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Thank you. I hate that trope because, yeah technically it's the right advice for most people, since it applies to 99% of companies. But there's that 1% that rai

Thank you. I hate that trope because, yeah technically it's the right advice for most people, since it applies to 99% of companies. But there's that 1% that raised seed or series A from a16z or Founders Fund where your equity has a relatively high chance of a decent payout

cortesoft 6y ago
Even that 'relatively high chance' is really low. Even companies funded by the top VCs only have a success rate of about 7.5% (success means generating ANY positive return). This is according to Marc Andreessen himself: https://youtu.be/JYYsXzt1VDc https://youtu.be/JYYsXzt1VDc
- est31 6y ago
  To add to that, even companies that "make it" like Skype can still royally screw their employees upon being acquired.
woofie11 6y ago
Well, no. Most of those companies have special terms which end up screwing most employees out of any upside. That goes anything from shares people can't exercise without a 10-year commitment to tiers of options, to simply offering 0.0000001% of the company, to many others. Equity is worth $0 unless the company is fully transparent on this stuff. I've never run into one which was.
dleslie 6y ago
> I hate that trope because, yeah technically it's the right advice for most people, since it applies to 99% of companies. But there's that 1% that raised seed or series A from a16z or Founders Fund where your equity has a relatively high chance of a decent payout Then it's _excellent_ advice. In Canada we have endless amounts of kids who bust their butts to get themselves into the NHL, and only a fraction of a fraction make it, and only a fraction of _those_ get a jaw-dropping contract. From your own admission, and from what seems to be generally accepted, this is also the case for winning the equity lottery in Tech Startups. For those trying to make a living, buy a house, and have a family then valuing your equity at $0 is the only rational option.
- fossuser 6y ago
  Canada taxes capital gains at 50% anyway so it’s probably not a great idea to value it as much there. That said, if you’re comparing FAANG and startups you’re already pretty selected which is not true of all the kids trying for NHL.
  - otoburb 6y ago
    >>Canada taxes capital gains at 50% anyway so it’s probably not a great idea to value it as much there. Can you elaborate on this a bit more? I thought that Canada only taxes half of the capital gains which is then added to your taxable income.[1] So the amount of tax paid on the capital gains might be 50% or more but only if your taxable income for that year places you in the highest tax bracket. In the US, you're generally on the hook to pay tax on 100% of any capital gains, compared to Canada where you're only paying tax on half of any capital gains. [1] https://turbotax.intuit.ca/tips/capital-gains-tax-in-ontario-11064 https://turbotax.intuit.ca/tips/capital-gains-tax-in-ontario...
    - fossuser 6y ago
      Ah interesting - I’m not Canadian so don’t know much about their tax law. You’re probably right and I had a confused misunderstanding. I only looked briefly to see what it’d be like if the election goes south and things get worse in the US. US long term capital gains is only 15% up to 400k and 20% after that which is really good. [Edit] Reading that turbo tax article it seems like only 50% of the gain is taxed at all and of that gain the maximum tax is under 15%? Is this just Ontario tax and there’s more federal or something else? That seems really good?
      - fossuser 6y ago
        Looks like that's in addition to federal income tax: https://www.canada.ca/en/revenue-agency/services/tax/individuals/frequently-asked-questions-individuals/canadian-income-tax-rates-individuals-current-previous-years.html https://www.canada.ca/en/revenue-agency/services/tax/individ... So I think most of the time it's probably a lot worse than the long term gains tax in the US.

cortesoft 6y ago

Even that 'relatively high chance' is really low. Even companies funded by the top VCs only have a success rate of about 7.5% (success means generating ANY positive return). This is according to Marc Andreessen himself: https://youtu.be/JYYsXzt1VDc https://youtu.be/JYYsXzt1VDc

est31 6y ago
To add to that, even companies that "make it" like Skype can still royally screw their employees upon being acquired.

woofie11 6y ago

Well, no. Most of those companies have special terms which end up screwing most employees out of any upside. That goes anything from shares people can't exercise without a 10-year commitment to tiers of options, to simply offering 0.0000001% of the company, to many others. Equity is worth $0 unless the company is fully transparent on this stuff. I've never run into one which was.

dleslie 6y ago

> I hate that trope because, yeah technically it's the right advice for most people, since it applies to 99% of companies. But there's that 1% that raised seed or series A from a16z or Founders Fund where your equity has a relatively high chance of a decent payout Then it's _excellent_ advice. In Canada we have endless amounts of kids who bust their butts to get themselves into the NHL, and only a fraction of a fraction make it, and only a fraction of _those_ get a jaw-dropping contract. From your own admission, and from what seems to be generally accepted, this is also the case for winning the equity lottery in Tech Startups. For those trying to make a living, buy a house, and have a family then valuing your equity at $0 is the only rational option.

fossuser 6y ago
Canada taxes capital gains at 50% anyway so it’s probably not a great idea to value it as much there. That said, if you’re comparing FAANG and startups you’re already pretty selected which is not true of all the kids trying for NHL.
- otoburb 6y ago
  >>Canada taxes capital gains at 50% anyway so it’s probably not a great idea to value it as much there. Can you elaborate on this a bit more? I thought that Canada only taxes half of the capital gains which is then added to your taxable income.[1] So the amount of tax paid on the capital gains might be 50% or more but only if your taxable income for that year places you in the highest tax bracket. In the US, you're generally on the hook to pay tax on 100% of any capital gains, compared to Canada where you're only paying tax on half of any capital gains. [1] https://turbotax.intuit.ca/tips/capital-gains-tax-in-ontario-11064 https://turbotax.intuit.ca/tips/capital-gains-tax-in-ontario...
  - fossuser 6y ago
    Ah interesting - I’m not Canadian so don’t know much about their tax law. You’re probably right and I had a confused misunderstanding. I only looked briefly to see what it’d be like if the election goes south and things get worse in the US. US long term capital gains is only 15% up to 400k and 20% after that which is really good. [Edit] Reading that turbo tax article it seems like only 50% of the gain is taxed at all and of that gain the maximum tax is under 15%? Is this just Ontario tax and there’s more federal or something else? That seems really good?
    - fossuser 6y ago
      Looks like that's in addition to federal income tax: https://www.canada.ca/en/revenue-agency/services/tax/individuals/frequently-asked-questions-individuals/canadian-income-tax-rates-individuals-current-previous-years.html https://www.canada.ca/en/revenue-agency/services/tax/individ... So I think most of the time it's probably a lot worse than the long term gains tax in the US.