3 ms·

Your story still leaves a lot of room for skepticism. For one, 1.5MM is not actually a very good deal for an engineer in your situation, and likely the company

by mlthoughts2018 8y ago

Your story still leaves a lot of room for skepticism. For one, 1.5MM is not actually a very good deal for an engineer in your situation, and likely the company gave you very unfavorable terms. Electing 83b is a fairly irrelevant detail in your story as it only affects taxes, not the outcome of the company. Your shares are likely going to get hugely diluted exactly because of growth investing like in the article. Investors and founders will essentially trade away your share of the company in new rounds, while they get huge payouts for it, your shares may grow a small amount, again realized over some long time horizon. Let’s take an extreme example and say your shares double in value (not likely) through the remaining funding rounds, and eventually in another ~7 years you can actually sell them in some liquidity event. So that’s $3 MM (gross) over 10 years. That works out to be $300,000 / yr in equity compensation. Certainly very high. But not any kind of crazy number. Definitely there are rank and file engineers in FAANG companies, Wall Street, and other industries getting annual RSUs or bonuses well beyond that without having to wait 10 years to realize it or have the risk that it folds or you get laid off and lose a bunch of future value, and have a high base salary, good benefits, and good work/life balance the whole time. Given that even a crazy outcome like $3 MM annualized over 10 years isn’t significantly better than other reasonable total comp opportunities, this overall paints a really bad picture for start-ups. Your case, which is nearly about the best lottery ticket someone could get, is only slightly better than a competitive position at many public companies, finance shops, etc. Meanwhile, almost all start-up outcomes would be far worse.

l2c1928 8y ago
There's a myth that you can't realize gains if a company doesn't IPO...I've already sold some shares in a tender offer. There is an active secondary market for shares if I chose to sell more. Not sure what your point is about $3MM over 10 years. Why would you divide it over anything other than the number of years you actually worked at the company? You've assumed I was a senior engineering hire. I was in a junior non-technical role a year out of college.
- mlthoughts2018 8y ago
  Early selling for employees is exceedingly rare and also often on bad terms, this was mentioned in the OP article. Again, it’s lucky that you were able to, but is such a wildly unlikely outcome that functionally everyone else has to ignore that aspect of your story. To boot, being able to sell in a secondary market transaction only after about 3 years is even more ridiculously rare (to the point that it makes me question if your whole story is even true, or just some trolling). The few companies I’ve heard of allowing that type of thing (late pre-IPO Spotify, Squarespace), only allowed it after early employees like yourself would have waited 7-10 years before getting any payout. > “Not sure what your point is about $3MM over 10 years.” Please re-read my comment to help understand. > “You've assumed I was a senior engineering hire. I was in a junior non-technical role a year out of college.” Where did I make an assumption about junior vs senior level? As for your claim you were given this grant for a non-technical role 1 year out of college, I think it’s more likely you’re just lying to troll this comment thread. Just in a Bayesian sense, the conditional probability that you’re lying is higher than that this is a true story. It’s not impossible that this could have happened for a non-tech hire with no experience, but that mere possibility also is irrelevant compared with the far greater probability that this is just made up.
  - l2c1928 8y ago
    I never said how many years ago I joined...by a "few years" I meant 5. I said I sold some shares via a tender offer, which are company sponsored, and last year was the first time I was offered that opportunity. Companies can't block you from selling on a secondary market unless you've specifically agreed to that as part of the initial grant. It's far more common that they have the "right of first refusal" clause which means they get the chance to buy back your shares before selling to a third party. I don't think there's anything particularly special about my situation other than I was fortunate to join a now unicorn early on.
CalChris 8y ago
If you can't afford to pay for your options up front and elect 83b then is it really a startup? For example, Uber is not a startup. It was a startup but that was awhile ago.

l2c1928 8y ago

There's a myth that you can't realize gains if a company doesn't IPO...I've already sold some shares in a tender offer. There is an active secondary market for shares if I chose to sell more. Not sure what your point is about $3MM over 10 years. Why would you divide it over anything other than the number of years you actually worked at the company? You've assumed I was a senior engineering hire. I was in a junior non-technical role a year out of college.

mlthoughts2018 8y ago
Early selling for employees is exceedingly rare and also often on bad terms, this was mentioned in the OP article. Again, it’s lucky that you were able to, but is such a wildly unlikely outcome that functionally everyone else has to ignore that aspect of your story. To boot, being able to sell in a secondary market transaction only after about 3 years is even more ridiculously rare (to the point that it makes me question if your whole story is even true, or just some trolling). The few companies I’ve heard of allowing that type of thing (late pre-IPO Spotify, Squarespace), only allowed it after early employees like yourself would have waited 7-10 years before getting any payout. > “Not sure what your point is about $3MM over 10 years.” Please re-read my comment to help understand. > “You've assumed I was a senior engineering hire. I was in a junior non-technical role a year out of college.” Where did I make an assumption about junior vs senior level? As for your claim you were given this grant for a non-technical role 1 year out of college, I think it’s more likely you’re just lying to troll this comment thread. Just in a Bayesian sense, the conditional probability that you’re lying is higher than that this is a true story. It’s not impossible that this could have happened for a non-tech hire with no experience, but that mere possibility also is irrelevant compared with the far greater probability that this is just made up.
- l2c1928 8y ago
  I never said how many years ago I joined...by a "few years" I meant 5. I said I sold some shares via a tender offer, which are company sponsored, and last year was the first time I was offered that opportunity. Companies can't block you from selling on a secondary market unless you've specifically agreed to that as part of the initial grant. It's far more common that they have the "right of first refusal" clause which means they get the chance to buy back your shares before selling to a third party. I don't think there's anything particularly special about my situation other than I was fortunate to join a now unicorn early on.

CalChris 8y ago

If you can't afford to pay for your options up front and elect 83b then is it really a startup? For example, Uber is not a startup. It was a startup but that was awhile ago.