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Honestly this is bad advice. Sure, you shouldn’t plan your life around striking it rich but if you’re going to take a job thinking the equity comp is worthless

Honestly this is bad advice. Sure, you shouldn’t plan your life around striking it rich but if you’re going to take a job thinking the equity comp is worthless then you are probably choosing the wrong company and/or going to negotiate poorly. Late stage growth companies that offer RSUs can be sold on secondary markets, so even though it’s not as easy to sell it is probably not worth 0 unless something is very wrong, which again is something you should assess before accepting any offer.

tempguy9999 7y ago
Maybe you've had good experiences; mine are that this is excellent advice - companies are there for themselves and not (repeat: not) for you.
adrianpike 7y ago
Strong disagree - you absolutely need to factor in liquidity effort alongside vesting schedule and face value for equity comp, and in general for most non-public companies that liquidity capability is zero. - RSU's that I can only dump on a secondary market are worth a fraction of their face value. - Grants in a company that'll never have a liquidity event are worth a fraction of their face value. - Options in a public company are definitely worthwhile, but I shouldn't be negotiating their face value one-to-one with cash. It's possible you've had a great outcome liquidating some equity from a private company, in which case I'm super stoked for you and that's a great outcome - but it's not the norm.
- undefined3840 7y ago
  Yes, which is why you should be negotiating for more RSUs to compensate for the additional risk and illiquidity. My point is that if you join a startup thinking your equity is and will forever be worthless, then why do you care if you get 10 or 10000 shares? To not care is bad advice for anyone joining a company that has a path toward IPO or acquisition. And if you don’t think a startup has any path then why are you joining a company that is offering you equity comp in the first place?
nostrademons 7y ago
I'm always torn about advice like this, and honestly I think that everybody who holds a strong opinion about it (on either side) holds the wrong opinion about it. On one hand, the basic intent behind this advice very true. Liquidity is worth something; the reason people are willing to forego 3% returns on T-bills, 7% returns in the stock market, 9% returns on rental income, or 1000+% returns on startups is because they either need the money now or there's a non-negligible chance of the money not actually being there later when you need it. (Note also that those asset classes - and their returns - are in inverse order by liquidity.) Anyone who tells you that your stock-options are surely going to triple when the company IPOs or that this ICO is going to make you a millionaire or that owning real estate is a guaranteed way to build wealth is selling you bullshit. And it's very useful to be able to see through that bullshit and appropriately discount it. But OTOH, people who say that you should value illiquid assets at zero are also spouting bullshit. That's clearly wrong: there are people who get rich off of stock options, or RSUs, or real estate, or cryptocurrency. And you're also strictly better off at a company that gives you $100K + 500 RSUs than one that gives you $100K. I know folks who didn't bother to negotiate for RSUs when they joined Google because they either didn't know what it was or valued it at zero; those folks now have a net worth several times smaller than the folks who negotiated for more stock. This is a poor-person mistake: believing that only those things that you can ascribe a cash value to right now have value. Like most things, it's worth breaking out of excluded-middle fallacies and understanding that your optimal strategy lies in making a best-effort estimate of some very fuzzy and uncertain quantities. You'll be wrong, but you'll do better than either those who value those quantities at zero or those who believe the estimates of the folks who sell these assets.
- opportune 7y ago
  I fully agree, I personally know a good number of people who did quite well for themselves taking a slightly lower offer at a fast growing startup than taking a standard or above-average FAANG offer. The problem for a lot of people of course is how to value options/rsus, and that generally the fast growing companies that everyone is taking about are generally about as hard to get a job at as FLAG For example let’s say you can take $240k TC at a big tech company where your comp is fully liquid, but instead have the option to take $170k base+bonus at a startup worth $400mm with RSUs valued at $50k/year. It’s easy to say that those RSUs are worthless and just go with FANG, but there’s nothing wrong with taking a calculated risk for slightly lower short term liquid comp in exchange for equity in a company you believe has a strong chance at 10xing. The net result is that you are choosing slightly lower pay in exchange for access to a high-risk high-reward investment

tempguy9999 7y ago

Maybe you've had good experiences; mine are that this is excellent advice - companies are there for themselves and not (repeat: not) for you.

adrianpike 7y ago

Strong disagree - you absolutely need to factor in liquidity effort alongside vesting schedule and face value for equity comp, and in general for most non-public companies that liquidity capability is zero. - RSU's that I can only dump on a secondary market are worth a fraction of their face value. - Grants in a company that'll never have a liquidity event are worth a fraction of their face value. - Options in a public company are definitely worthwhile, but I shouldn't be negotiating their face value one-to-one with cash. It's possible you've had a great outcome liquidating some equity from a private company, in which case I'm super stoked for you and that's a great outcome - but it's not the norm.

undefined3840 7y ago
Yes, which is why you should be negotiating for more RSUs to compensate for the additional risk and illiquidity. My point is that if you join a startup thinking your equity is and will forever be worthless, then why do you care if you get 10 or 10000 shares? To not care is bad advice for anyone joining a company that has a path toward IPO or acquisition. And if you don’t think a startup has any path then why are you joining a company that is offering you equity comp in the first place?

nostrademons 7y ago

I'm always torn about advice like this, and honestly I think that everybody who holds a strong opinion about it (on either side) holds the wrong opinion about it. On one hand, the basic intent behind this advice very true. Liquidity is worth something; the reason people are willing to forego 3% returns on T-bills, 7% returns in the stock market, 9% returns on rental income, or 1000+% returns on startups is because they either need the money now or there's a non-negligible chance of the money not actually being there later when you need it. (Note also that those asset classes - and their returns - are in inverse order by liquidity.) Anyone who tells you that your stock-options are surely going to triple when the company IPOs or that this ICO is going to make you a millionaire or that owning real estate is a guaranteed way to build wealth is selling you bullshit. And it's very useful to be able to see through that bullshit and appropriately discount it. But OTOH, people who say that you should value illiquid assets at zero are also spouting bullshit. That's clearly wrong: there are people who get rich off of stock options, or RSUs, or real estate, or cryptocurrency. And you're also strictly better off at a company that gives you $100K + 500 RSUs than one that gives you $100K. I know folks who didn't bother to negotiate for RSUs when they joined Google because they either didn't know what it was or valued it at zero; those folks now have a net worth several times smaller than the folks who negotiated for more stock. This is a poor-person mistake: believing that only those things that you can ascribe a cash value to right now have value. Like most things, it's worth breaking out of excluded-middle fallacies and understanding that your optimal strategy lies in making a best-effort estimate of some very fuzzy and uncertain quantities. You'll be wrong, but you'll do better than either those who value those quantities at zero or those who believe the estimates of the folks who sell these assets.

opportune 7y ago
I fully agree, I personally know a good number of people who did quite well for themselves taking a slightly lower offer at a fast growing startup than taking a standard or above-average FAANG offer. The problem for a lot of people of course is how to value options/rsus, and that generally the fast growing companies that everyone is taking about are generally about as hard to get a job at as FLAG For example let’s say you can take $240k TC at a big tech company where your comp is fully liquid, but instead have the option to take $170k base+bonus at a startup worth $400mm with RSUs valued at $50k/year. It’s easy to say that those RSUs are worthless and just go with FANG, but there’s nothing wrong with taking a calculated risk for slightly lower short term liquid comp in exchange for equity in a company you believe has a strong chance at 10xing. The net result is that you are choosing slightly lower pay in exchange for access to a high-risk high-reward investment