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> The more sophisticated hires will realize this and you may then have to increase their compensation (in equity, cash or both) to make up the difference to avo

> The more sophisticated hires will realize this and you may then have to increase their compensation (in equity, cash or both) to make up the difference to avoid a morale issue. What about the less sophisticated hires? Employees are trusting founders not to screw them over. I'd expect this piece to advise either: a) educating less-sophisticated employees, or b) increasing compensation for all employees that didn't get their equity grants before the term sheet.

throwaway2016a 9y ago
The part right above it is interesting too... > If you have any pending or promised equity grants you haven’t already taken care of before you start your Series A process, do that ASAP. Huh? Seriously? If someone promises me equity I expect that finalized within weeks. How many companies just have promised equity sitting around without the paperwork being done? Edit: Some super good points about board approval. Most of the company's I've worked at have the rules of the options pool voted on by the board but the grants can be given out without board approval (as long as they were the standard new hire grant and nothing unusual). But I can see how if something like that isn't in place it could take a while.
- johns 9y ago
  It happens. Option grants require board approval or are sometimes waiting on new 409a valuations. It would be nice to turn them all around quickly but it’s not always feasible. The advice quoted is good advice.
- chillax2 9y ago
  At a recent job, my option grant wasn't official until approved at the next quarterly board meeting. There was about 2 months delay (but it also didn't impact me as it wasn't between any "material events").
- icedchai 9y ago
  Tons. This happens all the time. Equity grants take months. I was promised x%, at hire. By the time I got my equity grant, I was already diluted.
  - deleted 9y ago
    [deleted]
  - throwaway2016a 9y ago
    I'd like to add the word "can" in there. "Equity grants [can] take months." They shouldn't though. They can take as little time as it takes the president or CEO to hit the "print" button and get out a pen if the rules are laid out clearly and voted on ahead of time by the board.
    - jforman 9y ago
      All three startups I have been involved with have had board-level approval for individual equity grants. I have never seen any real push-back on them, but I have also never heard of the board relinquishing control over something so vital. The employment contract guarantees the equity subject to board approval. I'm not quite sure why people are making such a big deal out of this.
      - throwaway2016a 9y ago
        What you describe is certainly common. I have a different experience and I like what I have seen better. > The board agrees all new employees get X options with a 1 year cliff and 4 year vesting without additional approval so long as total options granted does not exceed Y. The board only needs needs to be involved if X or Y need to be changed. Having the board bother themselves with every little hire is just ridiculous. They have better things to do. Plus if the options are defined on paper the company can't be accused of favoring certain classes of employees differently.
  - Retric 9y ago
    The best option at that point is to quit and make public the breach of contract. Don't do business with unethical people or organizations it's simply not worth your time.
    - jacquesm 9y ago
- rokhayakebe 9y ago
  How many companies just have promised equity sitting around without the paperwork being done? This is just pure dishonesty. I know folks who have said things like this and I A.L.W.A.Y.S. say "Sure for now send me a text message or email until we can get to documents." Sure enough I have never gotten a text or email or anything in writing. People/companies who are serious will take an action and tell you exactly when (in the next few days) this will be handled and how.
- jacquesm 9y ago
  > If someone promises me equity I expect that finalized within weeks. How many companies just have promised equity sitting around without the paperwork being done? This is so common that it's not even funny.
  - aorloff 9y ago
    The answer is : tons. Most startups I've worked for do option grant approvals quarterly or thereabouts. But I think it would be unethical to approve grants at a different price or size than promised in an offer. Sure you may have been diluted by then, but you wouldn't have had any say in it any way and the idea is that subsequent dilutions are good for you as they reflect a growing value. That's the IDEA anyhow.
neerkumar 9y ago
Yeah, that sounds so bad. It sounds like: try to screw them over, but be aware that some employees will realize that and, just for them, you will have to adjust compensation.
edanm 9y ago
"Employees are trusting founders not to screw them over." So on the one hand, every relationship of this kind (and of most kinds) requires trust. On the other hand, you as an employee really shouldn't just be flat-out trusting your employers about things where you are technically at odds with them. Even if they have no intention of screwing you over, it's not always about them - they may be replaced by new management as the company grows, for one. Or they simply might not know something, for another - what if they're unaware of a certain tax implication around an equity grant, for example? Founders are oftentimes doing this for the first time, and just like most employees, don't necessarily know everything. You should really make sure you are aware of all issues and implications of the contracts you get into, as much as is feasible.
akharris 9y ago
You're absolutely right. Thanks for flagging it. This is something that founders should pro-actively surface and address ahead of a financing whenever and wherever relevant. This is something we're working on advising founders to do. We want to do what we can to make sure that employees - no matter how experienced or sophisticated - get treated fairly throughout the life of the company. My bad for the wording which seems to suggest otherwise. Edit: We updated the wording as well.
- thaumasiotes 9y ago
  > My bad for the wording which seems to suggest otherwise. > Edit: We updated the wording as well. But the updated wording just says "some hires may realize this and you may then have to increase their compensation...". I don't think the problem being flagged was "you're implying that founders should screw over unsophisticated hires, when you should be implying that founders should screw over every hire they can, sophisticated or not".
  - deleted 9y ago
    [deleted]
joncrane 9y ago
Did they just update the wording? It just says "some hires" now.
- akharris 9y ago
  We did.
- bri3d 9y ago
  That's still just as bad, wow! This could be phrased much less offensively as something along the lines of "Your employees will notice and you may have to offer them compensation for their lost upside." This assumes you have hired intelligent employees and cautions against the actual issue (not having your outstanding-options ducks in a row before closing the Series A) rather than the consequence (employees find out and you have to pay them more). The current phrasing still assumes only some of your employees will notice, and couching the issue as one of "morale" pointlessly obfuscates the fact that these employees would be losing upside they (presumably) agreed to work for you with the understanding they would get.
jasonkwon 9y ago
The main point was to make sure employees equity promises are taken care of ASAP so their upside is as good as it can be. The point about some hires being upset if the price goes up in the interim was just meant to illustrate what can happen if the grants aren’t completed beforehand (descriptive, not prescriptive). I gave Aaron the language for that paragraph so I apologize if I offended anyone. It wasn’t intended to imply that founders should selectively pick and choose who gets made whole or not based on “sophistication.” I agree with all the points you make about educating and treating people fairly.
robbiemitchell 9y ago
This happened at my first startup job. After I started, a new round of funding was announced. After that, my grant was finally approved at a board meeting. At double the strike price. When I raised it, I was told that's the way it works. "Grants are not finalized until the board meeting." End of story. I was a junior employee at the time and had no leverage because I had already been in the seat for weeks. Not sharing for sympathy, just to highlight the reality: this can happen, and unless you get both the number of options and strike in writing -- or a commitment to make them equivalent -- there's a decent chance you will be screwed out of what you're promised.

throwaway2016a 9y ago

The part right above it is interesting too... > If you have any pending or promised equity grants you haven’t already taken care of before you start your Series A process, do that ASAP. Huh? Seriously? If someone promises me equity I expect that finalized within weeks. How many companies just have promised equity sitting around without the paperwork being done? Edit: Some super good points about board approval. Most of the company's I've worked at have the rules of the options pool voted on by the board but the grants can be given out without board approval (as long as they were the standard new hire grant and nothing unusual). But I can see how if something like that isn't in place it could take a while.

johns 9y ago
It happens. Option grants require board approval or are sometimes waiting on new 409a valuations. It would be nice to turn them all around quickly but it’s not always feasible. The advice quoted is good advice.
chillax2 9y ago
At a recent job, my option grant wasn't official until approved at the next quarterly board meeting. There was about 2 months delay (but it also didn't impact me as it wasn't between any "material events").
icedchai 9y ago
Tons. This happens all the time. Equity grants take months. I was promised x%, at hire. By the time I got my equity grant, I was already diluted.
- deleted 9y ago
  [deleted]
- throwaway2016a 9y ago
  I'd like to add the word "can" in there. "Equity grants [can] take months." They shouldn't though. They can take as little time as it takes the president or CEO to hit the "print" button and get out a pen if the rules are laid out clearly and voted on ahead of time by the board.
  - jforman 9y ago
    All three startups I have been involved with have had board-level approval for individual equity grants. I have never seen any real push-back on them, but I have also never heard of the board relinquishing control over something so vital. The employment contract guarantees the equity subject to board approval. I'm not quite sure why people are making such a big deal out of this.
    - throwaway2016a 9y ago
      What you describe is certainly common. I have a different experience and I like what I have seen better. > The board agrees all new employees get X options with a 1 year cliff and 4 year vesting without additional approval so long as total options granted does not exceed Y. The board only needs needs to be involved if X or Y need to be changed. Having the board bother themselves with every little hire is just ridiculous. They have better things to do. Plus if the options are defined on paper the company can't be accused of favoring certain classes of employees differently.
- Retric 9y ago
  The best option at that point is to quit and make public the breach of contract. Don't do business with unethical people or organizations it's simply not worth your time.
  - jacquesm 9y ago
rokhayakebe 9y ago
How many companies just have promised equity sitting around without the paperwork being done? This is just pure dishonesty. I know folks who have said things like this and I A.L.W.A.Y.S. say "Sure for now send me a text message or email until we can get to documents." Sure enough I have never gotten a text or email or anything in writing. People/companies who are serious will take an action and tell you exactly when (in the next few days) this will be handled and how.
jacquesm 9y ago
> If someone promises me equity I expect that finalized within weeks. How many companies just have promised equity sitting around without the paperwork being done? This is so common that it's not even funny.
- aorloff 9y ago
  The answer is : tons. Most startups I've worked for do option grant approvals quarterly or thereabouts. But I think it would be unethical to approve grants at a different price or size than promised in an offer. Sure you may have been diluted by then, but you wouldn't have had any say in it any way and the idea is that subsequent dilutions are good for you as they reflect a growing value. That's the IDEA anyhow.

neerkumar 9y ago

Yeah, that sounds so bad. It sounds like: try to screw them over, but be aware that some employees will realize that and, just for them, you will have to adjust compensation.

edanm 9y ago

"Employees are trusting founders not to screw them over." So on the one hand, every relationship of this kind (and of most kinds) requires trust. On the other hand, you as an employee really shouldn't just be flat-out trusting your employers about things where you are technically at odds with them. Even if they have no intention of screwing you over, it's not always about them - they may be replaced by new management as the company grows, for one. Or they simply might not know something, for another - what if they're unaware of a certain tax implication around an equity grant, for example? Founders are oftentimes doing this for the first time, and just like most employees, don't necessarily know everything. You should really make sure you are aware of all issues and implications of the contracts you get into, as much as is feasible.

akharris 9y ago

You're absolutely right. Thanks for flagging it. This is something that founders should pro-actively surface and address ahead of a financing whenever and wherever relevant. This is something we're working on advising founders to do. We want to do what we can to make sure that employees - no matter how experienced or sophisticated - get treated fairly throughout the life of the company. My bad for the wording which seems to suggest otherwise. Edit: We updated the wording as well.

thaumasiotes 9y ago
> My bad for the wording which seems to suggest otherwise. > Edit: We updated the wording as well. But the updated wording just says "some hires may realize this and you may then have to increase their compensation...". I don't think the problem being flagged was "you're implying that founders should screw over unsophisticated hires, when you should be implying that founders should screw over every hire they can, sophisticated or not".
- deleted 9y ago
  [deleted]

joncrane 9y ago

Did they just update the wording? It just says "some hires" now.

akharris 9y ago
We did.
bri3d 9y ago
That's still just as bad, wow! This could be phrased much less offensively as something along the lines of "Your employees will notice and you may have to offer them compensation for their lost upside." This assumes you have hired intelligent employees and cautions against the actual issue (not having your outstanding-options ducks in a row before closing the Series A) rather than the consequence (employees find out and you have to pay them more). The current phrasing still assumes only some of your employees will notice, and couching the issue as one of "morale" pointlessly obfuscates the fact that these employees would be losing upside they (presumably) agreed to work for you with the understanding they would get.

jasonkwon 9y ago

The main point was to make sure employees equity promises are taken care of ASAP so their upside is as good as it can be. The point about some hires being upset if the price goes up in the interim was just meant to illustrate what can happen if the grants aren’t completed beforehand (descriptive, not prescriptive). I gave Aaron the language for that paragraph so I apologize if I offended anyone. It wasn’t intended to imply that founders should selectively pick and choose who gets made whole or not based on “sophistication.” I agree with all the points you make about educating and treating people fairly.

robbiemitchell 9y ago

This happened at my first startup job. After I started, a new round of funding was announced. After that, my grant was finally approved at a board meeting. At double the strike price. When I raised it, I was told that's the way it works. "Grants are not finalized until the board meeting." End of story. I was a junior employee at the time and had no leverage because I had already been in the seat for weeks. Not sharing for sympathy, just to highlight the reality: this can happen, and unless you get both the number of options and strike in writing -- or a commitment to make them equivalent -- there's a decent chance you will be screwed out of what you're promised.