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Christ, I can't seriously believe this argument. As I understand it, the author believes that employees who have earned their options but can't afford to exerci

Christ, I can't seriously believe this argument. As I understand it, the author believes that employees who have earned their options but can't afford to exercise them are a problem? Such arrogance, A16Z should really have thought twice about what such a blatantly anti-employee piece would do to their reputation. The gall of them to insinuate that this is a good thing because the true believers get paid for their work is just grating.

arciini 10y ago
I completely agree. I think the following quote really captures the argument of the article: "There is a more fundamental issue at the heart of this seemingly good solution: A 10-year exercise window is really a direct wealth transfer from the employees who choose to remain at the company and build future shareholder value, to former employees who are no longer contributing to building the business/ its ultimate value." In short, Kupor believes that even if you chose a lower-salary, higher-options/equity package, you should be stripped of your options if you leave. To him, it's only fair if only investors and employees who remain get to keep equity. Instead, you, who have been directly responsible for making the stock price rise so much that your options are costly to exercise, deserve nothing.
- bravo22 10y ago
  I found that to be a bad argument as well. The author is conveniently ignoring the fact that those options vested in the first place. By that logic, why should investors get a lot of the windfall when they didn't "work hard" for the life of the company? Basically it is a disguised argument against shareholders who are not already wealthy. "Here have these shares of the company. Oh, but you don't really deserve them because you didn't buy it with cash like we did, you earned it through sweat. Your labor is worth less than our capital".
- chimeracoder 10y ago
  > Instead, you, who have been directly responsible for making the stock price rise so much that your options are costly to exercise I agree with what you're saying, but to clarify, it'd be the taxes which are prohibitively costly, not the act of exercising the options themselves (your hard work doesn't change the price at which you exercise; it just changes the amount that is taxable). You may still be unable to afford the money it'd cost to exercise your full grant, but that figure was determined before you started working at the company, based on the size of your grant and the price at that time. (IANAL)
- angersock 10y ago
  Good summary. Unfortunately, I'm not aware of anybody these days that actually is deliberately treating early employees well in this regard. On the one hand, there's the wink-and-nudge that joining early will make you a millionaire--but then you've got folks like this who are undermining the entire mythos. I think we are all interested in how this will play out.
- hkmurakami 10y ago
  That quote is almost verbatim what Ben Horowitz said in his "one management principle" Stanford lecture. A16Z is fully onboard with Scott Kupor writing this piece.
spinlock 10y ago
exactly. if you want people to stay at your company and add value, try not fucking them over. people who know that you have and will treat them fairly are more likely to add value to your business. people who know that they have 90 days to access the benefit of working for you will look for shortcuts to make sure that their interests are maximized.
thinkingkong 10y ago
Similarly if everyone could afford to exercise they might make the same argument.
abcampbell 10y ago
"Rationally, the now-former employee will hold off until the end of the exercise expiration window before deciding whether to exercise at all." Classic example of good maths, bad thinking. This is nonsensical. For employees where these options represent 90% of their wealth, the benefit from marginal time value in these options is trivial when compared to getting liquidity and diversification. "The bottom line is that if companies are going to continue to stay private longer, we need to fundamentally re-think the stock option compensation model. We need better, careful, and more thoughtful solutions." Seems like the simplest solution is just for the investors to force the company to go public. Going public creates the liquidity that solves this problem. It might be at a lower sticker price, but at least employees can arrange financing to pay for excercize and tax needs. That and they might be able to actually diversify from a portfolio no self-respecting LP would tolerate.
- abcampbell 10y ago
  Our take... http://bit.ly/youshouldsellyourequity http://bit.ly/youshouldsellyourequity
  - abalone 10y ago
    I'll save everyone the click.. It's advocating secondary sales. But most companies don't allow those anymore because it turns out it creates a messy cap table and accounting headaches.
    - abcampbell 10y ago
      #overconfident Not arguing for secondary sales, arguing that we take these companies public to clean up that crap.
- deleted 10y ago
  [deleted]
sgustard 10y ago
I thought from the title this article would be about the myriad of ways that startup employees can get screwed. Remarkably, all he does is propose another way to screw them. Silicon Valley with its sky-high cost of living is nothing more than a lottery. Those who have won the lottery mistake their luck for "smarts" and become "venture capitalists" who exist simply to grease up their fellow winners.
rodgerd 10y ago
> Christ, I can't seriously believe this argument. Capitalism!
a13n 10y ago
I read it completely differently. I'm pretty sure he is empathizing with those employees. He's saying it sucks that people must decide between leaving their pre-IPO company or forfeiting their valuable options. (looking at you Uber)
deleted 10y ago
[deleted]
jbapple 10y ago
> A16Z should really have thought twice about what such a blatantly anti-employee piece would do to their reputation. Does A16Z care about their reputation among the laboring class, or only among the ownership class?
bogomipz 10y ago
These were my thoughts exactly, specifically: "The 10-year “solution” thus takes money/option value out of the pockets of the current (and growing) employee base to line the pockets of former employees who are no longer contributing to the business." No it doesn't, those people helped get your startup where it is today. They put in sweat equity in lieu of greater pay. You can make this same dumb argument in reverse as well about current employee benefitting from the work that people did on the ground floor. Seriously the arrogance of this person is incredible.

arciini 10y ago

I completely agree. I think the following quote really captures the argument of the article: "There is a more fundamental issue at the heart of this seemingly good solution: A 10-year exercise window is really a direct wealth transfer from the employees who choose to remain at the company and build future shareholder value, to former employees who are no longer contributing to building the business/ its ultimate value." In short, Kupor believes that even if you chose a lower-salary, higher-options/equity package, you should be stripped of your options if you leave. To him, it's only fair if only investors and employees who remain get to keep equity. Instead, you, who have been directly responsible for making the stock price rise so much that your options are costly to exercise, deserve nothing.

bravo22 10y ago
I found that to be a bad argument as well. The author is conveniently ignoring the fact that those options vested in the first place. By that logic, why should investors get a lot of the windfall when they didn't "work hard" for the life of the company? Basically it is a disguised argument against shareholders who are not already wealthy. "Here have these shares of the company. Oh, but you don't really deserve them because you didn't buy it with cash like we did, you earned it through sweat. Your labor is worth less than our capital".
chimeracoder 10y ago
> Instead, you, who have been directly responsible for making the stock price rise so much that your options are costly to exercise I agree with what you're saying, but to clarify, it'd be the taxes which are prohibitively costly, not the act of exercising the options themselves (your hard work doesn't change the price at which you exercise; it just changes the amount that is taxable). You may still be unable to afford the money it'd cost to exercise your full grant, but that figure was determined before you started working at the company, based on the size of your grant and the price at that time. (IANAL)
angersock 10y ago
Good summary. Unfortunately, I'm not aware of anybody these days that actually is deliberately treating early employees well in this regard. On the one hand, there's the wink-and-nudge that joining early will make you a millionaire--but then you've got folks like this who are undermining the entire mythos. I think we are all interested in how this will play out.
hkmurakami 10y ago
That quote is almost verbatim what Ben Horowitz said in his "one management principle" Stanford lecture. A16Z is fully onboard with Scott Kupor writing this piece.

spinlock 10y ago

exactly. if you want people to stay at your company and add value, try not fucking them over. people who know that you have and will treat them fairly are more likely to add value to your business. people who know that they have 90 days to access the benefit of working for you will look for shortcuts to make sure that their interests are maximized.

thinkingkong 10y ago

Similarly if everyone could afford to exercise they might make the same argument.

abcampbell 10y ago

"Rationally, the now-former employee will hold off until the end of the exercise expiration window before deciding whether to exercise at all." Classic example of good maths, bad thinking. This is nonsensical. For employees where these options represent 90% of their wealth, the benefit from marginal time value in these options is trivial when compared to getting liquidity and diversification. "The bottom line is that if companies are going to continue to stay private longer, we need to fundamentally re-think the stock option compensation model. We need better, careful, and more thoughtful solutions." Seems like the simplest solution is just for the investors to force the company to go public. Going public creates the liquidity that solves this problem. It might be at a lower sticker price, but at least employees can arrange financing to pay for excercize and tax needs. That and they might be able to actually diversify from a portfolio no self-respecting LP would tolerate.

abcampbell 10y ago
Our take... http://bit.ly/youshouldsellyourequity http://bit.ly/youshouldsellyourequity
- abalone 10y ago
  I'll save everyone the click.. It's advocating secondary sales. But most companies don't allow those anymore because it turns out it creates a messy cap table and accounting headaches.
  - abcampbell 10y ago
    #overconfident Not arguing for secondary sales, arguing that we take these companies public to clean up that crap.
deleted 10y ago
[deleted]

sgustard 10y ago

I thought from the title this article would be about the myriad of ways that startup employees can get screwed. Remarkably, all he does is propose another way to screw them. Silicon Valley with its sky-high cost of living is nothing more than a lottery. Those who have won the lottery mistake their luck for "smarts" and become "venture capitalists" who exist simply to grease up their fellow winners.

rodgerd 10y ago

> Christ, I can't seriously believe this argument. Capitalism!

a13n 10y ago

I read it completely differently. I'm pretty sure he is empathizing with those employees. He's saying it sucks that people must decide between leaving their pre-IPO company or forfeiting their valuable options. (looking at you Uber)

deleted 10y ago

[deleted]

jbapple 10y ago

> A16Z should really have thought twice about what such a blatantly anti-employee piece would do to their reputation. Does A16Z care about their reputation among the laboring class, or only among the ownership class?

bogomipz 10y ago

These were my thoughts exactly, specifically: "The 10-year “solution” thus takes money/option value out of the pockets of the current (and growing) employee base to line the pockets of former employees who are no longer contributing to the business." No it doesn't, those people helped get your startup where it is today. They put in sweat equity in lieu of greater pay. You can make this same dumb argument in reverse as well about current employee benefitting from the work that people did on the ground floor. Seriously the arrogance of this person is incredible.