5 ms·

Bye bye Common Stock options.

by nwatson 9y ago

toomuchtodo 9y ago
I forsee many a bitter Uber engineer on the horizon when those options end up worthless.
- xyzzy_plugh 9y ago
  TBH I don't understand this perspective. If you sign on to a startup as risky as Uber, you have to understand that there is a large chance your shares will be worth nothing. The fact that anyone might not understand this is everything wrong with Silicon Valley.
  - stouset 9y ago
    Many of those engineers have likely stuck around for longer than they're happy with, and for less than market pay. It's one thing when you're excited about the outlook of the company and just started a few months ago. Even if the options turn out worthless, the work is enjoyable and you've gotten to work for a well-known company. Now it's been 5 years, the company looks to be cratering quickly, and you're burnt out. You've been hanging in there because it would be financially insane to quit when you've got a very high likelihood of walking away with millions. Take that last bit away, and you're telling me you can't understand why engineers might start walking away in droves?
    - xyzzy_plugh 9y ago
      Of course I can understand why engineers might leave in droves -- but it's all a risk they were willing to take. It's silly to be bitter than your bet didn't pay off -- few of them ever do.
      - mitrandimotor 9y ago
        It's easy to be bitter when management squanders a good thing.
      - pcwalton 9y ago
        Employees frequently don't have an accurate picture of the expected value of stock options for numerous reasons, not all of which are their fault. Silicon Valley engineers are not Homo economicus.
        xyzzy_plugh 9y ago
        As an employee of a startup, I agree, but it's ultimately their responsibility. My recruiter inflated valuation, which I am still bitter about, but regardless when I signed on I realized that this is just funny money until liquidation. If a Silicon Valley engineer goes and buys a house, planning on a big payout on their options, then they're a fool.
        toomuchtodo 9y ago
        Did you get a copy of the cap table, liquidation preferences, etc?
      - stouset 9y ago
        I can't even begin to understand how it's not immediately apparent to you that after five, six, or more years at a company, people might be sticking around longer than they otherwise would because it looked like they had an overwhelmingly likely chance of walking away with millions. Take that incentive away and you don't have anything to offset the burnout from the work environment there.
  - khazhoux 9y ago
    With all due respect: bullshit When a SV startup goes belly-up, the first to get fucked are the employees. Even employee #1 and even if you started a week after incorporation, your equity is the first to disappear. And add to that, the fact that many startups have allowed founders and key executives (but not rank and file) to sell options and take money out pre-exit. In my experience, startup employees are largely not aware of the drastic difference in equity distribution and protections. They know, of course, that founders and investors have a bigger share than they do, but they don't realize how lopsided it is, and that founders can walk away with multimillions as they drop to zero themselves. In fact, in cases where large numbers of employees got rich (>$1M... Google, FB, etc) from an exit, the founders did not become just "rich", but rather became multibillionaires, and the wealthiest people on the planet.
    - xyzzy_plugh 9y ago
      But this is Silicon Valley, and we have Hacker News, and lo your comment aptly describes the risks involved when working for a startup. You know this, and I know this, and frankly anyone who is going to sign an offer letter should know this, but they often don't, and people often don't understand predatory loans either. If you're an SV engineer making six figures I have no sympathy if you don't understand how your options work. You can afford a personal financial advisor.
      - deleted 9y ago
        [deleted]
  - ahh 9y ago
    I think you can easily separate understanding risk from being disappointed that the risky outcome occurred. It's the difference between knowing (or not knowing) that as a poker player, getting it in preflop with AA vs KK is a great idea, and being sad that your opponent spiked a K on the flop for a $5,000 pot. Now, good poker players do talk a lot about not being "results-oriented" (even if your AA is rivered by KK, you played the hand well if you got the money in before that), and many players will tell you that the way to do this is to cultivate a sense of detachment about money coming in and out. I certainly try to avoid being sad when I lose a big hand; such is life. But being sad isn't the end of the world, so long as you got the money in good and continue to do so.
  - bcassedy 9y ago
    Risky? In most discussions I've seen on the subject, Uber was mentioned as one of the least risky startups one could join.
    - icpmacdo 9y ago
      Maybe just all pre IPO tech shares are a risky asset class.
      - sgs1370 9y ago
        Any individual company is a risky asset class. The advantage of a company you work for is that you are able to influence the outcome, and for small companies, you may know insider information that allows you to decide whether to invest money or your effort in the company. But yes, working for, or investing in, a pre IPO company is risky and if you want to avoid risk you should just make sure you're getting a bi-weekly salary you're happy with.
  - geofft 9y ago
    Uber wasn't a risky startup about four or five years ago. They were a startup, yes, with all the risk that being a startup implies, but they were doing very well and expanding into new cities and holding their own against a competitor whose only attempt at differentiation was quirky pink mustaches. Even in cities that (unlike SF) had functional taxi systems, they offered compelling features that the taxis didn't have at the time: app-based realtime requests and reliable credit card payments. Or, put another way, if Uber's shares in 2013 should be estimated at zero, should anyone's shares not? Anyone substantially more stable than Uber is either paying you actual cash, or giving you something with a liquid market and a clear market price (e.g., RSUs on post-IPO stock, which you can just sell as soon as you get them) instead of ISOs. The entire point of ISOs is to avoid paying your employees a competitive salary entirely in cash by giving them something that you're claiming has more expected value than the difference between their base salary and what they're worth. If you're lying to them, then it's unsurprising that they'll be bitter.

Bye bye Common Stock options.

toomuchtodo 9y ago

I forsee many a bitter Uber engineer on the horizon when those options end up worthless.

xyzzy_plugh 9y ago
TBH I don't understand this perspective. If you sign on to a startup as risky as Uber, you have to understand that there is a large chance your shares will be worth nothing. The fact that anyone might not understand this is everything wrong with Silicon Valley.
- stouset 9y ago
  Many of those engineers have likely stuck around for longer than they're happy with, and for less than market pay. It's one thing when you're excited about the outlook of the company and just started a few months ago. Even if the options turn out worthless, the work is enjoyable and you've gotten to work for a well-known company. Now it's been 5 years, the company looks to be cratering quickly, and you're burnt out. You've been hanging in there because it would be financially insane to quit when you've got a very high likelihood of walking away with millions. Take that last bit away, and you're telling me you can't understand why engineers might start walking away in droves?
  - xyzzy_plugh 9y ago
    Of course I can understand why engineers might leave in droves -- but it's all a risk they were willing to take. It's silly to be bitter than your bet didn't pay off -- few of them ever do.
    - mitrandimotor 9y ago
      It's easy to be bitter when management squanders a good thing.
    - pcwalton 9y ago
      Employees frequently don't have an accurate picture of the expected value of stock options for numerous reasons, not all of which are their fault. Silicon Valley engineers are not Homo economicus.
      - xyzzy_plugh 9y ago
        As an employee of a startup, I agree, but it's ultimately their responsibility. My recruiter inflated valuation, which I am still bitter about, but regardless when I signed on I realized that this is just funny money until liquidation. If a Silicon Valley engineer goes and buys a house, planning on a big payout on their options, then they're a fool.
        toomuchtodo 9y ago
        Did you get a copy of the cap table, liquidation preferences, etc?
    - stouset 9y ago
      I can't even begin to understand how it's not immediately apparent to you that after five, six, or more years at a company, people might be sticking around longer than they otherwise would because it looked like they had an overwhelmingly likely chance of walking away with millions. Take that incentive away and you don't have anything to offset the burnout from the work environment there.
- khazhoux 9y ago
  With all due respect: bullshit When a SV startup goes belly-up, the first to get fucked are the employees. Even employee #1 and even if you started a week after incorporation, your equity is the first to disappear. And add to that, the fact that many startups have allowed founders and key executives (but not rank and file) to sell options and take money out pre-exit. In my experience, startup employees are largely not aware of the drastic difference in equity distribution and protections. They know, of course, that founders and investors have a bigger share than they do, but they don't realize how lopsided it is, and that founders can walk away with multimillions as they drop to zero themselves. In fact, in cases where large numbers of employees got rich (>$1M... Google, FB, etc) from an exit, the founders did not become just "rich", but rather became multibillionaires, and the wealthiest people on the planet.
  - xyzzy_plugh 9y ago
    But this is Silicon Valley, and we have Hacker News, and lo your comment aptly describes the risks involved when working for a startup. You know this, and I know this, and frankly anyone who is going to sign an offer letter should know this, but they often don't, and people often don't understand predatory loans either. If you're an SV engineer making six figures I have no sympathy if you don't understand how your options work. You can afford a personal financial advisor.
    - deleted 9y ago
      [deleted]
- ahh 9y ago
  I think you can easily separate understanding risk from being disappointed that the risky outcome occurred. It's the difference between knowing (or not knowing) that as a poker player, getting it in preflop with AA vs KK is a great idea, and being sad that your opponent spiked a K on the flop for a $5,000 pot. Now, good poker players do talk a lot about not being "results-oriented" (even if your AA is rivered by KK, you played the hand well if you got the money in before that), and many players will tell you that the way to do this is to cultivate a sense of detachment about money coming in and out. I certainly try to avoid being sad when I lose a big hand; such is life. But being sad isn't the end of the world, so long as you got the money in good and continue to do so.
- bcassedy 9y ago
  Risky? In most discussions I've seen on the subject, Uber was mentioned as one of the least risky startups one could join.
  - icpmacdo 9y ago
    Maybe just all pre IPO tech shares are a risky asset class.
    - sgs1370 9y ago
      Any individual company is a risky asset class. The advantage of a company you work for is that you are able to influence the outcome, and for small companies, you may know insider information that allows you to decide whether to invest money or your effort in the company. But yes, working for, or investing in, a pre IPO company is risky and if you want to avoid risk you should just make sure you're getting a bi-weekly salary you're happy with.
- geofft 9y ago
  Uber wasn't a risky startup about four or five years ago. They were a startup, yes, with all the risk that being a startup implies, but they were doing very well and expanding into new cities and holding their own against a competitor whose only attempt at differentiation was quirky pink mustaches. Even in cities that (unlike SF) had functional taxi systems, they offered compelling features that the taxis didn't have at the time: app-based realtime requests and reliable credit card payments. Or, put another way, if Uber's shares in 2013 should be estimated at zero, should anyone's shares not? Anyone substantially more stable than Uber is either paying you actual cash, or giving you something with a liquid market and a clear market price (e.g., RSUs on post-IPO stock, which you can just sell as soon as you get them) instead of ISOs. The entire point of ISOs is to avoid paying your employees a competitive salary entirely in cash by giving them something that you're claiming has more expected value than the difference between their base salary and what they're worth. If you're lying to them, then it's unsurprising that they'll be bitter.