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I'm ambivalent about notes vs priced rounds for founders. I agree that they create nasty surprises at conversion time. But notes/SAFEs are great for the earlie
by mrkurt 10y ago
I'm ambivalent about notes vs priced rounds for founders. I agree that they create nasty surprises at conversion time.
But notes/SAFEs are great for the earliest employees since we can grant them real shares instead of options. Plus, we can do it at par value.
Shares granted before a priced round are typically identical to the shares a founder has, with all the same tax advantages.
Doing priced rounds early means having to worry about a 409a early, and probably giving employees worse quality equity (or creating income tax problems for them).
- DenisM 10y agoHuh? Surely you cannot do 83b election for the employees who joined after 30 days since the company formation? And if you don't, that makes situation a lot worse for the employees, as they end up owning taxes at each vesting event.
- zamfi 10y ago83b doesn't have that restriction. You just have to file within 30 days of receiving the shares. Can be indefinitely long after company formation, since it's an election made by the employee, not the company.
- rdl 10y agoI'd recommend https://www.amazon.com/dp/B01M3UIVW3/ref=dp-kindle-redirect?_encoding=UTF8&btkr=1 https://www.amazon.com/dp/B01M3UIVW3/ref=dp-kindle-redirect?... if you want to learn all the details -- it is a great reference. The concern I think you have is that FMV of the shares might have increased after company formation? That is what 409a is for, but you generally have a decent window between reassessments, especially early on. (6mo? Is what I've seen) 83(b) clock starts when the restricted grant is issued to employee. The price is set at that time.