3 ms·

Nothing will change until folks start negotiating more savvy or building their own companies where this is handled better. My experience has been that if peopl

Nothing will change until folks start negotiating more savvy or building their own companies where this is handled better. My experience has been that if people over-value equity it's something they've done to themselves, whether it's through the groupthink in the air or their own tendency to be over-optimistic. Articles like this are a step in the right direction in that regard, but many people will never do their homework.

zenlikethat 10y ago
By the way, joining for the experience at a manageable salary is not necessarily a bad thing. The work and atmosphere at a startup will always be different than BigCo, and may well be better. The trick is to not get conned down in salary too much. Most startups if they've raised an A or further, should not be able to talk you down from market rate. If they do you can do the smart thing, walk.
acjohnson55 10y ago
> Nothing will change until folks start negotiating more savvy or building their own companies where this is handled better. I'm not holding my breath. The only thing that would fix this is regulation. The information asymmetry and power differential between founders and employees all but ensures that in the average case, the employees get the shaft. Since "regulation" is such a bad word, let's say "incentivization". Give employers a tax-advantaged way of offering equity in standard, comprehensible ways. The current tax rules do the opposite by forcing employees to navigate the complex world of options. If employers could simply grant common stock on a vesting schedule, that would be a start. And then add in some rules to incentivize not screwing over the employees and ironing out any other quirks.
- traviscj 10y ago
  > standard, comprehensible ways I am not convinced that the problem is exactly the lack of comprehension -- it's that startups going public are a probabilistic thing, not a deterministic thing. Given a population you can talk about the distribution of this or that happening, but you can't know if this particular one will get to milestone X. (See also cancer 5 year survival rates.) You could get around this if you could do a ton of startup jobs, because then it starts getting likelier that you actually hit on a winner. But you can't do many in a lifetime, because of the option / tax due on exercise / long pre-IPO / vesting schedule. Even if you could come up with something crystal clear, like "X% chance that you get $Y", and even if you could agree on those probabilities, you still only get to sample that distribution, not enjoy the big-N expected value. I think my best attempt at a solution here probably is forcing the light of public trading onto a company sooner rather than later, via regulation. My understanding is that usually the going public forcing function is the value of assets and the number of shareholders; perhaps some additional constraint on the number of (company-issued) option holders or volume thereof or amount of debt or ... something? as well? (Stupid risk-brain is just inventing loopholes for every rule I can think of.)
  - acjohnson55 10y ago
    I think we agree. I'm mostly just talking about removing some of the pitfalls and vulnerabilities startup employees face, so that if their business is successful, they are more likely to actually share in the windfall. Today, employees face a very complex path to liquidity, as well as all the possibilities for being plundered by founders and investors that the article mentions. No one is looking out for the most vulnerable, least informed constituency in the deal. In my experience, the vast majority of startup employees don't have a thorough understanding of their equity, and given the complexity of the situation, I think it's an unreasonable expectation that they would.

zenlikethat 10y ago

By the way, joining for the experience at a manageable salary is not necessarily a bad thing. The work and atmosphere at a startup will always be different than BigCo, and may well be better. The trick is to not get conned down in salary too much. Most startups if they've raised an A or further, should not be able to talk you down from market rate. If they do you can do the smart thing, walk.

acjohnson55 10y ago

> Nothing will change until folks start negotiating more savvy or building their own companies where this is handled better. I'm not holding my breath. The only thing that would fix this is regulation. The information asymmetry and power differential between founders and employees all but ensures that in the average case, the employees get the shaft. Since "regulation" is such a bad word, let's say "incentivization". Give employers a tax-advantaged way of offering equity in standard, comprehensible ways. The current tax rules do the opposite by forcing employees to navigate the complex world of options. If employers could simply grant common stock on a vesting schedule, that would be a start. And then add in some rules to incentivize not screwing over the employees and ironing out any other quirks.

traviscj 10y ago
> standard, comprehensible ways I am not convinced that the problem is exactly the lack of comprehension -- it's that startups going public are a probabilistic thing, not a deterministic thing. Given a population you can talk about the distribution of this or that happening, but you can't know if this particular one will get to milestone X. (See also cancer 5 year survival rates.) You could get around this if you could do a ton of startup jobs, because then it starts getting likelier that you actually hit on a winner. But you can't do many in a lifetime, because of the option / tax due on exercise / long pre-IPO / vesting schedule. Even if you could come up with something crystal clear, like "X% chance that you get $Y", and even if you could agree on those probabilities, you still only get to sample that distribution, not enjoy the big-N expected value. I think my best attempt at a solution here probably is forcing the light of public trading onto a company sooner rather than later, via regulation. My understanding is that usually the going public forcing function is the value of assets and the number of shareholders; perhaps some additional constraint on the number of (company-issued) option holders or volume thereof or amount of debt or ... something? as well? (Stupid risk-brain is just inventing loopholes for every rule I can think of.)
- acjohnson55 10y ago
  I think we agree. I'm mostly just talking about removing some of the pitfalls and vulnerabilities startup employees face, so that if their business is successful, they are more likely to actually share in the windfall. Today, employees face a very complex path to liquidity, as well as all the possibilities for being plundered by founders and investors that the article mentions. No one is looking out for the most vulnerable, least informed constituency in the deal. In my experience, the vast majority of startup employees don't have a thorough understanding of their equity, and given the complexity of the situation, I think it's an unreasonable expectation that they would.