28 ms·

I agree with Adam's post and intensely disagree with A16Z's post on this topic. I don't think companies should take back stock compensation on a technicality.

by sama 10y ago

I agree with Adam's post and intensely disagree with A16Z's post on this topic. I don't think companies should take back stock compensation on a technicality. It'd be silly to even discuss taking back cash compensation when someone leaves a company! I appreciate Adam starting this trend years ago.

american158931 10y ago
What's your opinion on how an employee should deal with a founder who clearly believes more in the A16Z stance on stock options more than the Adam's? Apart from obvious knee-jerk reactions like "stop working there." Obviously it's in the founder's financial best interest (at least on the very surface level) for employees to not have the option to leave the company with shares at all. It is just lost money, from their perspective, and probably annoying to have an employee leave (creating a headache in your life) and take a bunch of equity with them. (And it severely limits an employees negotiating power over time, which can be of benefit to the founder...) What are some strategies an employee can use to make the point that Adam's perspective is a much more employee-friendly one and, thus, better for the company? Looking for some perspective.
- qq66 10y ago
  I don't think anyone but a very early and very senior employee will be able to change a founder/company's perspective on this. The best attempt would be to walk away from the offer and explain explicitly why -- even if that doesn't work for the situation at hand, it will guide the market.
- jc4p 10y ago
  I don't think you can do anything here once a culture's already been set. I also think that repeatedly pestering execs to ask about their efforts on this (as I've done at my current company every few weeks for the last 6 months) makes them think you're about to jump ship and want "free money", so watch out :)
- jerf 10y ago
  "What's your opinion on how an employee should deal with a founder who clearly believes more in the A16Z stance on stock options more than the Adam's?" Value the options at zero and take appropriate steps. It may not be the statistical expected result, but it is the modal outcome anyhow. "Appropriate steps" isn't just "quit". If you're happy with the cash salary than you don't have a problem, for instance, or the experience, or the lifestyle, or any of the other reasons you may be choosing to work at a startup. "Obviously it's in the founder's financial best interest (at least on the very surface level) for employees to not have the option to leave the company with shares at all." Well, yeah, but that's sort of vacuous; it's not in the employer's best interest for employees to be compensated at all. But that makes hiring pretty challenging. "What are some strategies an employee can use to make the point that Adam's perspective is a much more employee-friendly one and, thus, better for the company?" There isn't a general answer to that question, because it depends on your status in the company. In some places, even opening that conversation will put you halfway out the door. In others, they'll fall over themselves to fix the problem if you just mention it, because they'll not have heard of this before. You need to judge the situation you're in, and play out the possible scenarios before you step in to something like this. But I'd suggest you're going to need a very solid position to change something this fundamental about a company. Generic advice: It's always easier to negotiate from a fallback position of strength; unless you're absolutely confident in your position, consider having a job in hand before starting this talk. (You don't have to tell your employers that you have an offer in hand.)
  - zzleeper 10y ago
    Yours is the most reasonable answer and I wish more engineers understood this. As long as there is a nontrivial fraction of engineers that don't, then startups can take advantage of these ridiculous vesting periods and terms.
- dogecoinbase 10y ago
  Encourage your qualified friends to apply for jobs at the company, get through to the offer stage, then decline the offer for that reason.
- ScottBurson 10y ago
  Let's put it this way. When considering a job offer from a startup, people say, you should value the options component of the offer at $0. Well, people say that, but I think everybody knows that someone who wants to work at a startup isn't really going to take that advice. They may try to factor it in by somewhat reducing the importance they give the options, but if they're accepting a below-market salary, as most startup employees do, they must be at least a little bit caught up in the hope of the options being worth something significant. I think even I, after years in the industry and several failed startups, could get caught up in that again, if wooed by the right startup. On the other hand, if I were told that the options would be worthless if I left before a liquidity event, then I definitely would value them at exactly $0, and would therefore insist on a market-value salary, period. If you've already joined such a startup, and taken a below-market salary, that's a different situation. I think the best advice I could give you -- unless you totally love working there -- would be to find another job.
  - x0x0 10y ago
    Or at least discover what you're giving up by getting an offer that either gives equity that is better than a pipe dream (viz an unethical founder could fire you 1 day before ipo and you'd get jack) or a good salary. Then negotiate with that in hand.
- mahyarm 10y ago
  Now? Go shop around ESO fund, snow ventures, standard VCs, angels, etc and ask them to make a deal to help buy out your stock. If they say no, maybe your company isn't doing as well as you think it is or your company is too small. Usually these founders give you the standard 90 day agreement and are not Uber-level aggressive in trying to prevent these kinds of deals. Later? Don't work for those companies or do the math. If you get RSUs then it's somewhat equivalent to getting those 10 year options anyway.
- danielweber 10y ago
  During salary negotiations, say "tell me why I should think my options are safe against dilution."
  - lukeschlather 10y ago
    From my (somewhat limited, but concrete) experience, there is no way to get a satisfactory answer to this question. Just value the options at $0 and set your salary expectations accordingly.
    - danielweber 10y ago
      My answer was perhaps a little tongue-in-cheek, because I agree they won't. You'll hear things like "we want to encourage our employees to give it their all" and "we believe performers should be well-compensated," but those don't really answer the question. You also might be told "you are in the same pot as the founders," which is technically true except that the founders can still be never-work-again-rich after a 90% dilution, and the founders will typically have a seat at the table when the question of "how do we re-up people who have been diluted so low but are still capable of spiking the deal if they don't like it?" comes up.
- robrenaud 10y ago
  > Obviously it's in the founder's financial best interest (at least on the very surface level) for employees to not have the option to leave the company with shares at all. On the that same surface level, it's also in the founder's financial best interest for employees to work for free. Fundamentally companies offer better terms in compensation to attract better talent. I spent 11 years at Google. I was recently looking around for new places to work, the lack of liquidity even in the face of success was a big deterrent for me to work at any early stage startup.
jsprogrammer 10y ago
>10-Year Exercise Periods Make Sense >I agree with Adam's post >I don't think companies should take back stock compensation on a technicality. Isn't a 10-year period a technicality? Anything that can take back compensation is a technicality. Heh, can't even get a response without downmods.
- dmansen 10y ago
  here you go your post doesn't add anything to the conversation it might technically be a technicality but 10 years is long enough in startup life units that it doesn't matter you're pointing out definitions when it was clear what the author meant and people don't like that because it's very annoying
  - jsprogrammer 10y ago
    If it is technically a technicality, which it is, then all the other fluff pieces and unpunctuated sentences in the world do not matter. Maybe you could elucidate sama's "clear" meaning? It was lost on me. As far as I can tell, the post adds nothing but confusion to this conversation (you could counter by pointing out something of value contributed by the post). Annoying is when people continually post contradictory or unclear things and never respond to their rightful critiques, or even change their future actions.
    - dmansen 10y ago
      you said you wanted a response and not just downvotes. i tried ¯\_(ツ)_/¯
      - jsprogrammer 10y ago
        Thank you for the effort. The sama account rarely makes responses and Sam Altman basically never responds to criticism of his pieces, or even outright proofs of wrongness. Honestly, this is the treatment I expect to receive here.
tarr11 10y ago
The answer here is for you to convince VCs and other investors to support this, publicly, and tell founders that they won't be punished for this on future fundraising. Hearing from A16Z that they don't support this is a big negative signal to any founder.
- argonaut 10y ago
  a16z is a major investor (growth round resulting in a board seat for a16z) in many of the companies that have extended vesting periods, such as Coinbase, Pinterest, and Asana. So I doubt they block companies from doing this.
  - hkmurakami 10y ago
    Notice the companies you listed. They are/were the absolute hottest companies when they raised their rounds, and are still some of the most prominent startups around. Put another way, they have negotiating leverage. The ones with the leverage (including YC backed companies) have to lead the charge to change the status quo and "the standard". The average startup doesn't have the leverage to do something nonstandard. The fact that YC has come out in support of 10 year vesting periods and is making it a standard is a massive step forward.
    - argonaut 10y ago
      Asana was never a hot company. Barely any companies even have extended exercise windows, so you can't go around excluding companies from the list because "they don't count". Also your logic is almost circular, because a16z tends to only invest in hot/great companies, by definition. You can go down the list: https://github.com/holman/extended-exercise-windows https://github.com/holman/extended-exercise-windows. Many other companies have a16z as an investor. Tilt and CodeCombat are two of them.
throwaway6497 10y ago
What I find amazing, is that except YC no-other VC firm would publicly acknowledge that 10 year exercise periods make sense. In this age of social media, I find it absolutely appalling that they still endorse the current 90 day rule. I am guessing they categorised the PR nightmare of not endorsing is marginal. So, they kept quiet, since keeping status quo is in their interest. YC is trying to make things better and fair for employees. For a really long time the odds were always stacked against the employees the most. YC, Adam are hacking it for the better. All good entrepreneurs who believe in "making the world a better place" should endorse this. Unless, the idea gathers enough momemtum, the old-guard, vulture VCs will not change their stance. This includes A16Z.

by sama 10y ago

american158931 10y ago

What's your opinion on how an employee should deal with a founder who clearly believes more in the A16Z stance on stock options more than the Adam's? Apart from obvious knee-jerk reactions like "stop working there." Obviously it's in the founder's financial best interest (at least on the very surface level) for employees to not have the option to leave the company with shares at all. It is just lost money, from their perspective, and probably annoying to have an employee leave (creating a headache in your life) and take a bunch of equity with them. (And it severely limits an employees negotiating power over time, which can be of benefit to the founder...) What are some strategies an employee can use to make the point that Adam's perspective is a much more employee-friendly one and, thus, better for the company? Looking for some perspective.

qq66 10y ago
I don't think anyone but a very early and very senior employee will be able to change a founder/company's perspective on this. The best attempt would be to walk away from the offer and explain explicitly why -- even if that doesn't work for the situation at hand, it will guide the market.
jc4p 10y ago
I don't think you can do anything here once a culture's already been set. I also think that repeatedly pestering execs to ask about their efforts on this (as I've done at my current company every few weeks for the last 6 months) makes them think you're about to jump ship and want "free money", so watch out :)
jerf 10y ago
"What's your opinion on how an employee should deal with a founder who clearly believes more in the A16Z stance on stock options more than the Adam's?" Value the options at zero and take appropriate steps. It may not be the statistical expected result, but it is the modal outcome anyhow. "Appropriate steps" isn't just "quit". If you're happy with the cash salary than you don't have a problem, for instance, or the experience, or the lifestyle, or any of the other reasons you may be choosing to work at a startup. "Obviously it's in the founder's financial best interest (at least on the very surface level) for employees to not have the option to leave the company with shares at all." Well, yeah, but that's sort of vacuous; it's not in the employer's best interest for employees to be compensated at all. But that makes hiring pretty challenging. "What are some strategies an employee can use to make the point that Adam's perspective is a much more employee-friendly one and, thus, better for the company?" There isn't a general answer to that question, because it depends on your status in the company. In some places, even opening that conversation will put you halfway out the door. In others, they'll fall over themselves to fix the problem if you just mention it, because they'll not have heard of this before. You need to judge the situation you're in, and play out the possible scenarios before you step in to something like this. But I'd suggest you're going to need a very solid position to change something this fundamental about a company. Generic advice: It's always easier to negotiate from a fallback position of strength; unless you're absolutely confident in your position, consider having a job in hand before starting this talk. (You don't have to tell your employers that you have an offer in hand.)
- zzleeper 10y ago
  Yours is the most reasonable answer and I wish more engineers understood this. As long as there is a nontrivial fraction of engineers that don't, then startups can take advantage of these ridiculous vesting periods and terms.
dogecoinbase 10y ago
Encourage your qualified friends to apply for jobs at the company, get through to the offer stage, then decline the offer for that reason.
ScottBurson 10y ago
Let's put it this way. When considering a job offer from a startup, people say, you should value the options component of the offer at $0. Well, people say that, but I think everybody knows that someone who wants to work at a startup isn't really going to take that advice. They may try to factor it in by somewhat reducing the importance they give the options, but if they're accepting a below-market salary, as most startup employees do, they must be at least a little bit caught up in the hope of the options being worth something significant. I think even I, after years in the industry and several failed startups, could get caught up in that again, if wooed by the right startup. On the other hand, if I were told that the options would be worthless if I left before a liquidity event, then I definitely would value them at exactly $0, and would therefore insist on a market-value salary, period. If you've already joined such a startup, and taken a below-market salary, that's a different situation. I think the best advice I could give you -- unless you totally love working there -- would be to find another job.
- x0x0 10y ago
  Or at least discover what you're giving up by getting an offer that either gives equity that is better than a pipe dream (viz an unethical founder could fire you 1 day before ipo and you'd get jack) or a good salary. Then negotiate with that in hand.
mahyarm 10y ago
Now? Go shop around ESO fund, snow ventures, standard VCs, angels, etc and ask them to make a deal to help buy out your stock. If they say no, maybe your company isn't doing as well as you think it is or your company is too small. Usually these founders give you the standard 90 day agreement and are not Uber-level aggressive in trying to prevent these kinds of deals. Later? Don't work for those companies or do the math. If you get RSUs then it's somewhat equivalent to getting those 10 year options anyway.
danielweber 10y ago
During salary negotiations, say "tell me why I should think my options are safe against dilution."
- lukeschlather 10y ago
  From my (somewhat limited, but concrete) experience, there is no way to get a satisfactory answer to this question. Just value the options at $0 and set your salary expectations accordingly.
  - danielweber 10y ago
    My answer was perhaps a little tongue-in-cheek, because I agree they won't. You'll hear things like "we want to encourage our employees to give it their all" and "we believe performers should be well-compensated," but those don't really answer the question. You also might be told "you are in the same pot as the founders," which is technically true except that the founders can still be never-work-again-rich after a 90% dilution, and the founders will typically have a seat at the table when the question of "how do we re-up people who have been diluted so low but are still capable of spiking the deal if they don't like it?" comes up.
robrenaud 10y ago
> Obviously it's in the founder's financial best interest (at least on the very surface level) for employees to not have the option to leave the company with shares at all. On the that same surface level, it's also in the founder's financial best interest for employees to work for free. Fundamentally companies offer better terms in compensation to attract better talent. I spent 11 years at Google. I was recently looking around for new places to work, the lack of liquidity even in the face of success was a big deterrent for me to work at any early stage startup.

jsprogrammer 10y ago

>10-Year Exercise Periods Make Sense >I agree with Adam's post >I don't think companies should take back stock compensation on a technicality. Isn't a 10-year period a technicality? Anything that can take back compensation is a technicality. Heh, can't even get a response without downmods.

dmansen 10y ago
here you go your post doesn't add anything to the conversation it might technically be a technicality but 10 years is long enough in startup life units that it doesn't matter you're pointing out definitions when it was clear what the author meant and people don't like that because it's very annoying
- jsprogrammer 10y ago
  If it is technically a technicality, which it is, then all the other fluff pieces and unpunctuated sentences in the world do not matter. Maybe you could elucidate sama's "clear" meaning? It was lost on me. As far as I can tell, the post adds nothing but confusion to this conversation (you could counter by pointing out something of value contributed by the post). Annoying is when people continually post contradictory or unclear things and never respond to their rightful critiques, or even change their future actions.
  - dmansen 10y ago
    you said you wanted a response and not just downvotes. i tried ¯\_(ツ)_/¯
    - jsprogrammer 10y ago
      Thank you for the effort. The sama account rarely makes responses and Sam Altman basically never responds to criticism of his pieces, or even outright proofs of wrongness. Honestly, this is the treatment I expect to receive here.

tarr11 10y ago

The answer here is for you to convince VCs and other investors to support this, publicly, and tell founders that they won't be punished for this on future fundraising. Hearing from A16Z that they don't support this is a big negative signal to any founder.

argonaut 10y ago
a16z is a major investor (growth round resulting in a board seat for a16z) in many of the companies that have extended vesting periods, such as Coinbase, Pinterest, and Asana. So I doubt they block companies from doing this.
- hkmurakami 10y ago
  Notice the companies you listed. They are/were the absolute hottest companies when they raised their rounds, and are still some of the most prominent startups around. Put another way, they have negotiating leverage. The ones with the leverage (including YC backed companies) have to lead the charge to change the status quo and "the standard". The average startup doesn't have the leverage to do something nonstandard. The fact that YC has come out in support of 10 year vesting periods and is making it a standard is a massive step forward.
  - argonaut 10y ago
    Asana was never a hot company. Barely any companies even have extended exercise windows, so you can't go around excluding companies from the list because "they don't count". Also your logic is almost circular, because a16z tends to only invest in hot/great companies, by definition. You can go down the list: https://github.com/holman/extended-exercise-windows https://github.com/holman/extended-exercise-windows. Many other companies have a16z as an investor. Tilt and CodeCombat are two of them.

throwaway6497 10y ago

What I find amazing, is that except YC no-other VC firm would publicly acknowledge that 10 year exercise periods make sense. In this age of social media, I find it absolutely appalling that they still endorse the current 90 day rule. I am guessing they categorised the PR nightmare of not endorsing is marginal. So, they kept quiet, since keeping status quo is in their interest. YC is trying to make things better and fair for employees. For a really long time the odds were always stacked against the employees the most. YC, Adam are hacking it for the better. All good entrepreneurs who believe in "making the world a better place" should endorse this. Unless, the idea gathers enough momemtum, the old-guard, vulture VCs will not change their stance. This includes A16Z.