4 ms·

How much does employee #38 make from his/her vested equity these days? I understand this is a very nosy question, but nonetheless having one more datapoint on t

How much does employee #38 make from his/her vested equity these days? I understand this is a very nosy question, but nonetheless having one more datapoint on the financial outcome from an early employee in a company that exited at ~$1B would be valuable. It truly couldn’t get better than that (assuming the funds were raised at ok-ish terms), so I assume your number must be in the multiple 7 figures at least!

strtup-lotto 8y ago
Using a throwaway for obv. reasons. I'm employee lower thirties in a company that recently went public with a similar valuation. Unlike gp, I am still with this company, and really like it there. Ignoring taxes, vested comes in at about 1 mill. I'll pay about half that in taxes. I have a few hundred k in unvested from subsequent awards. I've hit the start up lotto, but I will not likely pocket 7 figures from equity for a long while, assuming continual equity awards. Well, if the stock does really well, I could pocket 1M, but it needs to go up quite a bit. Honestly, I would likely have made more over these many years in aggregate at a FAANG. But I've enjoyed myself and still look forward to work every day. I'm blessed and lucky. But the startup lotto is not as good as you might think. Never count equity in a start up. Go for the salary.
- deanmoriarty 8y ago
  Really appreciate your comment, these insights are very valuable.
- drizzzler 8y ago
  Why half in taxes? Isn't this a capital gain? So 15-25% fed cap gain plus about 10% California income (if even applicable)
  - ohazi 8y ago
    Alternative Minimum Tax There's a good summary here: https://en.wikipedia.org/wiki/Alternative_minimum_tax#Stock_options https://en.wikipedia.org/wiki/Alternative_minimum_tax#Stock_... Basically, if you are given stock options with a strike price of $small, and then the company has a liquidity event and you exercise your options when the shares are at $large, your AMT taxable income increases by $(large - small), and you'll owe taxes on it for the current year (at AMT rates), regardless of whether you sold (or were able to sell) any shares. This is in addition to the short or long term capital gains that you'll eventually owe after you actually sell shares. Apparently some people went bankrupt after the first dot-com bust because they owed absurd amounts of money in taxes but weren't able to sell any of their shares (e.g. due to employee lockup) until after their company's stock tanked. If this happens and you are able to afford the taxes, there's a mechanism to carry your losses forward and get AMT credits in future years, but the rules are hilariously complicated, and you either won't get credit for anywhere near what you paid initially, or you'll end up getting a tiny tiny fraction back for the next hundred years. It kind of sucks. There's been talk of fixing this for a long time, but I don't think it's ever gotten anywhere. *I'm not an accountant; do your own taxes.
    - deanmoriarty 8y ago
      Keep in mind you pay the AMT, so you need to have liquidity, but you will get those extra taxes paid back eventually, via AMT credits. Source: me, I have gone through it exactly and recouped ~100k of AMT I paid, in about 4 years.
  - OiNG 8y ago
    its only long term cap gains if you hold the stock for more then a year. if you exercise and sell immediately, its income.
  - Kiro 8y ago
    Who said it was in the US?
  - jypepin 8y ago
    You usually are awarded stock options. A paper that gives you the right to buy stocks for a specific price. Those options (like most things employers will give you) are seen as income, because the employer give it to you as a reward for your work (just like salary). So usually, when your company exits, that's when you then "exercise" your options (aka actually buy the stocks the options allow you to buy) and then sell those stocks. Then: - Exercising the options triggers income taxes on the value of the stock you are getting (minus what you pay for it) - Selling the stock triggers capital gain (short term if you sell before 1 year, long term after holding them for 1 year) A simple example: - You join and receive 100 stock options at $1. That means you can buy 100 stocks for $100 total. - Your company IPOs at $5 per stock. - You decide it's time to sell. You "exercise" your options -> so you spend $100 to buy 100 stocks at $1. Those stocks are worth $5 each, so you receive $500 in value. -> You get taxed on $400 of income (just like salary, bonus, etc). - You sell your stocks for $500 instantly. You get taxes short term capital gain on $500. So you had in mind you'd make $500 (yayyy we IPO at $5 and I have 100 stocks) but you actually end up with ~$200 in your pocket.
    - carlosdp 8y ago
      This is if you exercise at/after the IPO. If you can afford it, you can exercise early, get taxed on that earlier value, and then it will be mostly capital gains. Higher risk, cause it could end up being worth nil, but higher reward.
      - jypepin 8y ago
        yes, there are a lot of other situations, but this is the general one and I was explaining the situation where why the person would not be paying capital gain tax
        carlosdp 8y ago
        Yea, I was just adding on to your comment to shed light on why ISOs can be good in certain situations.
xenadu02 8y ago
If I had stayed the full four years I would have vested between $600-$800k; I only vested around half that. The only people who hit low seven figures are very early employees, maybe #1-3. The exceptions are the really unique unicorns like Google or FaceBook, which print so much money everyone gets rich.
- deanmoriarty 8y ago
  Cool. Sounds like your full grant at the end would have been for ~0.1% of the company, so assuming a 50% dilution over the years, the original grant was in the ~0.2% range. It's a little bit stingy but overall (unfortunately) in line with my expectations of what employee #38 usually is granted. One more point that confirms one should really go work as employee at a startup for many reasons _except_ the financial outcome expectations. Thanks!
  - xenadu02 8y ago
    If you want to launch your own startup it is a great way to get some experience; if it pays off that also gives you a nest-egg to live on while you launch or bootstrap. If you don't want to or can't work for one of the BigTechCos then it still pays well compared to most jobs. Complaining about a six-figure payoff during an acquisition is one of the most Bay Area™️ things you can possibly do :)

strtup-lotto 8y ago

Using a throwaway for obv. reasons. I'm employee lower thirties in a company that recently went public with a similar valuation. Unlike gp, I am still with this company, and really like it there. Ignoring taxes, vested comes in at about 1 mill. I'll pay about half that in taxes. I have a few hundred k in unvested from subsequent awards. I've hit the start up lotto, but I will not likely pocket 7 figures from equity for a long while, assuming continual equity awards. Well, if the stock does really well, I could pocket 1M, but it needs to go up quite a bit. Honestly, I would likely have made more over these many years in aggregate at a FAANG. But I've enjoyed myself and still look forward to work every day. I'm blessed and lucky. But the startup lotto is not as good as you might think. Never count equity in a start up. Go for the salary.

deanmoriarty 8y ago
Really appreciate your comment, these insights are very valuable.
drizzzler 8y ago
Why half in taxes? Isn't this a capital gain? So 15-25% fed cap gain plus about 10% California income (if even applicable)
- ohazi 8y ago
  Alternative Minimum Tax There's a good summary here: https://en.wikipedia.org/wiki/Alternative_minimum_tax#Stock_options https://en.wikipedia.org/wiki/Alternative_minimum_tax#Stock_... Basically, if you are given stock options with a strike price of $small, and then the company has a liquidity event and you exercise your options when the shares are at $large, your AMT taxable income increases by $(large - small), and you'll owe taxes on it for the current year (at AMT rates), regardless of whether you sold (or were able to sell) any shares. This is in addition to the short or long term capital gains that you'll eventually owe after you actually sell shares. Apparently some people went bankrupt after the first dot-com bust because they owed absurd amounts of money in taxes but weren't able to sell any of their shares (e.g. due to employee lockup) until after their company's stock tanked. If this happens and you are able to afford the taxes, there's a mechanism to carry your losses forward and get AMT credits in future years, but the rules are hilariously complicated, and you either won't get credit for anywhere near what you paid initially, or you'll end up getting a tiny tiny fraction back for the next hundred years. It kind of sucks. There's been talk of fixing this for a long time, but I don't think it's ever gotten anywhere. *I'm not an accountant; do your own taxes.
  - deanmoriarty 8y ago
    Keep in mind you pay the AMT, so you need to have liquidity, but you will get those extra taxes paid back eventually, via AMT credits. Source: me, I have gone through it exactly and recouped ~100k of AMT I paid, in about 4 years.
- OiNG 8y ago
  its only long term cap gains if you hold the stock for more then a year. if you exercise and sell immediately, its income.
- Kiro 8y ago
  Who said it was in the US?
- jypepin 8y ago
  You usually are awarded stock options. A paper that gives you the right to buy stocks for a specific price. Those options (like most things employers will give you) are seen as income, because the employer give it to you as a reward for your work (just like salary). So usually, when your company exits, that's when you then "exercise" your options (aka actually buy the stocks the options allow you to buy) and then sell those stocks. Then: - Exercising the options triggers income taxes on the value of the stock you are getting (minus what you pay for it) - Selling the stock triggers capital gain (short term if you sell before 1 year, long term after holding them for 1 year) A simple example: - You join and receive 100 stock options at $1. That means you can buy 100 stocks for $100 total. - Your company IPOs at $5 per stock. - You decide it's time to sell. You "exercise" your options -> so you spend $100 to buy 100 stocks at $1. Those stocks are worth $5 each, so you receive $500 in value. -> You get taxed on $400 of income (just like salary, bonus, etc). - You sell your stocks for $500 instantly. You get taxes short term capital gain on $500. So you had in mind you'd make $500 (yayyy we IPO at $5 and I have 100 stocks) but you actually end up with ~$200 in your pocket.
  - carlosdp 8y ago
    This is if you exercise at/after the IPO. If you can afford it, you can exercise early, get taxed on that earlier value, and then it will be mostly capital gains. Higher risk, cause it could end up being worth nil, but higher reward.
    - jypepin 8y ago
      yes, there are a lot of other situations, but this is the general one and I was explaining the situation where why the person would not be paying capital gain tax
      - carlosdp 8y ago
        Yea, I was just adding on to your comment to shed light on why ISOs can be good in certain situations.

xenadu02 8y ago

If I had stayed the full four years I would have vested between $600-$800k; I only vested around half that. The only people who hit low seven figures are very early employees, maybe #1-3. The exceptions are the really unique unicorns like Google or FaceBook, which print so much money everyone gets rich.

deanmoriarty 8y ago
Cool. Sounds like your full grant at the end would have been for ~0.1% of the company, so assuming a 50% dilution over the years, the original grant was in the ~0.2% range. It's a little bit stingy but overall (unfortunately) in line with my expectations of what employee #38 usually is granted. One more point that confirms one should really go work as employee at a startup for many reasons _except_ the financial outcome expectations. Thanks!
- xenadu02 8y ago
  If you want to launch your own startup it is a great way to get some experience; if it pays off that also gives you a nest-egg to live on while you launch or bootstrap. If you don't want to or can't work for one of the BigTechCos then it still pays well compared to most jobs. Complaining about a six-figure payoff during an acquisition is one of the most Bay Area™️ things you can possibly do :)