4 ms·

Kind of depends on your definition of "getting screwed." The venn overlap of companies that are very successful and also screw early employees out of stock opt

Kind of depends on your definition of "getting screwed." The venn overlap of companies that are very successful and also screw early employees out of stock options is very small, but sometimes expectations aren't properly set about how options work. It is difficult to make money as an engineer via early stock options, but it is not impossible and the problems of a. understanding what you're being offered and b. making sure you don't get screwed are fairly tractable imo. The hard part is building a company that makes these things matter. Survivorship bias, n of 1 etc. of course, though. The main problem with startups is joining as employee 10-500ish/public. That's where you aren't getting good stock offers, no one has heard of your company yet and your salary sucks. The upside is this is a great place to learn as a junior both about engineering and about stock options. You are right that you need to have a lot of business experience to really understand this stuff too. Dabbling in startups is a good way to spin your tires and get screwed, but if you commit to the industry and go through enough deals you can learn enough to protect yourself. If anyone is currently considering an offer that includes equity and wants some help thinking about how to value it my contact info is in profile, feel free to reach out.

rhizome 8y ago
The venn overlap of companies that are very successful and also screw early employees out of stock options is very small, but sometimes expectations aren't properly set about how options work. Do you have any support for this? I'd love to read (or whatever) if so. but sometimes expectations aren't properly set about how options work. Perverse incentives, moral hazard, etc.
- wdewind 8y ago
  Sorry I don't have a source, but what I really meant by that was: when you hear the stories of engineers getting "screwed out of options" it always boils down to things like liquidation preferences and taxes and things like that that are built into the stock agreement. You also very rarely hear these stories in places that are doing super well, it's places that are failing and the company is being chopped up for scraps that things like liquidation preferences really even become a serious problem for employees anyway. The real problem is usually just that the business doesn't do well. I'm sure there are exceptions and places where people disagree about the terms of the actual agreement but by and large these stories are "a thing that felt really low chance happened and the stock agreement had a clause for that and that sucks for me." Truly shitty situations, but ones that you can factor into your risk model when deciding whether or not to accept the offer. Part of the deal of having ownership in the business is taking the responsibility of that risk on. Not everyone wants that which is why a higher salary at a more stable big company makes more sense for some people. Also, I think the perverse incentives thing is real, but again I want to reiterate: the cool thing about stock options is that they allow you to have a small (but often significant) amount of ownership in the means of production. But that also means increased responsibility, which includes the responsibility to understand the value of the options agreements you sign. If you need to hire a lawyer to explain the agreement, or you need more information on the business, cap table etc., in order to fairly value the options in the offer those are all fair questions to ask. Additionally the way companies respond to your request for such information will tell you everything you need to know about how they truly feel about employee ownership.

rhizome 8y ago

The venn overlap of companies that are very successful and also screw early employees out of stock options is very small, but sometimes expectations aren't properly set about how options work. Do you have any support for this? I'd love to read (or whatever) if so. but sometimes expectations aren't properly set about how options work. Perverse incentives, moral hazard, etc.

wdewind 8y ago
Sorry I don't have a source, but what I really meant by that was: when you hear the stories of engineers getting "screwed out of options" it always boils down to things like liquidation preferences and taxes and things like that that are built into the stock agreement. You also very rarely hear these stories in places that are doing super well, it's places that are failing and the company is being chopped up for scraps that things like liquidation preferences really even become a serious problem for employees anyway. The real problem is usually just that the business doesn't do well. I'm sure there are exceptions and places where people disagree about the terms of the actual agreement but by and large these stories are "a thing that felt really low chance happened and the stock agreement had a clause for that and that sucks for me." Truly shitty situations, but ones that you can factor into your risk model when deciding whether or not to accept the offer. Part of the deal of having ownership in the business is taking the responsibility of that risk on. Not everyone wants that which is why a higher salary at a more stable big company makes more sense for some people. Also, I think the perverse incentives thing is real, but again I want to reiterate: the cool thing about stock options is that they allow you to have a small (but often significant) amount of ownership in the means of production. But that also means increased responsibility, which includes the responsibility to understand the value of the options agreements you sign. If you need to hire a lawyer to explain the agreement, or you need more information on the business, cap table etc., in order to fairly value the options in the offer those are all fair questions to ask. Additionally the way companies respond to your request for such information will tell you everything you need to know about how they truly feel about employee ownership.