8 ms·

Dropbox has always been a successful company with great mindshare. While not quite a household name, if you worked there and told your family there's a chance t

Dropbox has always been a successful company with great mindshare. While not quite a household name, if you worked there and told your family there's a chance they would know what the company is (how many of you can do that?). Yet still, dropbox was founded in 2007. It's been over 10 years to reach IPO. Just a friendly message to any engineers out of school who see the tempting offer to work at a small fast moving startup, you may get the payout like dropbox is about to, but you might have to wait a decade.

deleted 9y ago
[deleted]
msmith10101 9y ago
More likely a new grad will get nothing: recruiters, dilution, and taxes will see to that.
- dawhizkid 9y ago
  Dropbox probably moved to RSUs at some point over the past few years, so this is only true of the last batch of options holders depending on the strike price.
jeremyis 9y ago
Early dropbox employees have had opportunities to cash out. Same has happened for other big private startups.
- econner 9y ago
  Yes, but there's no denying that a bit of bait and switch goes on at these companies whereby they grant you a bunch of stock options, call it part of your total comp, and then restrict 100% what you can do with them unless it's on their terms.
  - appachai2 9y ago
    Yeah, most startups aren't geared towards their employees. They have to grow a certain size before the employees are able to get reasonable terms from their employer.
  - cheriot 9y ago
    Plus the tax penalty of exercising those options when you leave! The only way companies will give up the ability to lock in talent is if enough people make it a condition of accepting the offer.
    - usaar333 9y ago
      Good thing Dropbox is one of those "good companies" that doesn't require exercising on leaving.
      - fossuser 9y ago
        Even with this, if they're ISOs they'll transfer to NSOs after 90 days. This probably didn't matter before, but the new tax law in the US increases where AMT kicks in from around 120k to 500k. This means that ISOs can probably be exercised tax free, but NSOs require you to pay taxes on the spread from strike to the fair market valuation. If your strike price is low enough you may be able to save and afford to exercise the ISOs, the NSOs will probably be too expensive with the tax burden. There's also a 10yr expiration on options anyway so it's possible that you could lose them even if you're waiting for an IPO while holding unexercised NSOs.
        woolvalley 9y ago
        Now it's 500k, the entire concept of ISOs is actually somewhat useful. Exercising a bit each year doesn't have hilarious consequences where the tax cost to exercise is 4 times more than the strike price itself. In my experience, small startup options don't get exercised because of the tax bill, not because of the strike price.
- RestlessMind 9y ago
  Is there any guarantee of a cash-out opportunity at private startups? Or is it at the mercy of your employer and one can even have bad experiences like Zynga where your options could be clawed back?
  - komali2 9y ago
    My understanding is that it's entirely at the mercy of whatever contract you signed.
  - hatred 9y ago
    Most startups in SV though have a standard ROFR clause. So as long as you can find a buyer, you would get paid. That being said, read the options agreement carefully and ensure your interests are well protected.
    - timr 9y ago
      "read the options agreement carefully and ensure your interests are well protected." It's worth noting that, in nearly all cases, you will not receive an options agreement until well after you have accepted the offer. I've never tried to ask for an options agreement prior to accepting an offer, but I'd imagine it would be a very difficult thing to get at most companies.
      - notyourday 9y ago
        So you accept the offer, get the options agreement and if it does not work for you then you find another job and move on.
        timr 9y ago
        ...or maybe you've quit another job, or moved across the country, or any number of things that aren't easily reversible decisions. Not everyone is 20 years old, single and childless. Point is, negotiate a salary that meets your needs, and treat the stock options like lottery tickets, because that's what they are.
- komali2 9y ago
  What sort of opportunities? I'm curious what I can eventually do with my options.
  - prklmn 9y ago
    Sell them in a private offering such as this - https://www.reuters.com/article/us-uber-softbank-tender/softbank-succeeds-in-tender-offer-for-uber-shares-idUSKBN1EM1NB https://www.reuters.com/article/us-uber-softbank-tender/soft...
  - SREinSF 9y ago
    Secondary markets. Both SharesPost and Nasdaq Private Market (Second Market Solutions was acquired by Nasdaq) offer this service. Pre IPO, FB shares were floating around secondary markets. Note investors are usually looking for household name unicorns on these markets. https://www.wsj.com/articles/SB10001424052970203833004577249512827646658 https://www.wsj.com/articles/SB10001424052970203833004577249...
  - woolvalley 9y ago
    As someone who has had those opportunities, they are often not that good. Your limited to a certain percentage of your vested stock, and there is a pool which quickly gets oversubscribed. And you can't do it in an adhoc manner, it's usually organized by the company to one buyer.
- bogomipz 9y ago
  And how many years was it before early Dropbox employees allowed to cash out?
TallGuyShort 9y ago
Waiting a decade is not necessarily a bad thing unless you're just looking for a quick payout. As a customer (and honestly as an employee most of the time), I like to see a company that built a business for 10 years and wasn't rushing to a huge infusion of cash that comes with a big burden attached.
- appachai2 9y ago
  I don't want to wait a decade to cash out (that's my 20s or 30s :-o), especially when this is my primary income stream. I would rather work at another competing public tech company in such a case, so that my payout is guaranteed. This way I can start building equity/second income stream etc. quite early in life.
- slg 9y ago
  I don't mean this facetiously, but what is different about Dropbox as a company compared to what it was 7 or 8 years ago? Their primary product seems mostly the same from an end user perspective.
  - komali2 9y ago
    Is that bad? I'm very attracted to that. Dropbox does the thing it always did, but better and more reliably.
    - slg 9y ago
      No it isn't bad, but the comment I was responding to mentioned that they like to see a company built up over time. I just don't generally know what Dropbox has been building over that span that wasn't present very early on.
      - TallGuyShort 9y ago
        > I just don't generally know what Dropbox has been building Customers.
econner 9y ago
This exactly. There's very a small chance you end up at a company like Dropbox, and even if you do it could still take 10 years to see any profit from it. Add to that the significant financial risk you probably have to take on to exercise options and pay AMT, all the while completely uncertain of payoff.
- jforman 9y ago
  These days, that is mitigated partially by salaries that are closer to market (and sometimes even higher than market) than was historically the case for startups. But the AMT/exercising problem can be severe if you're unlucky.
habosa 9y ago
I know some people who joined Dropbox as new grads in 2014. The company had <1000 employees and seemed like it had a lot of upside. The options given out at that time were priced at a $10B and have been basically under water since. So even if you do join a fast growing company with a good brand and the potential to go public there's still a solid chance you make no money.
- teej 9y ago
  Worse than making no money, you could have exercised your stock options for any number of totally valid reasons and lost some or all of that cash.
  - rockinghigh 9y ago
    If you exercised, wouldn't you be able to sell after the IPO?
    - dingdongding 9y ago
      No. You still go thru 6 month lock in period
- arnioxux 9y ago
  I thought they switched to RSUs? Are you sure that new grad didn't get a mix of RSUs and options?
  - habosa 9y ago
    They did attempt to make good later by converting some of those options to RSUs but some options remain. Note: I am basing this from one person who shared financial details with me, there may be a large variance in offers to different employees.
    - seattleeng 9y ago
      Just to be clear, you're saying that the strike of the option grants (or the 409a) in 2014 was roughly based on a 10b valuation? That does seem to screw over anyone with such options, since it's unlikely they'll see appreciable gain on those. Is this sort of conversion from existing option grants to RSUs common? I know most startups convert to RSUs for new grants eventually, but was unaware that some also apply it retroactively. It's a nice show of good faith to convert them to some # of RSUs on Dropbox's part.

deleted 9y ago

[deleted]

msmith10101 9y ago

More likely a new grad will get nothing: recruiters, dilution, and taxes will see to that.

dawhizkid 9y ago
Dropbox probably moved to RSUs at some point over the past few years, so this is only true of the last batch of options holders depending on the strike price.

jeremyis 9y ago

Early dropbox employees have had opportunities to cash out. Same has happened for other big private startups.

econner 9y ago
Yes, but there's no denying that a bit of bait and switch goes on at these companies whereby they grant you a bunch of stock options, call it part of your total comp, and then restrict 100% what you can do with them unless it's on their terms.
- appachai2 9y ago
  Yeah, most startups aren't geared towards their employees. They have to grow a certain size before the employees are able to get reasonable terms from their employer.
- cheriot 9y ago
  Plus the tax penalty of exercising those options when you leave! The only way companies will give up the ability to lock in talent is if enough people make it a condition of accepting the offer.
  - usaar333 9y ago
    Good thing Dropbox is one of those "good companies" that doesn't require exercising on leaving.
    - fossuser 9y ago
      Even with this, if they're ISOs they'll transfer to NSOs after 90 days. This probably didn't matter before, but the new tax law in the US increases where AMT kicks in from around 120k to 500k. This means that ISOs can probably be exercised tax free, but NSOs require you to pay taxes on the spread from strike to the fair market valuation. If your strike price is low enough you may be able to save and afford to exercise the ISOs, the NSOs will probably be too expensive with the tax burden. There's also a 10yr expiration on options anyway so it's possible that you could lose them even if you're waiting for an IPO while holding unexercised NSOs.
      - woolvalley 9y ago
        Now it's 500k, the entire concept of ISOs is actually somewhat useful. Exercising a bit each year doesn't have hilarious consequences where the tax cost to exercise is 4 times more than the strike price itself. In my experience, small startup options don't get exercised because of the tax bill, not because of the strike price.
RestlessMind 9y ago
Is there any guarantee of a cash-out opportunity at private startups? Or is it at the mercy of your employer and one can even have bad experiences like Zynga where your options could be clawed back?
- komali2 9y ago
  My understanding is that it's entirely at the mercy of whatever contract you signed.
- hatred 9y ago
  Most startups in SV though have a standard ROFR clause. So as long as you can find a buyer, you would get paid. That being said, read the options agreement carefully and ensure your interests are well protected.
  - timr 9y ago
    "read the options agreement carefully and ensure your interests are well protected." It's worth noting that, in nearly all cases, you will not receive an options agreement until well after you have accepted the offer. I've never tried to ask for an options agreement prior to accepting an offer, but I'd imagine it would be a very difficult thing to get at most companies.
    - notyourday 9y ago
      So you accept the offer, get the options agreement and if it does not work for you then you find another job and move on.
      - timr 9y ago
        ...or maybe you've quit another job, or moved across the country, or any number of things that aren't easily reversible decisions. Not everyone is 20 years old, single and childless. Point is, negotiate a salary that meets your needs, and treat the stock options like lottery tickets, because that's what they are.
komali2 9y ago
What sort of opportunities? I'm curious what I can eventually do with my options.
- prklmn 9y ago
  Sell them in a private offering such as this - https://www.reuters.com/article/us-uber-softbank-tender/softbank-succeeds-in-tender-offer-for-uber-shares-idUSKBN1EM1NB https://www.reuters.com/article/us-uber-softbank-tender/soft...
- SREinSF 9y ago
  Secondary markets. Both SharesPost and Nasdaq Private Market (Second Market Solutions was acquired by Nasdaq) offer this service. Pre IPO, FB shares were floating around secondary markets. Note investors are usually looking for household name unicorns on these markets. https://www.wsj.com/articles/SB10001424052970203833004577249512827646658 https://www.wsj.com/articles/SB10001424052970203833004577249...
- woolvalley 9y ago
  As someone who has had those opportunities, they are often not that good. Your limited to a certain percentage of your vested stock, and there is a pool which quickly gets oversubscribed. And you can't do it in an adhoc manner, it's usually organized by the company to one buyer.
bogomipz 9y ago
And how many years was it before early Dropbox employees allowed to cash out?

TallGuyShort 9y ago

Waiting a decade is not necessarily a bad thing unless you're just looking for a quick payout. As a customer (and honestly as an employee most of the time), I like to see a company that built a business for 10 years and wasn't rushing to a huge infusion of cash that comes with a big burden attached.

appachai2 9y ago
I don't want to wait a decade to cash out (that's my 20s or 30s :-o), especially when this is my primary income stream. I would rather work at another competing public tech company in such a case, so that my payout is guaranteed. This way I can start building equity/second income stream etc. quite early in life.
slg 9y ago
I don't mean this facetiously, but what is different about Dropbox as a company compared to what it was 7 or 8 years ago? Their primary product seems mostly the same from an end user perspective.
- komali2 9y ago
  Is that bad? I'm very attracted to that. Dropbox does the thing it always did, but better and more reliably.
  - slg 9y ago
    No it isn't bad, but the comment I was responding to mentioned that they like to see a company built up over time. I just don't generally know what Dropbox has been building over that span that wasn't present very early on.
    - TallGuyShort 9y ago
      > I just don't generally know what Dropbox has been building Customers.

econner 9y ago

This exactly. There's very a small chance you end up at a company like Dropbox, and even if you do it could still take 10 years to see any profit from it. Add to that the significant financial risk you probably have to take on to exercise options and pay AMT, all the while completely uncertain of payoff.

jforman 9y ago
These days, that is mitigated partially by salaries that are closer to market (and sometimes even higher than market) than was historically the case for startups. But the AMT/exercising problem can be severe if you're unlucky.

habosa 9y ago

I know some people who joined Dropbox as new grads in 2014. The company had <1000 employees and seemed like it had a lot of upside. The options given out at that time were priced at a $10B and have been basically under water since. So even if you do join a fast growing company with a good brand and the potential to go public there's still a solid chance you make no money.

teej 9y ago
Worse than making no money, you could have exercised your stock options for any number of totally valid reasons and lost some or all of that cash.
- rockinghigh 9y ago
  If you exercised, wouldn't you be able to sell after the IPO?
  - dingdongding 9y ago
    No. You still go thru 6 month lock in period
arnioxux 9y ago
I thought they switched to RSUs? Are you sure that new grad didn't get a mix of RSUs and options?
- habosa 9y ago
  They did attempt to make good later by converting some of those options to RSUs but some options remain. Note: I am basing this from one person who shared financial details with me, there may be a large variance in offers to different employees.
  - seattleeng 9y ago
    Just to be clear, you're saying that the strike of the option grants (or the 409a) in 2014 was roughly based on a 10b valuation? That does seem to screw over anyone with such options, since it's unlikely they'll see appreciable gain on those. Is this sort of conversion from existing option grants to RSUs common? I know most startups convert to RSUs for new grants eventually, but was unaware that some also apply it retroactively. It's a nice show of good faith to convert them to some # of RSUs on Dropbox's part.