3 ms·

What's the point of that? If you're an employee with stock options you aren't going to see a dime of the profits. You need an IPO or acquisition to make all tho

What's the point of that? If you're an employee with stock options you aren't going to see a dime of the profits. You need an IPO or acquisition to make all those extra overtime stock options pay off.

adventured 9y ago
See: the SAS Institute model of profit sharing, which they began shortly after forming the business. It has endured in an extremely successful manner for four decades as SAS has remained private. To put this into context. Facebook will likely hit ~$17 billion in profit for fiscal 2017. They have 20,000 employees. If their only obligation was to employees as owners, they could very safely distribute half a million dollars per year perpetually to every one of their employees (while distributing billions to the early shareholders). This model would have vastly outperformed the IPO model as far as the VC firms are concerned (specifically as far as their institutional capital suppliers are concerned). Most VC investment gets liquidated early on, shortly after the IPO (the same happened with Google, most of the early backers bailed not long after the IPO, or their returns to date would be comically higher; Peter Thiel made the same choice with his Facebook position, selling a lot of it early after the IPO).
- golergka 9y ago
  It's only better in hindsight, with a prior knowledge that Facebook is a mega-unicorn. But VCs make decisions with limited information, based on probabilities, and in this case going for an earlier payout via IPO or selling the company is a more rational option.
hugs 9y ago
Maybe if profitability is the goal (and not an IPO nor acquisition), then maybe offering stock options in the first place is a misaligned bad idea. Maybe a better idea is structuring a profit sharing plan? (Or if the options are offered anyway, possibly using that stock as a way to pay dividends someday.)
- justacat 9y ago
  The stock and IPO reality of the business world bums me out, when a company's product is its stock, a lot of things can get compromised.
icedchai 9y ago
Many established companies have something called a profit sharing plan, where a percentage of the profits is actually distributed to the employees. I actually worked at a company that had that, and we wound up with roughly a $5K bonus every year. Better than nothing, and actually more than I've made off of stock options, which is nothing. Actually it's negative, seeing I exercised some of them.

adventured 9y ago

See: the SAS Institute model of profit sharing, which they began shortly after forming the business. It has endured in an extremely successful manner for four decades as SAS has remained private. To put this into context. Facebook will likely hit ~$17 billion in profit for fiscal 2017. They have 20,000 employees. If their only obligation was to employees as owners, they could very safely distribute half a million dollars per year perpetually to every one of their employees (while distributing billions to the early shareholders). This model would have vastly outperformed the IPO model as far as the VC firms are concerned (specifically as far as their institutional capital suppliers are concerned). Most VC investment gets liquidated early on, shortly after the IPO (the same happened with Google, most of the early backers bailed not long after the IPO, or their returns to date would be comically higher; Peter Thiel made the same choice with his Facebook position, selling a lot of it early after the IPO).

golergka 9y ago
It's only better in hindsight, with a prior knowledge that Facebook is a mega-unicorn. But VCs make decisions with limited information, based on probabilities, and in this case going for an earlier payout via IPO or selling the company is a more rational option.

hugs 9y ago

Maybe if profitability is the goal (and not an IPO nor acquisition), then maybe offering stock options in the first place is a misaligned bad idea. Maybe a better idea is structuring a profit sharing plan? (Or if the options are offered anyway, possibly using that stock as a way to pay dividends someday.)

justacat 9y ago
The stock and IPO reality of the business world bums me out, when a company's product is its stock, a lot of things can get compromised.

icedchai 9y ago

Many established companies have something called a profit sharing plan, where a percentage of the profits is actually distributed to the employees. I actually worked at a company that had that, and we wound up with roughly a $5K bonus every year. Better than nothing, and actually more than I've made off of stock options, which is nothing. Actually it's negative, seeing I exercised some of them.