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I'm surprised to see no discussion of pre-IPO stock options as (tech) employee compensation. It used to be the deal was you'd take a below market salary plus o

I'm surprised to see no discussion of pre-IPO stock options as (tech) employee compensation. It used to be the deal was you'd take a below market salary plus options, and the company would either IPO or go out of business in a reasonable time. That's no longer the case. Since the time to IPO is so much longer than the average tenure at a tech company, employees end up either forfeiting a bunch of equity after leaving, or sitting on illiquid shares for years after buying them. Longer post-termination exercise periods don't really help the situation, as employees are still being deprived of liquidity on a large portion of their compensation, and secondary markets offerings are still not the norm. Forget about whether it's good for the market as a whole for the moment: is there a solution for the average tech employee?

dev_dull 8y ago
> It used to be the deal was you'd take a below market salary plus options, and the company would either IPO or go out of business in a reasonable time. It’s actually an interesting thing you mention. I’d you take a below-market rate but your employer doesn’t “exist” longer than necessary, there’s a lot less actual sunken cost. Nowadays they ask you to take a below market rate and try as long as possible to stay private.
twblalock 8y ago
> Forget about whether it's good for the market as a whole for the moment: is there a solution for the average tech employee? Not really. Working at a startup is almost certainly going to result in lower compensation than working at an established company that grants RSUs or options. The decline in IPOs is a net negative for engineers who work at startups. At the same time this has been happening, larger companies have been increasing compensation for engineers. The situation is now like this: you can work at a startup for several years and hope to make a big windfall if you get in early enough to get a lot of shares and there is an acquisition or an IPO, or you can work at a FAANG company for 5 years and make a million dollars or more with none of the risk, better benefits, and probably better work-life balance. Some people are passionate about startup culture, and they should probably go work at startups, but for everyone else startup work is becoming an increasingly larger sacrifice.
- pmiller2 8y ago
  If what you say is accurate (and, I admit, it’s a logical progression from the situation I mentioned), the Nash equilibrium is that only people who don’t know or don’t care their comp is going to be stunted will work at startups. That seems bad for the startup ecosystem, so VCs and founders ought to care about it, but they don’t seem to. That seems to point to a flaw in the chain of reasoning.
  - jurassic 8y ago
    There is also the reality that not everybody can work at FAANG. I know plenty of average engineers who know which way the economic wind is blowing but haven't been able to successfully make it through the process at big companies.
    - pmiller2 8y ago
      Are there no companies that pay less than FAANG but better than pre-IPO startups?
      - xchaotic 8y ago
        There's plenty in between, think Salesforce and corporate in general
liftbigweights 8y ago
> Since the time to IPO is so much longer than the average tenure at a tech company It is inconvenient for those looking to IPO for a windfall, but keep in mind that most startups aren't looking to IPO but to be bought out. Only a tiny fraction of the unicorns IPO. Most startups are usually bought by other companies. The software security startup I worked for didn't IPO. It was bought out by another more established startup. Which was bought out by some hedge fund or something a few years later. Most ( but not all ) tech billionaires are created by these huge IPOs. But by far, most millionaires in the tech world are created by being bought out, not IPOing.

dev_dull 8y ago

> It used to be the deal was you'd take a below market salary plus options, and the company would either IPO or go out of business in a reasonable time. It’s actually an interesting thing you mention. I’d you take a below-market rate but your employer doesn’t “exist” longer than necessary, there’s a lot less actual sunken cost. Nowadays they ask you to take a below market rate and try as long as possible to stay private.

twblalock 8y ago

> Forget about whether it's good for the market as a whole for the moment: is there a solution for the average tech employee? Not really. Working at a startup is almost certainly going to result in lower compensation than working at an established company that grants RSUs or options. The decline in IPOs is a net negative for engineers who work at startups. At the same time this has been happening, larger companies have been increasing compensation for engineers. The situation is now like this: you can work at a startup for several years and hope to make a big windfall if you get in early enough to get a lot of shares and there is an acquisition or an IPO, or you can work at a FAANG company for 5 years and make a million dollars or more with none of the risk, better benefits, and probably better work-life balance. Some people are passionate about startup culture, and they should probably go work at startups, but for everyone else startup work is becoming an increasingly larger sacrifice.

pmiller2 8y ago
If what you say is accurate (and, I admit, it’s a logical progression from the situation I mentioned), the Nash equilibrium is that only people who don’t know or don’t care their comp is going to be stunted will work at startups. That seems bad for the startup ecosystem, so VCs and founders ought to care about it, but they don’t seem to. That seems to point to a flaw in the chain of reasoning.
- jurassic 8y ago
  There is also the reality that not everybody can work at FAANG. I know plenty of average engineers who know which way the economic wind is blowing but haven't been able to successfully make it through the process at big companies.
  - pmiller2 8y ago
    Are there no companies that pay less than FAANG but better than pre-IPO startups?
    - xchaotic 8y ago
      There's plenty in between, think Salesforce and corporate in general

liftbigweights 8y ago

> Since the time to IPO is so much longer than the average tenure at a tech company It is inconvenient for those looking to IPO for a windfall, but keep in mind that most startups aren't looking to IPO but to be bought out. Only a tiny fraction of the unicorns IPO. Most startups are usually bought by other companies. The software security startup I worked for didn't IPO. It was bought out by another more established startup. Which was bought out by some hedge fund or something a few years later. Most ( but not all ) tech billionaires are created by these huge IPOs. But by far, most millionaires in the tech world are created by being bought out, not IPOing.