4 ms·

libertarians will tell you that that's on you for not understanding the risks involved, but that's a heartlessness and antisocial position to take. instead, po

libertarians will tell you that that's on you for not understanding the risks involved, but that's a heartlessness and antisocial position to take. instead, potential startup employees can educate themselves a bit on how options are a risky derivative investment in the startup you work for. there's really no need for the bitterness in your post once you can properly account for them (they're like lottery tickets that are only mostly, but not completely, up to chance). if you know some quantitative finance, you can (approximately) value the options (binomial and black-scholes are commonly taught in b-school), but it's really easy to miss important valuation factors that will throw your valuation way off. for example, preferred shares bought by investors could have (very unfriendly) participating preferred clauses that discount the value of your common shares. you can value that, but you'd need to be pretty good about forecasting the future value of the company to get it right. a simpler approach is to do a rough back-of-the-envelope calculation like this: i've noticed (completely anecdotally) that startups will give you options at the current valuation that if the company has a good outcome, will net you about 1-5 years worth of salary in the end. if my salary is $100K and i believe the chances of this startup succeeding is 20% (this is the hand-wavy part), my options are worth $20-100K in 5-7 years when the startup exits. or if you're risk averse, you'll completely discount the value of the options in comp negotiations. that's different by the way from scornful statements like "options have no value" where you're completely surrendering your agency in the matter. in this case, you acknowledge your risk tolerance and account for it.

gaius 9y ago
libertarians will tell you that that's on you for not understanding the risks involved, but that's a heartlessness and antisocial position to take You're missing the constant drumbeat of "options will make you rich! Work 80 hour weeks, sacrifice your health and relationships, get paid well below market rate, join our startup!" The entire VC industry is focussed on misleading people like this. One of the reasons for ageism in Silly Valley is that experienced engineers can't be suckered like this.
sockgrant 9y ago
> they're like lottery tickets that are only mostly, but not completely, up to chance > if you know some quantitative finance [...] > a simpler approach is to do a rough back-of-the-envelope calculation [...] You're looking at this as if you're calculating the odds of winning the lottery and doing backwards math to figure out the viability. That's only half of the picture. There are a lot of circumstances that do happen and can't be put into a math equation. 1) If a company is striking gold and you have significant options they can fire you before the rest of your options vest to get more stock back into the pool. See: Zynga 2) If the company needs to grow fast but doesn't have enough stock to offer new employees they can ask you to relinquish stock back into the pool to help hire more employees. If you refuse, go back to #1. There was a good post on HN where someone was being strong armed like this. 3) Dilution will happen. You can't account for how founders and investors will dilute things because there's a lot of tricks that can happen here. 4) At the end of the day, you're counting on the company to go public or be sold. The problem is that founders turn down huge acquisitions all the time, only to have the company -- and your stock -- become worthless. See: Digg and the would-be-millionaire employees that ended up with fat debt from exercising. There's plenty of ways that your stock can go bottom-up that have nothing to do with the success of a company.
- clairity 9y ago
  no, that half the picture is accounted for. that's part of the riskiness of the asset which you incorporate as the statistical variance.

gaius 9y ago

libertarians will tell you that that's on you for not understanding the risks involved, but that's a heartlessness and antisocial position to take You're missing the constant drumbeat of "options will make you rich! Work 80 hour weeks, sacrifice your health and relationships, get paid well below market rate, join our startup!" The entire VC industry is focussed on misleading people like this. One of the reasons for ageism in Silly Valley is that experienced engineers can't be suckered like this.

sockgrant 9y ago

> they're like lottery tickets that are only mostly, but not completely, up to chance > if you know some quantitative finance [...] > a simpler approach is to do a rough back-of-the-envelope calculation [...] You're looking at this as if you're calculating the odds of winning the lottery and doing backwards math to figure out the viability. That's only half of the picture. There are a lot of circumstances that do happen and can't be put into a math equation. 1) If a company is striking gold and you have significant options they can fire you before the rest of your options vest to get more stock back into the pool. See: Zynga 2) If the company needs to grow fast but doesn't have enough stock to offer new employees they can ask you to relinquish stock back into the pool to help hire more employees. If you refuse, go back to #1. There was a good post on HN where someone was being strong armed like this. 3) Dilution will happen. You can't account for how founders and investors will dilute things because there's a lot of tricks that can happen here. 4) At the end of the day, you're counting on the company to go public or be sold. The problem is that founders turn down huge acquisitions all the time, only to have the company -- and your stock -- become worthless. See: Digg and the would-be-millionaire employees that ended up with fat debt from exercising. There's plenty of ways that your stock can go bottom-up that have nothing to do with the success of a company.

clairity 9y ago
no, that half the picture is accounted for. that's part of the riskiness of the asset which you incorporate as the statistical variance.