6 ms·

This is a really good read. It pisses me off to no end, but anybody who is an engineer (especially an early engineer, christ!) should read this to try and under

This is a really good read. It pisses me off to no end, but anybody who is an engineer (especially an early engineer, christ!) should read this to try and understand the mindset of investors and new founders. This article articulates what seems to be a common sentiment among founders I've met: early employees who want to do good work and cash out are a liability. The rhetoric proposed here of "early employees who leave" vs "god-fearing quality employees who stay or join" is targeted directly at dividing and taking advantage of us. EDIT: If you would like to downvote me, please do explain your reasoning.

deleted 10y ago
[deleted]
icedchai 10y ago
When I left my last company I had to write a check for about $10K to buy my options. It's like rolling the dice.
tn13 10y ago
I really don't understand why employers don't allow the employees to exercise the options right in the beginning when the value is much much lower.
- nulltype 10y ago
  Usually you are allowed to exercise the options as soon as they are vested.
- xiphias 10y ago
  I really don't understand why good employees work in startups instead of going to an IPO-ed company. Most of the time in the current climate they are worse off.
  - palakchokshi 10y ago
    Ask the good employees of Facebook, Google, AirBnb, etc. who joined those companies early on. The upside for the employees where the company IPO-ed is just insane. Another reason might be the product/technology that the startup is working with that might be of interest to a good employee. Money is not everything.
    - spinlock 10y ago
      I've asked them. To a one, they got lucky. None of them had an actual plan for how their contribution would lead to a multi-billion dollar exit.
  - rhizome 10y ago
    Public companies can be a drag.
  - ropiku 10y ago
    If you are talking just about $ then totally but there's more than just money. Big companies have bureaucracy, corporate politics, etc.
    - xiphias 10y ago
      I'm working at one of those companies and I prefer the bureaucracy and real big data & machine learning over iterating on the web platform (Rails, Javascript, Angular...). With small companies it felt like I had to create features after features, but as there were not many users, I didn't have the same impact (number of users * $/user earned for the company)
  - tn13 10y ago
    I must second you here. Many times the stock options that you get at Google, or Facebook even today outperform all other forms of investment.
- spullara 10y ago
  Many companies allow you to exercise your options and file an 83b election with the IRS. This only really works well though for the earliest employees because valuations often go up so fast that the exercise prices becomes prohibitive a year or two in. Then later, if your price is low and the stock price is high, exercising becomes cost prohibitive on the tax side where you pay taxes on the difference (AMT) even though you can't sell the stock. It is complicated issue but at its core is the IRS IMHO.
- fragsworth 10y ago
  Employers need to get an independent valuation prior to issuing options. If you're hiring employees at a later stage, your hands are tied.
x0x0 10y ago
The Donald Trump-esque "dear employee, getting to keep the options you've 'earned' is, like, actually bad for you! No really!" is amazing. And referring to vested yet unexercised options as dead money really demonstrates what a rip-off options are as a comp method. Frankly, I don't think fairness has anything to do with anything. My bet is more that valley employees talk, and more of us know someone who's gotten screwed on options. Or are ourselves in that boat. (Raises hand! Dear former employer, please eventually go public. Pretty please? I'd really like my $15k back eventually.) Add in increasing times to ipo and frothy valuations and going to goog/apple/fb/amazon/LI/et al and getting RSUs which are essentially cash is way more attractive than options. So you see Sam Altman (to his credit, but also to his financial health) pushing 10 year vesting periods and an ISO NSO flip because YC needs engineers for all those startups, and if experienced engineers strongly prefer public companies, that's a big problem. And the author admits his goals: with the provision that a departing employee cannot exercise his or her stock options unless there has been a liquidity event? If you stay, you’re a serious owner, but if you don’t want to be part of the company for any reason you won’t be an owner. (note that this shouldn't be surprising from someone tangentially related to the Silver Lake / Skype option yankaroo) But hey, good luck selling the idea that if you should leave any time in the 10-ish years before ipo, you get fuck and all from "your" options. But you should choose options over google stock! No really! Why aren't you jumping at this chance? Come back! Edit: a friend just got $290 combined cash + rsus from a post-ipo company in sf. The total comp numbers eg patio11 talks about are real. You have to be a sucker to turn down that type of cash for options that disappear if you leave anytime before ipo.
rodgerd 10y ago
> try and understand the mindset of investors and new founders. Marc Andresson is Reacher Gilt.
- mnutt 10y ago
  I had to look up the Reacher Gilt reference (Terry Pratchett novel) but I know a handful of people who had to scrape together cash to buy their Gilt Groupe options and subsequently lost a lot of money in the sale.

deleted 10y ago

[deleted]

icedchai 10y ago

When I left my last company I had to write a check for about $10K to buy my options. It's like rolling the dice.

tn13 10y ago

I really don't understand why employers don't allow the employees to exercise the options right in the beginning when the value is much much lower.

nulltype 10y ago
Usually you are allowed to exercise the options as soon as they are vested.
xiphias 10y ago
I really don't understand why good employees work in startups instead of going to an IPO-ed company. Most of the time in the current climate they are worse off.
- palakchokshi 10y ago
  Ask the good employees of Facebook, Google, AirBnb, etc. who joined those companies early on. The upside for the employees where the company IPO-ed is just insane. Another reason might be the product/technology that the startup is working with that might be of interest to a good employee. Money is not everything.
  - spinlock 10y ago
    I've asked them. To a one, they got lucky. None of them had an actual plan for how their contribution would lead to a multi-billion dollar exit.
- rhizome 10y ago
  Public companies can be a drag.
- ropiku 10y ago
  If you are talking just about $ then totally but there's more than just money. Big companies have bureaucracy, corporate politics, etc.
  - xiphias 10y ago
    I'm working at one of those companies and I prefer the bureaucracy and real big data & machine learning over iterating on the web platform (Rails, Javascript, Angular...). With small companies it felt like I had to create features after features, but as there were not many users, I didn't have the same impact (number of users * $/user earned for the company)
- tn13 10y ago
  I must second you here. Many times the stock options that you get at Google, or Facebook even today outperform all other forms of investment.
spullara 10y ago
Many companies allow you to exercise your options and file an 83b election with the IRS. This only really works well though for the earliest employees because valuations often go up so fast that the exercise prices becomes prohibitive a year or two in. Then later, if your price is low and the stock price is high, exercising becomes cost prohibitive on the tax side where you pay taxes on the difference (AMT) even though you can't sell the stock. It is complicated issue but at its core is the IRS IMHO.
fragsworth 10y ago
Employers need to get an independent valuation prior to issuing options. If you're hiring employees at a later stage, your hands are tied.

x0x0 10y ago

The Donald Trump-esque "dear employee, getting to keep the options you've 'earned' is, like, actually bad for you! No really!" is amazing. And referring to vested yet unexercised options as dead money really demonstrates what a rip-off options are as a comp method. Frankly, I don't think fairness has anything to do with anything. My bet is more that valley employees talk, and more of us know someone who's gotten screwed on options. Or are ourselves in that boat. (Raises hand! Dear former employer, please eventually go public. Pretty please? I'd really like my $15k back eventually.) Add in increasing times to ipo and frothy valuations and going to goog/apple/fb/amazon/LI/et al and getting RSUs which are essentially cash is way more attractive than options. So you see Sam Altman (to his credit, but also to his financial health) pushing 10 year vesting periods and an ISO NSO flip because YC needs engineers for all those startups, and if experienced engineers strongly prefer public companies, that's a big problem. And the author admits his goals: with the provision that a departing employee cannot exercise his or her stock options unless there has been a liquidity event? If you stay, you’re a serious owner, but if you don’t want to be part of the company for any reason you won’t be an owner. (note that this shouldn't be surprising from someone tangentially related to the Silver Lake / Skype option yankaroo) But hey, good luck selling the idea that if you should leave any time in the 10-ish years before ipo, you get fuck and all from "your" options. But you should choose options over google stock! No really! Why aren't you jumping at this chance? Come back! Edit: a friend just got $290 combined cash + rsus from a post-ipo company in sf. The total comp numbers eg patio11 talks about are real. You have to be a sucker to turn down that type of cash for options that disappear if you leave anytime before ipo.

rodgerd 10y ago

> try and understand the mindset of investors and new founders. Marc Andresson is Reacher Gilt.

mnutt 10y ago
I had to look up the Reacher Gilt reference (Terry Pratchett novel) but I know a handful of people who had to scrape together cash to buy their Gilt Groupe options and subsequently lost a lot of money in the sale.