8 ms·

When you're a small company which hope to grow it can be a win-win for both you and your employees (if they understand correctly how options work) : you may be

When you're a small company which hope to grow it can be a win-win for both you and your employees (if they understand correctly how options work) : you may be short on cash, but confident in your growth, and if they too feel confident they can choose to work for less cash compensation but with a chance of getting more when converting their options later

colinbartlett 9y ago
I have a drawer full of stock option paperwork from various start ups I’ve worked with over my career, all of which were “confident” in their growth prospects and none of which exist anymore. At this point I feel like anyone who chooses stock options over cash is naive, delusional, or misled.
- jsjohnst 9y ago
  > I have a drawer full of stock option paperwork from various start ups I’ve worked with over my career Ditto, but I’ve also had two good success stories in my career too. > At this point I feel like anyone who chooses stock options over cash is naive, delusional, or misled. Why does everyone think it’s an either / or scenario? I’ve negotiated to have both more than once, salary at where I feel I should be and options/RSU where it might be a very nice bonus at a future date. Don’t be afraid to say no and keep looking if a company is taking advantage of you. I realize it’s hard sometimes, but the folks on HN generally can have the upper hand negotiating as tech employees are in such demand.
  - colinbartlett 9y ago
    I'm fortunate that I recognized early the negotiating position I had, and each one of those worthless pieces of paper came with what I would consider a generous, above market salary. But I worry that many new to the industry are selling themselves short with an "or" and not realizing that an "and" is possible.
    - jsjohnst 9y ago
      Agree completely. I got bit early in my career, which is why I try to help as many as I can who are early in their career now.
    - sidlls 9y ago
      Well, an "and" is possible to the extent that there isn't a sufficient supply of people thinking "or" competing for the job. There are a number of self-imposed mechanisms that put downward pressure on compensation for developers. Willingness to take what are effectively lottery tickets and rationalizing it as discounted or future potential earnings is one of them.
  - padobson 9y ago
    This. Your salary should ALWAYS be the highest possible salary the market can support. Equity or options compensation at a startup should be used to defray the risk of the company failing in the near and midterm. So if Google is offering you $100k, then you should be asking Startup X for $100k plus equity.
    - CalChris 9y ago
      As an early employee, I have taken less than market (like a third less) along with a 0.1% equity option. That aligned my interests with those of the company. If starting a company I would offer the same.
      - azinman2 9y ago
        0.1% isn’t much. You’d need a billion dollar exit to make that 0.1% turn into something super significant.
        deleted 9y ago
        [deleted]
        CalChris 9y ago
        At .1% you're roughly employee 100. Yes, everyone involved at that point should be looking for a billion dollar exit.
      - s73ver_ 9y ago
        Would you offer those as preferred shares, with a non-dilution clause in there? Otherwise I don't see how that's just pushing risk onto the employee for no gain.
        CalChris 9y ago
        Neither founders nor employees ever get an anti-dilution clause, or at least, I've never heard of this. VCs would simply hate it. Founders and employees get common and are last on the liquidation preference list. Anti-dilution is usually for A or B rounds against a possible later round. A cap (I hate caps) is a form of anti-dilution. None of this is available to employees at least that I've ever heard of. As a founder I'd never expect it from a VC nor would I ever give it to employees. Founders can get something called Series FF that grants them a supermajority of voting which allows them to retain control even as they give up their majority. You have to do really well in the seed round to get it in A. I think Larry+Sergey got this.
- mbesto 9y ago
  I tell everyone that seeks my advice on this subject - options are basically lottery tickets, so don't lever your salary up and down based on what option packages the company might present to you. From a startup's perspective, I've seen this happen all of the time "take $10k less and you'll get 5 BPS!". For a financial computational analysis of why this never really works out in the aggregate, I basically just send them this: https://danluu.com/startup-options/ https://danluu.com/startup-options/ > At this point I feel like anyone who chooses stock options over cash is naive, delusional, or misled. People consistently make irrational decisions with money all of the time. The reality for many people is taking the stock option route makes them emotionally more vested in the success in the company. Companies know this and regularly exploit it. Lastly - it is OK to join a startup early on to "mint" yourself professionally (e.g. "I was employee #4 at Google" or "I was employee #4 at a company that was bought by Google"). People's eyes perk up (in the Valley especially) because they assume that because you were an early employee you were more likely to contribute to the successful exit of the company. Thus, "minting" yourself in the job market. Whether that's true or not in reality is another point...
- logicallee 9y ago
  This comment might be a bit hard to swallow, I've tried to be polite but the message itself is a difficult one. >I have a drawer full of stock option paperwork from various start ups I’ve worked with over my career, all of which were “confident” in their growth prospects and none of which exist anymore. >At this point I feel like anyone who chooses stock options over cash is naive, delusional, or misled. First let's assume you're a 10,000x engineer who was also able to change the course of small startups through your personality. Then if this has happened once or twice it might be bad luck. But a drawerful of times, and we should perhaps revisit the assumption that you are a 10,000x engineer who is able to change the course of small startups. Maybe this is about you. You conclude: > I feel like anyone who chooses stock options over cash is naive, delusional, or misled. But there is a hidden assumption there that if you are not a 10,000x engineer, then nobody is. Do you think this is a fair generalization for you to make? If the startups you picked and joined failed is it fair to say had anyone else been the one to pick and join startups (not necessarily the ones you picked and joined) they could fare no better? That you're the best there is, at the task of picking a startup to join and lighting its boosters on fire? Basically it is like dating: if someone says every single person has left them severely disappointed, that says more about them than it does about dating. To stick with the analogy: we know people enter happy successful and long-lived relationships. We know there are successful startups whose destinies early hires helped set. If every one of the ones you've tried with have failed, a drawerful over the course of a career - could this be more about you than them? Are you not perhaps the "truly excellent" husband who has given up on marriage, after 5 divorces. If so, then perhaps it is not fair for you to generalize and say that anyone who gets married is delusional. Because you've been married 5 times, you know how to pick 'em, you know how to make it work: and it just does not work. I tried to be a bit polite but I hope you can see the analogy. I get that it doesn't work for you. But is it really fair to generalize your experience?
  - s73ver_ 9y ago
    Considering the vast majority of companies fail rather than become unicorns, I feel their experience is much, much more generalized than the alternative.
    - 9y ago
s73ver_ 9y ago
How is that better for the employee, though? All that's happened is that the employee took a substantial pay cut in exchange for having serious risk placed on them. Risk which is extremely tilted against them. This is also ignoring the fact that most companies will dilute the hell out of your options, so even if the company does make it, odds are you'll just have broken even from working for a regular company.

colinbartlett 9y ago

I have a drawer full of stock option paperwork from various start ups I’ve worked with over my career, all of which were “confident” in their growth prospects and none of which exist anymore. At this point I feel like anyone who chooses stock options over cash is naive, delusional, or misled.

jsjohnst 9y ago
> I have a drawer full of stock option paperwork from various start ups I’ve worked with over my career Ditto, but I’ve also had two good success stories in my career too. > At this point I feel like anyone who chooses stock options over cash is naive, delusional, or misled. Why does everyone think it’s an either / or scenario? I’ve negotiated to have both more than once, salary at where I feel I should be and options/RSU where it might be a very nice bonus at a future date. Don’t be afraid to say no and keep looking if a company is taking advantage of you. I realize it’s hard sometimes, but the folks on HN generally can have the upper hand negotiating as tech employees are in such demand.
- colinbartlett 9y ago
  I'm fortunate that I recognized early the negotiating position I had, and each one of those worthless pieces of paper came with what I would consider a generous, above market salary. But I worry that many new to the industry are selling themselves short with an "or" and not realizing that an "and" is possible.
  - jsjohnst 9y ago
    Agree completely. I got bit early in my career, which is why I try to help as many as I can who are early in their career now.
  - sidlls 9y ago
    Well, an "and" is possible to the extent that there isn't a sufficient supply of people thinking "or" competing for the job. There are a number of self-imposed mechanisms that put downward pressure on compensation for developers. Willingness to take what are effectively lottery tickets and rationalizing it as discounted or future potential earnings is one of them.
- padobson 9y ago
  This. Your salary should ALWAYS be the highest possible salary the market can support. Equity or options compensation at a startup should be used to defray the risk of the company failing in the near and midterm. So if Google is offering you $100k, then you should be asking Startup X for $100k plus equity.
  - CalChris 9y ago
    As an early employee, I have taken less than market (like a third less) along with a 0.1% equity option. That aligned my interests with those of the company. If starting a company I would offer the same.
    - azinman2 9y ago
      0.1% isn’t much. You’d need a billion dollar exit to make that 0.1% turn into something super significant.
      - deleted 9y ago
        [deleted]
      - CalChris 9y ago
        At .1% you're roughly employee 100. Yes, everyone involved at that point should be looking for a billion dollar exit.
    - s73ver_ 9y ago
      Would you offer those as preferred shares, with a non-dilution clause in there? Otherwise I don't see how that's just pushing risk onto the employee for no gain.
      - CalChris 9y ago
        Neither founders nor employees ever get an anti-dilution clause, or at least, I've never heard of this. VCs would simply hate it. Founders and employees get common and are last on the liquidation preference list. Anti-dilution is usually for A or B rounds against a possible later round. A cap (I hate caps) is a form of anti-dilution. None of this is available to employees at least that I've ever heard of. As a founder I'd never expect it from a VC nor would I ever give it to employees. Founders can get something called Series FF that grants them a supermajority of voting which allows them to retain control even as they give up their majority. You have to do really well in the seed round to get it in A. I think Larry+Sergey got this.
mbesto 9y ago
I tell everyone that seeks my advice on this subject - options are basically lottery tickets, so don't lever your salary up and down based on what option packages the company might present to you. From a startup's perspective, I've seen this happen all of the time "take $10k less and you'll get 5 BPS!". For a financial computational analysis of why this never really works out in the aggregate, I basically just send them this: https://danluu.com/startup-options/ https://danluu.com/startup-options/ > At this point I feel like anyone who chooses stock options over cash is naive, delusional, or misled. People consistently make irrational decisions with money all of the time. The reality for many people is taking the stock option route makes them emotionally more vested in the success in the company. Companies know this and regularly exploit it. Lastly - it is OK to join a startup early on to "mint" yourself professionally (e.g. "I was employee #4 at Google" or "I was employee #4 at a company that was bought by Google"). People's eyes perk up (in the Valley especially) because they assume that because you were an early employee you were more likely to contribute to the successful exit of the company. Thus, "minting" yourself in the job market. Whether that's true or not in reality is another point...
logicallee 9y ago
This comment might be a bit hard to swallow, I've tried to be polite but the message itself is a difficult one. >I have a drawer full of stock option paperwork from various start ups I’ve worked with over my career, all of which were “confident” in their growth prospects and none of which exist anymore. >At this point I feel like anyone who chooses stock options over cash is naive, delusional, or misled. First let's assume you're a 10,000x engineer who was also able to change the course of small startups through your personality. Then if this has happened once or twice it might be bad luck. But a drawerful of times, and we should perhaps revisit the assumption that you are a 10,000x engineer who is able to change the course of small startups. Maybe this is about you. You conclude: > I feel like anyone who chooses stock options over cash is naive, delusional, or misled. But there is a hidden assumption there that if you are not a 10,000x engineer, then nobody is. Do you think this is a fair generalization for you to make? If the startups you picked and joined failed is it fair to say had anyone else been the one to pick and join startups (not necessarily the ones you picked and joined) they could fare no better? That you're the best there is, at the task of picking a startup to join and lighting its boosters on fire? Basically it is like dating: if someone says every single person has left them severely disappointed, that says more about them than it does about dating. To stick with the analogy: we know people enter happy successful and long-lived relationships. We know there are successful startups whose destinies early hires helped set. If every one of the ones you've tried with have failed, a drawerful over the course of a career - could this be more about you than them? Are you not perhaps the "truly excellent" husband who has given up on marriage, after 5 divorces. If so, then perhaps it is not fair for you to generalize and say that anyone who gets married is delusional. Because you've been married 5 times, you know how to pick 'em, you know how to make it work: and it just does not work. I tried to be a bit polite but I hope you can see the analogy. I get that it doesn't work for you. But is it really fair to generalize your experience?
- s73ver_ 9y ago
  Considering the vast majority of companies fail rather than become unicorns, I feel their experience is much, much more generalized than the alternative.
  - 9y ago

s73ver_ 9y ago

How is that better for the employee, though? All that's happened is that the employee took a substantial pay cut in exchange for having serious risk placed on them. Risk which is extremely tilted against them. This is also ignoring the fact that most companies will dilute the hell out of your options, so even if the company does make it, odds are you'll just have broken even from working for a regular company.