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As a FAANG engineer that used to work for start ups I’ll give my honest feedback on why I don’t consider working for a start up anymore. A 15% options pool is

As a FAANG engineer that used to work for start ups I’ll give my honest feedback on why I don’t consider working for a start up anymore. A 15% options pool is insulting as you’ve decided to split off 85% for yourself and non-employees while leaving a measly 15% for the people who will actually build the company. 2% is just way to low to be of interest to me. And the sad part is, that is much higher that most offers. I have no idea what that two percent will be after being diluted x number of times, so the one thing that is supposed to incentivize me is just a black box with a theoretical ceiling of 2% and a very real possibility of 0 or close to it. Other things I would like to see: actual vacation time (not unlimited vacation) and accounting/books shared with employees (these are not PowerPoints).

trytozoom 6y ago
I appreciate the feedback, it's useful to hear this. I'd be willing to boost the options pool, but I'm not sure I'd be willing to do so right now for a few reasons. 1.) I don't trust that someone isn't going to come in, get offered a large chunk of equity (lets say it's 10%), and leave after 2 years with 5% of the company. In many ways that would be unfair to a future employee who works with us for a longer period of time and gets dramatically less equity. This could be solved with highly backloaded option grants (I've been thinking about doing this), but I suspect you wouldn't be interested if 8 of the 10% vests over years 5 and 6 or years 5-8 either. 2.) At previous startups I've worked, there are often follow-on grants that mitigate dilution for employees upon fundraising events. As a founder, I definitely won't get such a grant until I'm close to fully vesting. If we take some of the sting out of dilution, then that effectively is growing the option pool over time. 3.) I currently have 50.1% of the company. Had I cofounders, we would together own 50.1% of the company. This is helpful because it allows me to make some decisions without relying on our investor (who's been lovely so far, but still). Later, that will change, but at that point we'll have more infrastructure. On accounting/books, I don't know if I can do that. I've never seen it done across the org, though I'm happy to show senior management rough projections and our current burn. Unlimited vacation is an accounting construct. The pain of having to deal with accrued days vacation is not worth the hassle for a small company. When we have better financial infrastructure, maybe we'll revisit. A lot of this sounds like I need to foster some trust in my potential hires that I'm going to take care of them more than anything else. Regarding the equity, how would a long or highly backloaded vesting schedule work for people in your shoes?
- thrwn_frthr_awy 6y ago
  I'm glad to give feedback. I'd prefer to have start up jobs as an option, so I'm incentivized to help with this problem as well. Sorry you are being downvoted as you are at least thinking about the problem and possible solutions. You say you don't trust someone to get a chunk of equity and then leave after two years, but you asking employees to trust that they won't get let go before vesting. I'm not saying you think of it that way, but that is how it comes across. You want to have your cake and it it too. Re owning 50.1%: Do you not trust the 15% of employee votes to side with you over the investors? I really don't know much about corporate structures, but I'd love to see the collective employees represent a board vote as well. I have no idea if this is possible. I would not join a start up without knowing the burn rate with existing revenue/investment (not sales about to close or an investor about to sign papers). Re-unlimited vacation: What you say is a hassle sounds like offloading your burden as a founder to the employees in the form of a pay decrease. At least in California, PTO is debt owed to the employees, so 2 weeks at 200k is 8k being withheld because of a hassle. Again, does not feel good. Also, I believe in an "unlimited" pto situation employees will only take as much time off as their manager/leadership so in my interview I would be asking what time off my manager/founders have taken in the past year or what you are doing to ensure people take the time off they need to live a healthy and balanced life. I also ask this question at interviews for non-unlimited PTO jobs, but because at least that time will get paid out if unused it isn't as big of deal, although I still wouldn't accept a position if my direct manager hasn't taken at least one week off in the past year. There are too many creative ways for options to go poorly for an employee. Even with founders with the greatest intentions, things change. Board control can change, divorces can affect shares and control, a co-founder could leave, market conditions could cause well intended founders to have to let people go when things get rocky. If there is medium-success acquisition will the investors/founders be paid before my shares? Also with options... what am I expecting to be a good payout? $500k after 4-5 years maybe? Thats ~100k a year. With RSUs for actual public stock, sign on grants, ESPP, PTO, etc., the TCO at a FAANG company can be quite high, so it feels like I'm taking on a lot risk to maybe break even? Yes, there is the chance of a billion dollar startup, but those are outliers and aren't representative of most successful startups. One thing that startups haven't yet started to utilize is the resource of time. Many FAANG engineers make more than enough. If a startup offered me half my FAANG salary for 3 days full time employment with benefits, this is an offer I would strongly consider. It also eases the pressure of PTO issue. Like the old saying goes... Time is money. I may not be representative of everyone, but these are things have become important to me as I've grown as both an engineer and a person.

trytozoom 6y ago

I appreciate the feedback, it's useful to hear this. I'd be willing to boost the options pool, but I'm not sure I'd be willing to do so right now for a few reasons. 1.) I don't trust that someone isn't going to come in, get offered a large chunk of equity (lets say it's 10%), and leave after 2 years with 5% of the company. In many ways that would be unfair to a future employee who works with us for a longer period of time and gets dramatically less equity. This could be solved with highly backloaded option grants (I've been thinking about doing this), but I suspect you wouldn't be interested if 8 of the 10% vests over years 5 and 6 or years 5-8 either. 2.) At previous startups I've worked, there are often follow-on grants that mitigate dilution for employees upon fundraising events. As a founder, I definitely won't get such a grant until I'm close to fully vesting. If we take some of the sting out of dilution, then that effectively is growing the option pool over time. 3.) I currently have 50.1% of the company. Had I cofounders, we would together own 50.1% of the company. This is helpful because it allows me to make some decisions without relying on our investor (who's been lovely so far, but still). Later, that will change, but at that point we'll have more infrastructure. On accounting/books, I don't know if I can do that. I've never seen it done across the org, though I'm happy to show senior management rough projections and our current burn. Unlimited vacation is an accounting construct. The pain of having to deal with accrued days vacation is not worth the hassle for a small company. When we have better financial infrastructure, maybe we'll revisit. A lot of this sounds like I need to foster some trust in my potential hires that I'm going to take care of them more than anything else. Regarding the equity, how would a long or highly backloaded vesting schedule work for people in your shoes?

thrwn_frthr_awy 6y ago
I'm glad to give feedback. I'd prefer to have start up jobs as an option, so I'm incentivized to help with this problem as well. Sorry you are being downvoted as you are at least thinking about the problem and possible solutions. You say you don't trust someone to get a chunk of equity and then leave after two years, but you asking employees to trust that they won't get let go before vesting. I'm not saying you think of it that way, but that is how it comes across. You want to have your cake and it it too. Re owning 50.1%: Do you not trust the 15% of employee votes to side with you over the investors? I really don't know much about corporate structures, but I'd love to see the collective employees represent a board vote as well. I have no idea if this is possible. I would not join a start up without knowing the burn rate with existing revenue/investment (not sales about to close or an investor about to sign papers). Re-unlimited vacation: What you say is a hassle sounds like offloading your burden as a founder to the employees in the form of a pay decrease. At least in California, PTO is debt owed to the employees, so 2 weeks at 200k is 8k being withheld because of a hassle. Again, does not feel good. Also, I believe in an "unlimited" pto situation employees will only take as much time off as their manager/leadership so in my interview I would be asking what time off my manager/founders have taken in the past year or what you are doing to ensure people take the time off they need to live a healthy and balanced life. I also ask this question at interviews for non-unlimited PTO jobs, but because at least that time will get paid out if unused it isn't as big of deal, although I still wouldn't accept a position if my direct manager hasn't taken at least one week off in the past year. There are too many creative ways for options to go poorly for an employee. Even with founders with the greatest intentions, things change. Board control can change, divorces can affect shares and control, a co-founder could leave, market conditions could cause well intended founders to have to let people go when things get rocky. If there is medium-success acquisition will the investors/founders be paid before my shares? Also with options... what am I expecting to be a good payout? $500k after 4-5 years maybe? Thats ~100k a year. With RSUs for actual public stock, sign on grants, ESPP, PTO, etc., the TCO at a FAANG company can be quite high, so it feels like I'm taking on a lot risk to maybe break even? Yes, there is the chance of a billion dollar startup, but those are outliers and aren't representative of most successful startups. One thing that startups haven't yet started to utilize is the resource of time. Many FAANG engineers make more than enough. If a startup offered me half my FAANG salary for 3 days full time employment with benefits, this is an offer I would strongly consider. It also eases the pressure of PTO issue. Like the old saying goes... Time is money. I may not be representative of everyone, but these are things have become important to me as I've grown as both an engineer and a person.