits past a billion dollars, those shares won't even buy a house in the area....
- patio11 11y ago
  When did startup equity get so tiny? Non-technical line employee past Series A. See also the top 25% salary of $64.5k, which is roughly half of what new college grads get offered in engineering at AppAmaGooFaceSoft. Fundamentally this is driven by one number which is an iron law in the Valley: the employee options pool gets 20% of the company. This is 2000 basis points. It will never, under any circumstances, suddenly have more than 2000 basis points in it. That's 2000 basis points you can issue to every employee from engineer #1 to social media marketing intern #6 in year 8. What's the average equity allocation going to be when you have 400 employees? Well, it can't be 6 basis points, because 6 * 400 is greater than 2000. Is 400 employees a reasonable amount of a company at IPO? It's actually on the low side, particularly as companies are waiting longer and longer to IPO. This means that, as companies get de-risked by succeeding investment rounds, equity available to employees drops sharply. Engineer #1 might get 200 basis points out of that pool, for giving up a sleepwalk-to-$300k offer from Google to take a flyer on a company paying $80k which needs to, ahem, build a CRUD app. (Not casting aspersions on any company by calling them CRUD apps. CRUD apps make the world go round.) That's still a low number relative to the amount of risk that engineer is taking and their opportunity cost. I've heard on the grapevine that the iron law might be relaxed. Investors are pretty in favor of this, as long as the extra basis points come out of founder pockets rather than investor pockets.
  - hkmurakami 11y ago
    Great answer. I'll just add an anecdote where I was in a fairly similar role/situation as this fictional example of Robert. The equity grant # was about #350 at a post Series B startup that would exit for about $1B later that year. My stake in the company was 1 basis point (0.01%). Equity grants loosely follow an exponentially decaying pattern.
    - w1ntermute 11y ago
      So your 1 bp grant was basically a year's salary for a junior engineer in the Bay Area. What is the advantage of joining such a large post Series B startup (which could still face a down round or layoffs before the exit) instead of AppAmaGooFaceSoft?
      - landryraccoon 11y ago
        There isn't one. If you want to join a startup and do well you have to be willing to join when they're paying lower than market salary, desperate for help and nobody's more than 50% sure they'll be around in 2 years. If you can't handle that then a startup isn't a great proposition for you.
      - abalone 11y ago
        It's probably a lot less than even that because, having joined less than a year before exit, the strike price would be far from nothing. Having said that, you can only say there's no advantage in retrospect. If it had become a $10B or $100B company, 1bp would be substantial. And if the exit was a stock swap then perhaps the potential is still there.
      - hkmurakami 11y ago
        1) This was back when the economy was much worse than it is today. 2) I was a young desperate 20 something who didn't know better. ;)
  - x0x0 11y ago
    Don't forget those options aren't just lottery tickets; unless your employer is giving out options with 10-year exercise windows, they're rigged lottery tickets. viz the CTOs on here talking about using them as retention leverage. You can find a (very small) list maintained by Zach Holman here: https://github.com/holman/extended-exercise-windows https://github.com/holman/extended-exercise-windows I assume Zach got interested because he discovered after he was fired from github that he was close to losing all the money he "made" on options when github became a unicorn -- he probably had 90 days to exercise a very high priced illiquid security with horrid tax consequences if he fucked up. That's the thing about cash: it's not rigged. If you get cash, it stays in your bank account. Paper gains can disappear.
- djb_hackernews 11y ago
  Hmm I was actually thinking 0.03% was high for the role and position of the company. Startup equity has always been tiny. Even for critical engineer hires 1-10. Engineers in general are poor negotiators and, in my experience, the employee pool is preserved for later executive hires that are brought in to bring the company and product into the fold of the industry trying to be disrupted.
sytelus 11y ago
Simple question: Why not retire whole concept of stock options? Why not just give RSUs? More I read about how stock options work and how it can ruin you financially, I just don't think this whole thing is friendly to attract talent. I would be super hesitant to go to any company offering stock options instead of RSUs - no matter how good the offer looks on paper. Even though RSU value can go down to zero, you at least don't end up paying our of pocket. And things don't require 3 pages of explanations and caveats in your offer letter.
- x0x0 11y ago
  A (somewhat) secret: lots of employees don't/can't exercise, returning options to the pool. Hell, just last week someone was on HN discussing walking away from $0.5m because he couldn't afford to exercise when he left an employer that was later sold.
  - vehementi 11y ago
    Why can't they take out loans for that purpose? Seems like free money for a bank
    - x0x0 11y ago
      At the required decision time, the employee often has no idea how much or when a company will be worth money. Plus the obvious risk that someone fucks up and the company is worth a lot less than planned.
      - ryandrake 11y ago
        So he didn't really "walk away from $0.5m". He walked away from a piece of paper that may or may not be worth $0.5m in some unknown time (or never) in the future.
        x0x0 11y ago
        Had he been able to exercise he would have received that half million
dmurray 11y ago
I don't like the language of "below is what our lawyers require we tell you". The lawyers didn't decide that the offer is contingent on a background check, or that the employment is at will. You decided that, the government insisted that you communicated it to your prospective employee, and the lawyers informed you of that requirement. Maybe it's splitting hairs, but it would leave a better taste in my mouth if the company is took responsibility for those decisions. Other than that, the letter is great and shows a wonderful commitment to transparency.
- epicureanideal 11y ago
  Agreed. I personally would prefer if offers had, as a standard, 2 weeks or 4 weeks severance. If the company is not hiring a high percentage of people it needs to fire or lay off, it's not a problem. This of course provides more security to their employees. All the tech companies are talking about a shortage of skilled workers, but outside of management the terms of employment are still biased toward minimizing the company's potential costs. If there were a real shortage we'd see contractual changes.
- kemitchell 11y ago
  Made my day.
- hodgesrm 11y ago
  Yep, that line is pretty lame, especially if the letter is signed by the CEO as seems to be the case here. Either they are not being straightforward or somehow don't have control of the legal folks. There are various reasons for the latter case, some of them potentially quite negative. To be fair this letter seems to be making an effort to be transparent, so I get what they are trying to do. As I noted in another comment though this is a tough trick to pull off successfully without seeming insincere.
jheriko 11y ago
"live your life as though your equity is worthless" that is really nice to see in an offer letter. a lot of hipster-y startups do the opposite, and act like its an alternative to hard cash.
- p4wnc6 11y ago
  But in this same letter they encourage you to not do an expected value calculation about the value of your compensation package. That's extremely bad advice. The more I read this letter, the more it looks like they are trying to be selectively transparent in ways that don't actually cause them to give up any information advantage over the candidate -- and they are putting overly specific numbers in (like the magic 77MM figure for an exit) and tossing in relatively meaningless graphs, and an incredibly meaningless salary distribution, to add window dressing and make it sound like it's all much more technical, facts-based, and non-negotiable than it really is. While it is a move in the direction of transparency, which is good in theory, this particular offer letter makes me feel like it's just a wolf in sheep's clothing -- still fundamentally trying to get a candidate to agree to be priced at a level well below their actual value to the company. If the letter said "live your life as through your equity is worthless, because it is worthless and by agreeing to work for us for a lower wage you're not likely to recover those lost earnings down the road" .. then I might be impressed by the honesty.
  - vehementi 11y ago
    Didn't they put the calculations near the top? I think their point was that the expected value of the company is approximately the same as the chance the company will Make It.
gumby 11y ago
Five year vesting? Is this common? I've always used four -- the only company I've heard of who uses five is Microsoft.
- iolothebard 11y ago
  It's graded vesting, I've always seen it at 5 years (20%/year). It seems they do 20% after the first year then 1/48th afterward monthly (which is nice). Legally they can do up to 6 years.
  - akavi 11y ago
    I don't think the graded vesting was the surprising thing to the parent comment, it's that it's five years instead of four. All the tech companies I've seen use 1 year cliff/4 year total vesting. Ie, 25% after the first year, 1/36th of the remainder monthly.
    - p4wnc6 11y ago
      Yes, 4 years is the standard.
- phamilton 11y ago
  There's weird stuff out there. Amazon apparently does 4 year, but 5%, 15%, 40%, 40%.
agentgt 11y ago
I actually saw this article and was immediately thinking of an additional product my company could sell (we sell recruiting software). But then I started playing devils advocate. If your sending an offer letter wouldn't you want it really personal and not as much about the $$$. Wouldn't you want to cite memorable and salient specifics about the individual. This letter seemed like it was completely automated. It didn't seem "sticky" at all. I think a "personal" letter might have greater success particularly for smaller companies hiring expensive talent. Obviously you need to state what the candidate would be receiving for compensation but I think making it the only focus will lead to price comparisons.
- lscore720 11y ago
  Recruiter here. You raise a good point: I think this takes the need for compensation transparency to an extreme. However, I strongly support this concept overall. Often, I see the offer letter essentially presented as a formality once the basics are agreed upon. The candidate has completed the interview process, decided his/her non-financial interests in the opportunity, and received that "personal" positive reinforcement from the hiring manager & team. At this point: sure, the offer letter can include a personalized message to start, but ultimately it's for the candidate to review the hard facts: compensation, benefits, disclosures, etc. I applaud this, but I'm cynical and think it would require an overhaul of the entire system regarding compensation transparency. The status quo offer letter simply benefits the company, and it's hard to justify changing course when only a tiny minority of companies are following suit. If this trend took off, then the threat of a competitive disadvantage come offer time would be a worthwhile motivator. I hope it happens someday.
- wdewind 11y ago
  I disagree, not only does this give me a huge amount of insight into the company (more than I've ever seen from an offer letter), if it is automated that's actually a plus to me: it shows that they know this stuff is an important part of the offer and are showing it to everyone. I don't need to hear nice stuff about myself, I need to deeply understand the deal I'm making. Plus, there's nothing that stops them from adding a personal cover letter to this.
- 11y ago
stygiansonic 11y ago
Nitpick: The slide, "How we set your salary", shows a (presumably) normal distribution (with specified mean and std. dev.) and then uses this to determine the percentile value. (Since a normal distribution is fully specified by mean and variance) However, is a normal distribution appropriate for income/wages? (Or better: Would this even have an effect on the percentile value?)
- p4wnc6 11y ago
  It also comes off a little entitled of the company. So what if you have some distribution? Maybe I don't agree with you about where I fall in the distribution. A policy to set salaries without considering how far above average the candidate is is unsettling. It speaks of seeing people as fungible cogs. If one person won't accept our distribution-based-standard-offer, oh well, next... As a candidate I would see that and then begin to question whether other good people turned them down, and what caliber is the team I'd actually join.
packetized 11y ago
Why Palo Alto one day a week? That seems odd.
- debacle 11y ago
  As someone who has worked remotely in various percentages, being in the office one day a week can be quite helpful for developing social capital, team building, keeping in sync, etc. Some things, even with video, are just hard to do remotely.
  - packetized 11y ago
    I'd largely agree with that - but that's not what's going on here. It seems that the person entertaining the offer would work in an office in Soma, then commute another 50 miles one way, once weekly.
    - ghaff 11y ago
      Honestly, that doesn't seem particularly horrible. Lots of people spend a lot of time driving to spread-out customer sites and/or travelling by air to various places. I know Bay area traffic etc. but one day a week in an office that's a bit of a drive doesn't seem a particularly onerous imposition.
  - deleted 11y ago
    [deleted]
- erichurkman 11y ago
  We have two offices, one in Palo Alto, one in SOMA. Our product teams are based in Palo Alto, but client services, customer success, etc are based in SOMA. We want a lot of cross-pollination between those groups and our product teams, so we commute to the main office once a week. It works pretty well – sometimes talking face to face is more effective than through Hangouts or Slack. Obvious disclaimer: engineering at eShares.
  - jldugger 11y ago
ryandrake 11y ago
The capital structure graph is wonderful. Very clear. Would be nice to also send out updated charts to existing employees every time the capital structure changes. All startups and VC-funded companies should do this!
p4wnc6 11y ago
The part about exit values is a bit misleading. You don't include anything about liquidity preference or anything else that would be taken off the top before common shares are bought out. And if shares are diluted or liquidity preference is added later after some fundraising, do you always go back and share all of the specifics of all of that with all employees? Kudos if you do, but if not it kinda renders the initial transparency less impressive or useful. I've generally found the advice here [0] to be a much better proxy for hypothetical exit calculations. One other thought: isn't it odd that you're willing to provide a distribution over salaries to argue for the salary you offered, but you just pull a number out of thin air for the possible exit? Why not provide a distribution on exit values (and evidence for why you believe it), and then show the expected value along with risk, under that distribution. At the very least, this way if your distribution over exit values isn't a severe power law drop off with uncomfortably low expected value, the candidate knows you're blowing smoke and can walk away. Instead, you deny the premise that an expected value calculation is useful towards the end. Wow, that is absolutely walk-away-immediately stuff right there. "The distribution over outcomes is unknown..." Right, so of course you should make zero attempt to gather data about it and model it. That's one of the most bananas things I've ever seen, and it's right in the offer letter! Picking a number like 77MM is almost like a dirty in-app purchase priming trick or something. (And no, it's not the least bit redeeming to add a tiny line at the bottom of the chart stating that it's just an example and not a forecast.) If you personally, actually believe no one should engage in an expected value calculation regarding their start-up compensation package, then why not simply omit any slides about what the options will be worth? The 77MM thing is a red herring, and surely you would agree that in the absence of enough evidence to put together a crude approximate distribution, it can hardly been viewed as a better alternative to just make shit up out of thin air ... Pointing out the 77MM example is basically saying "Hey, look at this number! It might not be related to your shares or your life at all, but look at it anyway!" On the other hand, if you believe that 77MM is "reasonable" in some sense, well then you are absolutely talking about some approximate notion of a prior distribution on your exit value. [0] http://www.danshapiro.com/blog/2010/11/how-much-are-startup-options-worth/ http://www.danshapiro.com/blog/2010/11/how-much-are-startup-...
- jsprogrammer 11y ago
hodgesrm 11y ago
Transparency is a noble goal but a substantial part of this offer letter boils down to the counter-party in a financial transaction offering you financial and legal advice. That's a bad practice in transactions and makes this letter seem more like a sales tactic than something truly open. The letter would be stronger if they just presented the facts (like revealing the cap structure, which unusual and interesting) and referred you to a neutral 3rd party for how to evaluate those facts. By the way this letter seems to be incomplete because it has no reference to assignment of technical inventions or protection of trade secrets, which is de rigeur in most tech firms. There's also no mention of binding arbitration in the event of disputes. In the event the latter is not an omission and they do not attempt to impose arbitration I would say these folks are good eggs. The fact that they don't try to evade legal requirements would have more value to me than anything else in the letter when judging them as an potential employer.

152 points by rdl 11y ago

cpks 11y ago

1) I really like this, for transparency, clarity, and design. 2) The actual numbers there are a little bit scary. 0.03% equity grant? That's tiny. It's basically worthless. When did startup equity get so tiny? I'm not singling eShares out here -- just broadly speaking. That means that if eShares exits past a billion dollars, those shares won't even buy a house in the area....

patio11 11y ago
When did startup equity get so tiny? Non-technical line employee past Series A. See also the top 25% salary of $64.5k, which is roughly half of what new college grads get offered in engineering at AppAmaGooFaceSoft. Fundamentally this is driven by one number which is an iron law in the Valley: the employee options pool gets 20% of the company. This is 2000 basis points. It will never, under any circumstances, suddenly have more than 2000 basis points in it. That's 2000 basis points you can issue to every employee from engineer #1 to social media marketing intern #6 in year 8. What's the average equity allocation going to be when you have 400 employees? Well, it can't be 6 basis points, because 6 * 400 is greater than 2000. Is 400 employees a reasonable amount of a company at IPO? It's actually on the low side, particularly as companies are waiting longer and longer to IPO. This means that, as companies get de-risked by succeeding investment rounds, equity available to employees drops sharply. Engineer #1 might get 200 basis points out of that pool, for giving up a sleepwalk-to-$300k offer from Google to take a flyer on a company paying $80k which needs to, ahem, build a CRUD app. (Not casting aspersions on any company by calling them CRUD apps. CRUD apps make the world go round.) That's still a low number relative to the amount of risk that engineer is taking and their opportunity cost. I've heard on the grapevine that the iron law might be relaxed. Investors are pretty in favor of this, as long as the extra basis points come out of founder pockets rather than investor pockets.
- hkmurakami 11y ago
  Great answer. I'll just add an anecdote where I was in a fairly similar role/situation as this fictional example of Robert. The equity grant # was about #350 at a post Series B startup that would exit for about $1B later that year. My stake in the company was 1 basis point (0.01%). Equity grants loosely follow an exponentially decaying pattern.
  - w1ntermute 11y ago
    So your 1 bp grant was basically a year's salary for a junior engineer in the Bay Area. What is the advantage of joining such a large post Series B startup (which could still face a down round or layoffs before the exit) instead of AppAmaGooFaceSoft?
    - landryraccoon 11y ago
      There isn't one. If you want to join a startup and do well you have to be willing to join when they're paying lower than market salary, desperate for help and nobody's more than 50% sure they'll be around in 2 years. If you can't handle that then a startup isn't a great proposition for you.
    - abalone 11y ago
      It's probably a lot less than even that because, having joined less than a year before exit, the strike price would be far from nothing. Having said that, you can only say there's no advantage in retrospect. If it had become a $10B or $100B company, 1bp would be substantial. And if the exit was a stock swap then perhaps the potential is still there.
    - hkmurakami 11y ago
      1) This was back when the economy was much worse than it is today. 2) I was a young desperate 20 something who didn't know better. ;)
- x0x0 11y ago
  Don't forget those options aren't just lottery tickets; unless your employer is giving out options with 10-year exercise windows, they're rigged lottery tickets. viz the CTOs on here talking about using them as retention leverage. You can find a (very small) list maintained by Zach Holman here: https://github.com/holman/extended-exercise-windows https://github.com/holman/extended-exercise-windows I assume Zach got interested because he discovered after he was fired from github that he was close to losing all the money he "made" on options when github became a unicorn -- he probably had 90 days to exercise a very high priced illiquid security with horrid tax consequences if he fucked up. That's the thing about cash: it's not rigged. If you get cash, it stays in your bank account. Paper gains can disappear.
djb_hackernews 11y ago
Hmm I was actually thinking 0.03% was high for the role and position of the company. Startup equity has always been tiny. Even for critical engineer hires 1-10. Engineers in general are poor negotiators and, in my experience, the employee pool is preserved for later executive hires that are brought in to bring the company and product into the fold of the industry trying to be disrupted.

sytelus 11y ago

Simple question: Why not retire whole concept of stock options? Why not just give RSUs? More I read about how stock options work and how it can ruin you financially, I just don't think this whole thing is friendly to attract talent. I would be super hesitant to go to any company offering stock options instead of RSUs - no matter how good the offer looks on paper. Even though RSU value can go down to zero, you at least don't end up paying our of pocket. And things don't require 3 pages of explanations and caveats in your offer letter.

x0x0 11y ago
A (somewhat) secret: lots of employees don't/can't exercise, returning options to the pool. Hell, just last week someone was on HN discussing walking away from $0.5m because he couldn't afford to exercise when he left an employer that was later sold.
- vehementi 11y ago
  Why can't they take out loans for that purpose? Seems like free money for a bank
  - x0x0 11y ago
    At the required decision time, the employee often has no idea how much or when a company will be worth money. Plus the obvious risk that someone fucks up and the company is worth a lot less than planned.
    - ryandrake 11y ago
      So he didn't really "walk away from $0.5m". He walked away from a piece of paper that may or may not be worth $0.5m in some unknown time (or never) in the future.
      - x0x0 11y ago
        Had he been able to exercise he would have received that half million

dmurray 11y ago

I don't like the language of "below is what our lawyers require we tell you". The lawyers didn't decide that the offer is contingent on a background check, or that the employment is at will. You decided that, the government insisted that you communicated it to your prospective employee, and the lawyers informed you of that requirement. Maybe it's splitting hairs, but it would leave a better taste in my mouth if the company is took responsibility for those decisions. Other than that, the letter is great and shows a wonderful commitment to transparency.

epicureanideal 11y ago
Agreed. I personally would prefer if offers had, as a standard, 2 weeks or 4 weeks severance. If the company is not hiring a high percentage of people it needs to fire or lay off, it's not a problem. This of course provides more security to their employees. All the tech companies are talking about a shortage of skilled workers, but outside of management the terms of employment are still biased toward minimizing the company's potential costs. If there were a real shortage we'd see contractual changes.
kemitchell 11y ago
Made my day.
hodgesrm 11y ago
Yep, that line is pretty lame, especially if the letter is signed by the CEO as seems to be the case here. Either they are not being straightforward or somehow don't have control of the legal folks. There are various reasons for the latter case, some of them potentially quite negative. To be fair this letter seems to be making an effort to be transparent, so I get what they are trying to do. As I noted in another comment though this is a tough trick to pull off successfully without seeming insincere.

jheriko 11y ago

"live your life as though your equity is worthless" that is really nice to see in an offer letter. a lot of hipster-y startups do the opposite, and act like its an alternative to hard cash.

p4wnc6 11y ago
But in this same letter they encourage you to not do an expected value calculation about the value of your compensation package. That's extremely bad advice. The more I read this letter, the more it looks like they are trying to be selectively transparent in ways that don't actually cause them to give up any information advantage over the candidate -- and they are putting overly specific numbers in (like the magic 77MM figure for an exit) and tossing in relatively meaningless graphs, and an incredibly meaningless salary distribution, to add window dressing and make it sound like it's all much more technical, facts-based, and non-negotiable than it really is. While it is a move in the direction of transparency, which is good in theory, this particular offer letter makes me feel like it's just a wolf in sheep's clothing -- still fundamentally trying to get a candidate to agree to be priced at a level well below their actual value to the company. If the letter said "live your life as through your equity is worthless, because it is worthless and by agreeing to work for us for a lower wage you're not likely to recover those lost earnings down the road" .. then I might be impressed by the honesty.
- vehementi 11y ago
  Didn't they put the calculations near the top? I think their point was that the expected value of the company is approximately the same as the chance the company will Make It.

gumby 11y ago

Five year vesting? Is this common? I've always used four -- the only company I've heard of who uses five is Microsoft.

iolothebard 11y ago
It's graded vesting, I've always seen it at 5 years (20%/year). It seems they do 20% after the first year then 1/48th afterward monthly (which is nice). Legally they can do up to 6 years.
- akavi 11y ago
  I don't think the graded vesting was the surprising thing to the parent comment, it's that it's five years instead of four. All the tech companies I've seen use 1 year cliff/4 year total vesting. Ie, 25% after the first year, 1/36th of the remainder monthly.
  - p4wnc6 11y ago
    Yes, 4 years is the standard.
phamilton 11y ago
There's weird stuff out there. Amazon apparently does 4 year, but 5%, 15%, 40%, 40%.

agentgt 11y ago

I actually saw this article and was immediately thinking of an additional product my company could sell (we sell recruiting software). But then I started playing devils advocate. If your sending an offer letter wouldn't you want it really personal and not as much about the $$$. Wouldn't you want to cite memorable and salient specifics about the individual. This letter seemed like it was completely automated. It didn't seem "sticky" at all. I think a "personal" letter might have greater success particularly for smaller companies hiring expensive talent. Obviously you need to state what the candidate would be receiving for compensation but I think making it the only focus will lead to price comparisons.

lscore720 11y ago
Recruiter here. You raise a good point: I think this takes the need for compensation transparency to an extreme. However, I strongly support this concept overall. Often, I see the offer letter essentially presented as a formality once the basics are agreed upon. The candidate has completed the interview process, decided his/her non-financial interests in the opportunity, and received that "personal" positive reinforcement from the hiring manager & team. At this point: sure, the offer letter can include a personalized message to start, but ultimately it's for the candidate to review the hard facts: compensation, benefits, disclosures, etc. I applaud this, but I'm cynical and think it would require an overhaul of the entire system regarding compensation transparency. The status quo offer letter simply benefits the company, and it's hard to justify changing course when only a tiny minority of companies are following suit. If this trend took off, then the threat of a competitive disadvantage come offer time would be a worthwhile motivator. I hope it happens someday.
wdewind 11y ago
I disagree, not only does this give me a huge amount of insight into the company (more than I've ever seen from an offer letter), if it is automated that's actually a plus to me: it shows that they know this stuff is an important part of the offer and are showing it to everyone. I don't need to hear nice stuff about myself, I need to deeply understand the deal I'm making. Plus, there's nothing that stops them from adding a personal cover letter to this.
11y ago

stygiansonic 11y ago

Nitpick: The slide, "How we set your salary", shows a (presumably) normal distribution (with specified mean and std. dev.) and then uses this to determine the percentile value. (Since a normal distribution is fully specified by mean and variance) However, is a normal distribution appropriate for income/wages? (Or better: Would this even have an effect on the percentile value?)

p4wnc6 11y ago
It also comes off a little entitled of the company. So what if you have some distribution? Maybe I don't agree with you about where I fall in the distribution. A policy to set salaries without considering how far above average the candidate is is unsettling. It speaks of seeing people as fungible cogs. If one person won't accept our distribution-based-standard-offer, oh well, next... As a candidate I would see that and then begin to question whether other good people turned them down, and what caliber is the team I'd actually join.

packetized 11y ago

Why Palo Alto one day a week? That seems odd.

debacle 11y ago
As someone who has worked remotely in various percentages, being in the office one day a week can be quite helpful for developing social capital, team building, keeping in sync, etc. Some things, even with video, are just hard to do remotely.
- packetized 11y ago
  I'd largely agree with that - but that's not what's going on here. It seems that the person entertaining the offer would work in an office in Soma, then commute another 50 miles one way, once weekly.
  - ghaff 11y ago
    Honestly, that doesn't seem particularly horrible. Lots of people spend a lot of time driving to spread-out customer sites and/or travelling by air to various places. I know Bay area traffic etc. but one day a week in an office that's a bit of a drive doesn't seem a particularly onerous imposition.
- deleted 11y ago
  [deleted]
erichurkman 11y ago
We have two offices, one in Palo Alto, one in SOMA. Our product teams are based in Palo Alto, but client services, customer success, etc are based in SOMA. We want a lot of cross-pollination between those groups and our product teams, so we commute to the main office once a week. It works pretty well – sometimes talking face to face is more effective than through Hangouts or Slack. Obvious disclaimer: engineering at eShares.
- jldugger 11y ago

ryandrake 11y ago

The capital structure graph is wonderful. Very clear. Would be nice to also send out updated charts to existing employees every time the capital structure changes. All startups and VC-funded companies should do this!

p4wnc6 11y ago

The part about exit values is a bit misleading. You don't include anything about liquidity preference or anything else that would be taken off the top before common shares are bought out. And if shares are diluted or liquidity preference is added later after some fundraising, do you always go back and share all of the specifics of all of that with all employees? Kudos if you do, but if not it kinda renders the initial transparency less impressive or useful. I've generally found the advice here [0] to be a much better proxy for hypothetical exit calculations. One other thought: isn't it odd that you're willing to provide a distribution over salaries to argue for the salary you offered, but you just pull a number out of thin air for the possible exit? Why not provide a distribution on exit values (and evidence for why you believe it), and then show the expected value along with risk, under that distribution. At the very least, this way if your distribution over exit values isn't a severe power law drop off with uncomfortably low expected value, the candidate knows you're blowing smoke and can walk away. Instead, you deny the premise that an expected value calculation is useful towards the end. Wow, that is absolutely walk-away-immediately stuff right there. "The distribution over outcomes is unknown..." Right, so of course you should make zero attempt to gather data about it and model it. That's one of the most bananas things I've ever seen, and it's right in the offer letter! Picking a number like 77MM is almost like a dirty in-app purchase priming trick or something. (And no, it's not the least bit redeeming to add a tiny line at the bottom of the chart stating that it's just an example and not a forecast.) If you personally, actually believe no one should engage in an expected value calculation regarding their start-up compensation package, then why not simply omit any slides about what the options will be worth? The 77MM thing is a red herring, and surely you would agree that in the absence of enough evidence to put together a crude approximate distribution, it can hardly been viewed as a better alternative to just make shit up out of thin air ... Pointing out the 77MM example is basically saying "Hey, look at this number! It might not be related to your shares or your life at all, but look at it anyway!" On the other hand, if you believe that 77MM is "reasonable" in some sense, well then you are absolutely talking about some approximate notion of a prior distribution on your exit value. [0] http://www.danshapiro.com/blog/2010/11/how-much-are-startup-options-worth/ http://www.danshapiro.com/blog/2010/11/how-much-are-startup-...

jsprogrammer 11y ago

hodgesrm 11y ago

Transparency is a noble goal but a substantial part of this offer letter boils down to the counter-party in a financial transaction offering you financial and legal advice. That's a bad practice in transactions and makes this letter seem more like a sales tactic than something truly open. The letter would be stronger if they just presented the facts (like revealing the cap structure, which unusual and interesting) and referred you to a neutral 3rd party for how to evaluate those facts. By the way this letter seems to be incomplete because it has no reference to assignment of technical inventions or protection of trade secrets, which is de rigeur in most tech firms. There's also no mention of binding arbitration in the event of disputes. In the event the latter is not an omission and they do not attempt to impose arbitration I would say these folks are good eggs. The fact that they don't try to evade legal requirements would have more value to me than anything else in the letter when judging them as an potential employer.