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The C-level to IC comp ratio is still way too astronomical. If a VC is telling you he feels there’s a better way to comp, he has a financial interest in ensuri

The C-level to IC comp ratio is still way too astronomical. If a VC is telling you he feels there’s a better way to comp, he has a financial interest in ensuring your loss. Do not support investor-focused comp models like backweighted vesting (Amazon) or outright fraud like a start-up giving you a stock offer with no percentage or no 409A. Employees deserve high-quality equity on par with investors. The OP’s suggestion is a major step back in one of the greediest economies in history. Complete non-starter. Don’t let this guy live in your thoughts rent-free.

aledalgrande 5y ago
The options offer with no percentage ("we're giving you a very generous 80,000 options"), always blows my mind!!! And often even without a strike price!
- ProAm 5y ago
  Always ask for a non-diluatable percentage early on.
  - sokoloff 5y ago
    It’s reasonable to ask “what percentage does this represent on a fully-diluted basis?” It is entirely unreasonable to ask for a percentage of the company which can never be diluted by a future fund-raising round. Doing so just telegraphs that you don’t know how venture funding/corporate finance works.
    - deleted 5y ago
      [deleted]
    - oogabooga123 5y ago
      I’ve scored deals that can’t be diluted for X years after liquidity event, so employees should be able to as well. Don’t put people down with “you must not know what you’re talking about”.
      - azinman2 5y ago
        You’d have to be one hell of a hire to convince anyone to agree to something that will complicate all finance rounds going forward. I cannot imagine the average employee could get away with this.
        oogabooga123 5y ago
        It’s as easy to imagine as it is to imagine a VC getting this kind of deal. The first employees are the ones who literally build the company and usually take far greater personal risk
        sokoloff 5y ago
        VCs can somewhat commonly get pro-rata rights in future rounds. That's quite a bit different from a guarantee of never being diluted.
        enra 5y ago
        Pro-rata only usually applies once. The investor has an option to retain their ownership by investing more in the next round, but only that one round. If they use it, it’s gone. If they don’t use it, it’s gone. Then they have to negotiate it again for future rounds and usually you can’t get prorata unless you are the lead investor.
        tyre 5y ago
        I cannot imagine a competent and well-informed founder accepting an investment on these terms. Prorata is fine for larger investors, but explicitly undilutable is idiotic.
    - HWR_14 5y ago
      How would they know what fully-diluted would be? Wouldn't there be unknown number of rounds at unknown valuation before liquidity? Or do you just mean based on current expectations. Because, if the latter, how do you hold them to that?
      - sokoloff 5y ago
        Fully diluted means if all currently issued options, warrants, convertible bonds, etc are converted to shares. It obviously can't account for future financing rounds which aren't even yet contemplated.
      - dbt00 5y ago
        Fully diluted is not the same as future diluted, it just means including all the available options currently allocated but not exercised.
    - ska 5y ago
      > It’s reasonable to ask “what percentage does this represent on a fully-diluted basis?” Not only reasonable, but you really should. If they won't answer it's a bad sign.
  - staysaasy 5y ago
    I imagine that that would be really hard to achieve (or manage for the company) in practice, although I'd love to see a world in which employees could essentially get pro rata rights to purchase more shares built into their employment. That'd allow them to participate more fully in the upside of companies taking off like rocket ships.
    - ska 5y ago
      > employees could essentially get pro rata rights to purchase more shares built into their employment. I've seen this done, for what it's worth. Both contractually and ad-hoc.
- choppaface 5y ago
  I got one of these and was dumb to accept because the finance department claimed the offer was legit. When I started, it turns out the deal to double the valuation to what they advertised... that deal hadn’t been done yet. I left and it took another 6 months to do the deal and the valuation was lower than expected. If you’re a VC harping on comp, spend your energy calling out frauds. Now that would be an actual public service.
sokoloff 5y ago
If CxO and founder compensation is unreasonably too high, why not go become one of them (presumably founder is easier to self-select into)?
hinkley 5y ago
I feel like we should have PSAs on LinkedIn that tell you this every time you mark yourself as 'looking': If the Board and/or the VCs ever get uncomfortable with the % of the company that is owned by ICs, they will just print more shares of stock. And don't get me started on preferred shares. Has any IC ever gotten those?
- alecbz 5y ago
  Preferred shares were explained to me once this way: Imagine I give you $1M for 10% of your business. You now own 90% of a business that has $1M in assets. You easily sell the whole business for $900k (giving away $100k to the buyer, basically), give me back my 10% * $900k = $90k, and keep the remaining $810k for yourself. Preferred shares are a mechanism for preventing you from immediately liquidating my capital. An investment of time can't be liquidated as easily, so preferred shares are generally only for those making liquid investments. --- It seems there are probably other mechanisms for dealing with this problem, but this explanation makes _some_ sense.
  - gnicholas 5y ago
    It's easier than this — you wouldn't even have to sell the business. You can just dissolve the company and return the assets to the shareholders pro rata.
kemitche 5y ago
Did Amazon return to back-weighted comp? The offer I received two years ago had comp that shifted from "cash focused" to RSUs over 4 years, and had equivalent cash value over the 4 years. Obviously, by year 3/4 when comp was mostly/all RSUs, the stock could have gone up or down significantly. Given that the year 1 cash could be used to buy stock if I really wanted, it didn't seem an unreasonable approach to comp to me.
- voidfunc 5y ago
  I definitely know some people on the 10/10/40/40 Amazon comp plan... also seems to be a common tactic to PIP people just before year 3 vests. Fuck Amazon. I'll never work for them.
  - andonisus 5y ago
    They comp the difference in vesting schedule (against average) with a cash sign on bonus that pays out over the first 2 years. Your yearly comp is equal to getting 25% of the RSU value per year (plus the actual stock accrues value over this time).
  - amzn_throw 5y ago
    Who gives a f about the comp plan? I'm on 5/15/40/40. The first two years are cash with bonus and then the stock vests in lieu of the bonus. I am making $275k and the stock has gone up 40% since I joined. And yet, if I stay through vest, it's like a $25k raise (9%). Why would they be incentivized to PIP me? Plenty of people work here and get filthy rich. They stay because they create immense value at scale. Sounds like sour grapes to me. I doubt you'd pass our interview.
    - voidfunc 5y ago
      This is cute.
    - aardvarkr 5y ago
      Sounds like you’re pleasant to work with and are a great ambassador of Amazon’s culture
johnthealy3 5y ago
Agreed that it's right to be suspicious of the motives of any venture capitalist that makes a post like this (nothing against Fred Wilson personally). One thing I noticed at my last few startups is that the initial option agreements tend to have less diligence around them, say a very small strike price and more favorable terms on stuff like acceleration. Naturally, later-stage VCs would seek to skew the terms more in their favor, and redoing option grants yearly allows this to happen. On a more general note though, golden handcuffs can benefit the employee just because they are a guarantee. There's no possibility of future faking when it's up front and signed into a four year vesting schedule (e.g. "we'll give you a few percent next year but we need to get through this raise first").
- walshemj 5y ago
  If Fred wanted to compensate employee shares he should be lobbying for banning some of the abuses dilution etc and for taxation only on a real gain
pvarangot 5y ago
To add more fuel to the fire, in most if not all of the companies that switched to 1-year grants last year some director positions and all executive positions are still on four year grants.
deleted 5y ago
[deleted]
bashang 5y ago
> live in your thoughts rent-free What does this cliché mean? "To be thought about?" It sounds like the kind of corny garbage I fled reddit to avoid.
heavyset_go 5y ago
> Employees deserve high-quality equity on par with investors. There is no reason that labor and time couldn't build equity, it's just that our current system favors those who use capital to build wealth over those who need to sell their time and labor to build wealth. A common reason I hear for the fact that investors get more equity is because of the "risk" they take on, as if losing some money is the only risk on the table should a business go under. What is ignored, or outright dismissed, is the risk borne by those who invest their time and labor in a business for little to no equity. When a business goes under, the employees have just lost their abilities to feed themselves, keep a roof over their heads, see doctors, buy medicine and provide for their families. Workers sacrifice time that they can never get back working for one business when they could have spent that time working at another. While money invested can be earned back, employees can never earn their time back. Sometimes, those workers are paid below market rate while they help make a business successful, but don't see much or any equity as a result. It seems to me that there is more risk on the shoulders of employees than those of investors, and they should be compensated accordingly.
- lukevp 5y ago
  I think you’re hand waving away that money is a store of value, and indirectly of time spent. The money investors have also came from them creating value by doing some activity. It doesn’t materialize independently. And it is still a risk to lose that money that they earned by trading their own time in the past.
  - B4CKlash 5y ago
    Another term for VC is risk capital. A diligent investor will only put what they can safely risk into the market. While your correct that money indirectly represents time, you’re overlooking the incremental utility of money. An investor logically values each incremental dollar less, purely evidenced by the fact they were willing to risk it. An employee on the other hand will turn those funds directly into shelter/food/health. Seems like a false equivalency to value investment assets at the same level as the money you need to survive.
tick_tock_tick 5y ago
> Employees deserve high-quality equity on par with investors Why? As an employee I'm taking on nearly 0 risk. Maybe if they are paying me poorly I can see the argument where I'm "investing" more time/work into the company that I am being paid for and that difference should be made up with equity but otherwise this seems divorced from reality.
- 908B64B197 5y ago
  > Why? As an employee I'm taking on nearly 0 risk. I'm not sure how you are pricing things. FAANG stock comp is guaranteed money; You can sell it as soon as it vest for exactly the amount you signed for. Startup equity, not so much (there's no guarantee that a liquidity event will ever happen for starter). Unless you are working in a lower tier market where stock comp isn't the norm.
- floren 5y ago
  The company could not exist without the employees, and for most startups it could not exist without the investors. Why should one critical component be rewarded not just with more of the company, but with better versions of the same rewards? You can argue that employees are fungible, but so is investor money, and frankly I'd rather take random money than random programmers.
- drenvuk 5y ago
  If you're a good employee you're better off working at a FAANG. the risk your taking is working for relatively crappy pay for the chance at a large pay off at the end when the company you believe it finally IPOs. At a FAANG I don't have to care, I'm making $300k-$500k or more if I'm actually worth anything. It's an investment by the employee. Coinbase is being cheap and it will come back to bite them. Odds are they don't care for the lifetime of the company since they're so tied to bitcoin's success.
HWR_14 5y ago
Dumb question time: What's "IC". As you can imagine, the term is kind of overloaded in internet searches. Also, does anyone know of a good primer on equity founders/early employees/later employees should expect/require so they don't get totally taken advantage of? It turns out experience is an expensive teacher.
- deusex_ 5y ago
  Individual Contributor, as opposed to Manager
- mattpratt 5y ago
  The Holloway Guide has some goodies -- https://www.holloway.com/g/equity-compensation https://www.holloway.com/g/equity-compensation It's complicated and there's a lot of gotchas I wish I had known. You can read up but if you are considering any of these I would find someone who has navigated the space (and has likely been burned).
- standardUser 5y ago
  It's never dumb to call out the confusing usage of acronyms, especially not here where the problem is endemic.
om2 5y ago
What specifically is wrong with a comp model of one-year vesting (instead of 4-year) and no cliff? Whether it's better or worse for employees depends on how they size the grant and in general is very situational. If the company goes up in value a lot over 4 years, then yeah, the employee may lose out, even if grants are comparable in dollar terms at time of grant. If the company has more volatility than growth, or only modest growth expected, then annual grants with one year vesting are likely better. It definitely does not seem as obviously evil as backlighted vesting or underspecified stock offers. Is there a more subtle problem?
- chris11 5y ago
  > If the company goes up in value a lot over 4 years, then yeah, the employee may lose out This is horrible at pre-IPO unicorns like Stripe. One year vesting could cost normal employees millions if the company blows up. Sure, the stock might not move much, or it can go down. A temporary dip means good performers are more likely to get larger refreshers to get tc up to market rate. And if pay is your driving motivation you can switch to a new job.
  - alecbz 5y ago
    Stripe's last round was at like $100B. There's some growth being missed out on, sure, but I'm not sure for how many people that's gonna net out to be millions.
    - bradlys 5y ago
      It could be a lot. 100B makes a lot of millionaires. Even at 10B, lots of millionaires are created unless all hires were made at high valuation. I was getting 1m/yr at 5B and I wasn’t even that early of an employee or high up. Expand that same company to 100B? Everyone would be getting millions out of it - even the lowest ranking employees.
      - alecbz 5y ago
        ? My point is that $100B is very high and Stripe's unlikely to see insane future growth. For the people who joined at $10B, yes, 10x their equity could be millions for them. But I think it's a lot less likely that Stripe will make it to $1T soon, so people joining now are unlikely to 10x.
jm20 5y ago
Including percentages for startup stock grants is tricky. You have things like common/preferred stock, liquidation preferences, subsequent rounds causing dilution, etc. that the average employee doesn't usually understand. At best it's very confusing and at worst you have actual legal liability issues. And I would never want my employees to value their stock based on our 409a price, we (like all startups) do all we can to keep that number as low as possible!
- rhizome 5y ago
  How do you want your employees to value their stock, then?
gajjanag 5y ago
I have heard anecdotally that the situation was quite different in the past. For example, Google became what it is today in part because their early offers were outstanding for the time, compared to what the typical VC/IPO gives today. I would love to know if there is concrete data supporting this. I can't easily find it myself on the net.
zuhayeer 5y ago
Agreed. Also C-levels get parachutes and a bunch of custom clauses to help ensure they are compensated even in some pretty lopsided scenarios.
- ozim 5y ago
  Have you tried to look for a job after being terminated as a C-level or when startup you put in many years goes under? Job market for IC is most of the time quite easy if you are technical, developers are usually spending 2 years at a company. I don't see C-level people switching companies on a whim and work one company for many years (not everyone is Elon Musk). Once you have C-level on your CV good luck finding job again on lower level or the same level but different company. My boss is in it for life with current company, I can put my notice tomorrow and I walk away like I never worked there.
  - anonyxyz 5y ago
    I should hope at C level comp levels, these folks can manage their money well enough to weather a multi year dry spell after a few years of gainful employment.
dehrmann 5y ago
> Do not support investor-focused comp models like backweighted vesting (Amazon) This is from ~7 years ago, but my backweighted Amazon RSUs were balanced by a signing bonus, and another signing bonus a year later. Roughly, my total comp would be similar each year if AMZN stayed the same price, so it felt fair.
- hef19898 5y ago
  And, at least in my case, the sign on bonus and number of RSU was calculated based on some long-term estimation of stock price done by Amazon. That wasn't only done for compensation purposes. Obviously, having started in 2014 that estimation worked out rather in favor of employees. You could even see the impact rising stock prices had on variable compensation in the Amazon reporting for, if memory serves well, 2016 and 2017. Being surprised by the huge valuation increase in the last years was rather expensive for Amazon. Overall, I considered the Amazon approach fair. But then I never considered the sign on bonus nor RDIs as part of my everyday salary, for me it was rather a bonus to be put away to be used when absolutely necessary. Allowed me to boot strap since Oct. 2019. Unsuccessfully so but that has hardly anything to do with Amazon.
raffraffraff 5y ago
> ...or outright fraud like a start-up giving you a stock offer with no percentage or no 409A If you only get the FMV from something like Carta, is that "enough"? I mean, it tells you nothing about the % at all. You can guess that the strike price will fit within a band (greater than 4, less than 35, likely around 17)
andrepd 5y ago
> Employees deserve high-quality equity on par with investors. My, if only there were an economic philosophy based on that. Some kind of "social"-ism...
ozim 5y ago
Employees can put in notice and be gone if something they don't like is going on. C-level mostly not. There is a lot less job openings for C-levels... When you are simple employee it is still better to get your paycheck and invest on your own in other companies. As a IC level employee mostly you can invest your paycheck freely. C-level guy before buying some stocks/investing probably has to go via lawyers/legal so he also is has lot less options for diversification of his investments. You are also making such statement looking at successful companies, there are loads of companies and C-level people who were invested for life in it and company went under. If you are IC you should get market rate salary, don't settle for less, invest it in other places. I don't accept equity as a compensation, I want market rate salary and the rest I will handle myself. Let investors keep their risk, I don't want any of that, because you know not every company is successful.

aledalgrande 5y ago

The options offer with no percentage ("we're giving you a very generous 80,000 options"), always blows my mind!!! And often even without a strike price!

ProAm 5y ago
Always ask for a non-diluatable percentage early on.
- sokoloff 5y ago
  It’s reasonable to ask “what percentage does this represent on a fully-diluted basis?” It is entirely unreasonable to ask for a percentage of the company which can never be diluted by a future fund-raising round. Doing so just telegraphs that you don’t know how venture funding/corporate finance works.
  - deleted 5y ago
    [deleted]
  - oogabooga123 5y ago
    I’ve scored deals that can’t be diluted for X years after liquidity event, so employees should be able to as well. Don’t put people down with “you must not know what you’re talking about”.
    - azinman2 5y ago
      You’d have to be one hell of a hire to convince anyone to agree to something that will complicate all finance rounds going forward. I cannot imagine the average employee could get away with this.
      - oogabooga123 5y ago
        It’s as easy to imagine as it is to imagine a VC getting this kind of deal. The first employees are the ones who literally build the company and usually take far greater personal risk
        sokoloff 5y ago
        VCs can somewhat commonly get pro-rata rights in future rounds. That's quite a bit different from a guarantee of never being diluted.
        enra 5y ago
        Pro-rata only usually applies once. The investor has an option to retain their ownership by investing more in the next round, but only that one round. If they use it, it’s gone. If they don’t use it, it’s gone. Then they have to negotiate it again for future rounds and usually you can’t get prorata unless you are the lead investor.
        tyre 5y ago
        I cannot imagine a competent and well-informed founder accepting an investment on these terms. Prorata is fine for larger investors, but explicitly undilutable is idiotic.
  - HWR_14 5y ago
    How would they know what fully-diluted would be? Wouldn't there be unknown number of rounds at unknown valuation before liquidity? Or do you just mean based on current expectations. Because, if the latter, how do you hold them to that?
    - sokoloff 5y ago
      Fully diluted means if all currently issued options, warrants, convertible bonds, etc are converted to shares. It obviously can't account for future financing rounds which aren't even yet contemplated.
    - dbt00 5y ago
      Fully diluted is not the same as future diluted, it just means including all the available options currently allocated but not exercised.
  - ska 5y ago
    > It’s reasonable to ask “what percentage does this represent on a fully-diluted basis?” Not only reasonable, but you really should. If they won't answer it's a bad sign.
- staysaasy 5y ago
  I imagine that that would be really hard to achieve (or manage for the company) in practice, although I'd love to see a world in which employees could essentially get pro rata rights to purchase more shares built into their employment. That'd allow them to participate more fully in the upside of companies taking off like rocket ships.
  - ska 5y ago
    > employees could essentially get pro rata rights to purchase more shares built into their employment. I've seen this done, for what it's worth. Both contractually and ad-hoc.
choppaface 5y ago
I got one of these and was dumb to accept because the finance department claimed the offer was legit. When I started, it turns out the deal to double the valuation to what they advertised... that deal hadn’t been done yet. I left and it took another 6 months to do the deal and the valuation was lower than expected. If you’re a VC harping on comp, spend your energy calling out frauds. Now that would be an actual public service.

sokoloff 5y ago

If CxO and founder compensation is unreasonably too high, why not go become one of them (presumably founder is easier to self-select into)?

hinkley 5y ago

I feel like we should have PSAs on LinkedIn that tell you this every time you mark yourself as 'looking': If the Board and/or the VCs ever get uncomfortable with the % of the company that is owned by ICs, they will just print more shares of stock. And don't get me started on preferred shares. Has any IC ever gotten those?

alecbz 5y ago
Preferred shares were explained to me once this way: Imagine I give you $1M for 10% of your business. You now own 90% of a business that has $1M in assets. You easily sell the whole business for $900k (giving away $100k to the buyer, basically), give me back my 10% * $900k = $90k, and keep the remaining $810k for yourself. Preferred shares are a mechanism for preventing you from immediately liquidating my capital. An investment of time can't be liquidated as easily, so preferred shares are generally only for those making liquid investments. --- It seems there are probably other mechanisms for dealing with this problem, but this explanation makes _some_ sense.
- gnicholas 5y ago
  It's easier than this — you wouldn't even have to sell the business. You can just dissolve the company and return the assets to the shareholders pro rata.

kemitche 5y ago

Did Amazon return to back-weighted comp? The offer I received two years ago had comp that shifted from "cash focused" to RSUs over 4 years, and had equivalent cash value over the 4 years. Obviously, by year 3/4 when comp was mostly/all RSUs, the stock could have gone up or down significantly. Given that the year 1 cash could be used to buy stock if I really wanted, it didn't seem an unreasonable approach to comp to me.

voidfunc 5y ago
I definitely know some people on the 10/10/40/40 Amazon comp plan... also seems to be a common tactic to PIP people just before year 3 vests. Fuck Amazon. I'll never work for them.
- andonisus 5y ago
  They comp the difference in vesting schedule (against average) with a cash sign on bonus that pays out over the first 2 years. Your yearly comp is equal to getting 25% of the RSU value per year (plus the actual stock accrues value over this time).
- amzn_throw 5y ago
  Who gives a f about the comp plan? I'm on 5/15/40/40. The first two years are cash with bonus and then the stock vests in lieu of the bonus. I am making $275k and the stock has gone up 40% since I joined. And yet, if I stay through vest, it's like a $25k raise (9%). Why would they be incentivized to PIP me? Plenty of people work here and get filthy rich. They stay because they create immense value at scale. Sounds like sour grapes to me. I doubt you'd pass our interview.
  - voidfunc 5y ago
    This is cute.
  - aardvarkr 5y ago
    Sounds like you’re pleasant to work with and are a great ambassador of Amazon’s culture

johnthealy3 5y ago

Agreed that it's right to be suspicious of the motives of any venture capitalist that makes a post like this (nothing against Fred Wilson personally). One thing I noticed at my last few startups is that the initial option agreements tend to have less diligence around them, say a very small strike price and more favorable terms on stuff like acceleration. Naturally, later-stage VCs would seek to skew the terms more in their favor, and redoing option grants yearly allows this to happen. On a more general note though, golden handcuffs can benefit the employee just because they are a guarantee. There's no possibility of future faking when it's up front and signed into a four year vesting schedule (e.g. "we'll give you a few percent next year but we need to get through this raise first").

walshemj 5y ago
If Fred wanted to compensate employee shares he should be lobbying for banning some of the abuses dilution etc and for taxation only on a real gain

pvarangot 5y ago

To add more fuel to the fire, in most if not all of the companies that switched to 1-year grants last year some director positions and all executive positions are still on four year grants.

deleted 5y ago

[deleted]

bashang 5y ago

> live in your thoughts rent-free What does this cliché mean? "To be thought about?" It sounds like the kind of corny garbage I fled reddit to avoid.

heavyset_go 5y ago

> Employees deserve high-quality equity on par with investors. There is no reason that labor and time couldn't build equity, it's just that our current system favors those who use capital to build wealth over those who need to sell their time and labor to build wealth. A common reason I hear for the fact that investors get more equity is because of the "risk" they take on, as if losing some money is the only risk on the table should a business go under. What is ignored, or outright dismissed, is the risk borne by those who invest their time and labor in a business for little to no equity. When a business goes under, the employees have just lost their abilities to feed themselves, keep a roof over their heads, see doctors, buy medicine and provide for their families. Workers sacrifice time that they can never get back working for one business when they could have spent that time working at another. While money invested can be earned back, employees can never earn their time back. Sometimes, those workers are paid below market rate while they help make a business successful, but don't see much or any equity as a result. It seems to me that there is more risk on the shoulders of employees than those of investors, and they should be compensated accordingly.

lukevp 5y ago
I think you’re hand waving away that money is a store of value, and indirectly of time spent. The money investors have also came from them creating value by doing some activity. It doesn’t materialize independently. And it is still a risk to lose that money that they earned by trading their own time in the past.
- B4CKlash 5y ago
  Another term for VC is risk capital. A diligent investor will only put what they can safely risk into the market. While your correct that money indirectly represents time, you’re overlooking the incremental utility of money. An investor logically values each incremental dollar less, purely evidenced by the fact they were willing to risk it. An employee on the other hand will turn those funds directly into shelter/food/health. Seems like a false equivalency to value investment assets at the same level as the money you need to survive.

tick_tock_tick 5y ago

> Employees deserve high-quality equity on par with investors Why? As an employee I'm taking on nearly 0 risk. Maybe if they are paying me poorly I can see the argument where I'm "investing" more time/work into the company that I am being paid for and that difference should be made up with equity but otherwise this seems divorced from reality.

908B64B197 5y ago
> Why? As an employee I'm taking on nearly 0 risk. I'm not sure how you are pricing things. FAANG stock comp is guaranteed money; You can sell it as soon as it vest for exactly the amount you signed for. Startup equity, not so much (there's no guarantee that a liquidity event will ever happen for starter). Unless you are working in a lower tier market where stock comp isn't the norm.
floren 5y ago
The company could not exist without the employees, and for most startups it could not exist without the investors. Why should one critical component be rewarded not just with more of the company, but with better versions of the same rewards? You can argue that employees are fungible, but so is investor money, and frankly I'd rather take random money than random programmers.
drenvuk 5y ago
If you're a good employee you're better off working at a FAANG. the risk your taking is working for relatively crappy pay for the chance at a large pay off at the end when the company you believe it finally IPOs. At a FAANG I don't have to care, I'm making $300k-$500k or more if I'm actually worth anything. It's an investment by the employee. Coinbase is being cheap and it will come back to bite them. Odds are they don't care for the lifetime of the company since they're so tied to bitcoin's success.

HWR_14 5y ago

Dumb question time: What's "IC". As you can imagine, the term is kind of overloaded in internet searches. Also, does anyone know of a good primer on equity founders/early employees/later employees should expect/require so they don't get totally taken advantage of? It turns out experience is an expensive teacher.

deusex_ 5y ago
Individual Contributor, as opposed to Manager
mattpratt 5y ago
The Holloway Guide has some goodies -- https://www.holloway.com/g/equity-compensation https://www.holloway.com/g/equity-compensation It's complicated and there's a lot of gotchas I wish I had known. You can read up but if you are considering any of these I would find someone who has navigated the space (and has likely been burned).
standardUser 5y ago
It's never dumb to call out the confusing usage of acronyms, especially not here where the problem is endemic.

om2 5y ago

What specifically is wrong with a comp model of one-year vesting (instead of 4-year) and no cliff? Whether it's better or worse for employees depends on how they size the grant and in general is very situational. If the company goes up in value a lot over 4 years, then yeah, the employee may lose out, even if grants are comparable in dollar terms at time of grant. If the company has more volatility than growth, or only modest growth expected, then annual grants with one year vesting are likely better. It definitely does not seem as obviously evil as backlighted vesting or underspecified stock offers. Is there a more subtle problem?

chris11 5y ago
> If the company goes up in value a lot over 4 years, then yeah, the employee may lose out This is horrible at pre-IPO unicorns like Stripe. One year vesting could cost normal employees millions if the company blows up. Sure, the stock might not move much, or it can go down. A temporary dip means good performers are more likely to get larger refreshers to get tc up to market rate. And if pay is your driving motivation you can switch to a new job.
- alecbz 5y ago
  Stripe's last round was at like $100B. There's some growth being missed out on, sure, but I'm not sure for how many people that's gonna net out to be millions.
  - bradlys 5y ago
    It could be a lot. 100B makes a lot of millionaires. Even at 10B, lots of millionaires are created unless all hires were made at high valuation. I was getting 1m/yr at 5B and I wasn’t even that early of an employee or high up. Expand that same company to 100B? Everyone would be getting millions out of it - even the lowest ranking employees.
    - alecbz 5y ago
      ? My point is that $100B is very high and Stripe's unlikely to see insane future growth. For the people who joined at $10B, yes, 10x their equity could be millions for them. But I think it's a lot less likely that Stripe will make it to $1T soon, so people joining now are unlikely to 10x.

jm20 5y ago

Including percentages for startup stock grants is tricky. You have things like common/preferred stock, liquidation preferences, subsequent rounds causing dilution, etc. that the average employee doesn't usually understand. At best it's very confusing and at worst you have actual legal liability issues. And I would never want my employees to value their stock based on our 409a price, we (like all startups) do all we can to keep that number as low as possible!

rhizome 5y ago
How do you want your employees to value their stock, then?

gajjanag 5y ago

I have heard anecdotally that the situation was quite different in the past. For example, Google became what it is today in part because their early offers were outstanding for the time, compared to what the typical VC/IPO gives today. I would love to know if there is concrete data supporting this. I can't easily find it myself on the net.

zuhayeer 5y ago

Agreed. Also C-levels get parachutes and a bunch of custom clauses to help ensure they are compensated even in some pretty lopsided scenarios.

ozim 5y ago
Have you tried to look for a job after being terminated as a C-level or when startup you put in many years goes under? Job market for IC is most of the time quite easy if you are technical, developers are usually spending 2 years at a company. I don't see C-level people switching companies on a whim and work one company for many years (not everyone is Elon Musk). Once you have C-level on your CV good luck finding job again on lower level or the same level but different company. My boss is in it for life with current company, I can put my notice tomorrow and I walk away like I never worked there.
- anonyxyz 5y ago
  I should hope at C level comp levels, these folks can manage their money well enough to weather a multi year dry spell after a few years of gainful employment.

dehrmann 5y ago

> Do not support investor-focused comp models like backweighted vesting (Amazon) This is from ~7 years ago, but my backweighted Amazon RSUs were balanced by a signing bonus, and another signing bonus a year later. Roughly, my total comp would be similar each year if AMZN stayed the same price, so it felt fair.

hef19898 5y ago
And, at least in my case, the sign on bonus and number of RSU was calculated based on some long-term estimation of stock price done by Amazon. That wasn't only done for compensation purposes. Obviously, having started in 2014 that estimation worked out rather in favor of employees. You could even see the impact rising stock prices had on variable compensation in the Amazon reporting for, if memory serves well, 2016 and 2017. Being surprised by the huge valuation increase in the last years was rather expensive for Amazon. Overall, I considered the Amazon approach fair. But then I never considered the sign on bonus nor RDIs as part of my everyday salary, for me it was rather a bonus to be put away to be used when absolutely necessary. Allowed me to boot strap since Oct. 2019. Unsuccessfully so but that has hardly anything to do with Amazon.

raffraffraff 5y ago

> ...or outright fraud like a start-up giving you a stock offer with no percentage or no 409A If you only get the FMV from something like Carta, is that "enough"? I mean, it tells you nothing about the % at all. You can guess that the strike price will fit within a band (greater than 4, less than 35, likely around 17)

andrepd 5y ago

> Employees deserve high-quality equity on par with investors. My, if only there were an economic philosophy based on that. Some kind of "social"-ism...

ozim 5y ago

Employees can put in notice and be gone if something they don't like is going on. C-level mostly not. There is a lot less job openings for C-levels... When you are simple employee it is still better to get your paycheck and invest on your own in other companies. As a IC level employee mostly you can invest your paycheck freely. C-level guy before buying some stocks/investing probably has to go via lawyers/legal so he also is has lot less options for diversification of his investments. You are also making such statement looking at successful companies, there are loads of companies and C-level people who were invested for life in it and company went under. If you are IC you should get market rate salary, don't settle for less, invest it in other places. I don't accept equity as a compensation, I want market rate salary and the rest I will handle myself. Let investors keep their risk, I don't want any of that, because you know not every company is successful.