4 ms·

The article seems to speak of stock awards and not salary, despite what the title says. "Today’s Tech Founders Don’t Just Own the Company. They’re Also Getting

The article seems to speak of stock awards and not salary, despite what the title says. "Today’s Tech Founders Don’t Just Own the Company. They’re Also Getting Huge Pay Packages." How are these stock awards different to owning the company? If anything, those stock awards sound less attractive as they should be options at a very high valuation? In effect, isn't this the same as later VCs reallocating the cap table in favour of the founders (and against earlier investor and employees)?

aspaceman 5y ago
> How are these stock awards different to owning the company? You're already expecting way too much intelligence from a journalist.
- marstall 5y ago
  this is the wsj? they're going to get information about company stock and executive compensation right.
  - wsjtho55 5y ago
    That’s also a huge bias They want to peddle headlines of people doing well playing the speculative economics game Their article is simply to make it look attractive to keep playing, because of course their owners control a lot of the speculative economy But please keep going everyone; all the tech stocks I have been buying since Apple at 6-10/share in the late 90s aren’t going to prop themselves up Why work when you’ll do it for me!
marstall 5y ago
>Seven of the 10 most valuable compensation packages for U.S. public companies in 2020 were to CEOs of startups that listed publicly that year They're talking about companies that are, or are about to become, public - so a stock grant is closer to being cash.
yarky 5y ago
> If anything, those stock awards sound less attractive as they should be options at a very high valuation? An option to buy something at a certain price isn't the same as just getting the something. As mentioned in the article, ceo compensation consists usually of stock + options (et al.) tied to performance targets. > In effect, isn't this the same as later VCs reallocating the cap table in favour of the founders (and against earlier investor and employees)? Sort of, that's the point of the article. Apparently, new founders take on too much early financing.
JumpCrisscross 5y ago
> How are these stock awards different to owning the company? Getting (a) stock worth $800mm and (b) investing some lesser fraction many years ago that winds up being worth $800mm are very, very different different. > those stock awards sound less attractive as they should be options at a very high valuation? They are. (Well, sort of. Robinhood grants RSUs that vest depending on the stock price, with only 20% of the pre-IPO grants vesting at the current price and 0% of the post-IPO grants vesting until the stock price at least triples within the next 8 years [1].) Getting (a) $800mm in cash versus (b) an option theoretically worth $800mm but which must be held to expiration are very, very different. [1] https://www.sec.gov/Archives/edgar/data/0001783879/000162828021014488/robinhoods-1a2.htm#ib5a32e8afc3b422193a2f2891a49e0c9_920 https://www.sec.gov/Archives/edgar/data/0001783879/000162828... page 226, Narrative Description of Executive Compensation Arrangements
- throwbigdata 5y ago
  “only 20%”
chrisseaton 5y ago
> The article seems to speak of stock awards and not salary, despite what the title says. Doesn't the title say 'pay package'? Stock awards are part of your pay package. Where did you read 'salary'?
- random_savv 5y ago
  The way it's phrased, it sounded like something that is the opposite of owning the company, which implies salary. You are right that it didn't specifically say salary.
  - OJFord 5y ago
    I would object to 'paid' sure, but to me 'package' immediately implies (a focus on) not cash. Even for non-exec employees in sectors where shares would be highly unusual/not happen, it's used to mean the whole deal, benefits, pension, etc.
refurb 5y ago
I found this confusing too. It’s not pay, it’s a stock grant or options grant. They are also selecting for amazingly successful companies AND likely companies that didn’t have to raise a ton of money (this dilute founder equity). It shouldn’t be surprising the founders end up with a big % of equity and massive payouts. If the companies had failed and the 20% equity was worth $0 and the founder wasn’t getting paid, not sure WSJ would do an article called “Tech founders are left with almost nothing to show for years of work” This seems similar to a headline that says “Winners of lottery jackpot walk away with huge payouts”. I mean yeah, you only focused on the biggest winners.
mind-blight 5y ago
For later stage companies, these are likely in the form of RSUs over options. That makes it a lot closer to giving cash based incentives than stock, especially when compared to owning the company outright from an early stage. If a CEO owns 60% from the beginning, that's already built into the cap table no matter how big the company gets. If they get RSUs as incentives later on, the company is still footing the bill for giving them an $500 million in stock - an asset the company owned that could have otherwise been converted to cash. The article doesn't do a great job explaining why giving bonuses later is so much more expensive for the company and its shareholders

aspaceman 5y ago

> How are these stock awards different to owning the company? You're already expecting way too much intelligence from a journalist.

marstall 5y ago
this is the wsj? they're going to get information about company stock and executive compensation right.
- wsjtho55 5y ago
  That’s also a huge bias They want to peddle headlines of people doing well playing the speculative economics game Their article is simply to make it look attractive to keep playing, because of course their owners control a lot of the speculative economy But please keep going everyone; all the tech stocks I have been buying since Apple at 6-10/share in the late 90s aren’t going to prop themselves up Why work when you’ll do it for me!

marstall 5y ago

>Seven of the 10 most valuable compensation packages for U.S. public companies in 2020 were to CEOs of startups that listed publicly that year They're talking about companies that are, or are about to become, public - so a stock grant is closer to being cash.

yarky 5y ago

> If anything, those stock awards sound less attractive as they should be options at a very high valuation? An option to buy something at a certain price isn't the same as just getting the something. As mentioned in the article, ceo compensation consists usually of stock + options (et al.) tied to performance targets. > In effect, isn't this the same as later VCs reallocating the cap table in favour of the founders (and against earlier investor and employees)? Sort of, that's the point of the article. Apparently, new founders take on too much early financing.

JumpCrisscross 5y ago

> How are these stock awards different to owning the company? Getting (a) stock worth $800mm and (b) investing some lesser fraction many years ago that winds up being worth $800mm are very, very different different. > those stock awards sound less attractive as they should be options at a very high valuation? They are. (Well, sort of. Robinhood grants RSUs that vest depending on the stock price, with only 20% of the pre-IPO grants vesting at the current price and 0% of the post-IPO grants vesting until the stock price at least triples within the next 8 years [1].) Getting (a) $800mm in cash versus (b) an option theoretically worth $800mm but which must be held to expiration are very, very different. [1] https://www.sec.gov/Archives/edgar/data/0001783879/000162828021014488/robinhoods-1a2.htm#ib5a32e8afc3b422193a2f2891a49e0c9_920 https://www.sec.gov/Archives/edgar/data/0001783879/000162828... page 226, Narrative Description of Executive Compensation Arrangements

throwbigdata 5y ago
“only 20%”

chrisseaton 5y ago

> The article seems to speak of stock awards and not salary, despite what the title says. Doesn't the title say 'pay package'? Stock awards are part of your pay package. Where did you read 'salary'?

random_savv 5y ago
The way it's phrased, it sounded like something that is the opposite of owning the company, which implies salary. You are right that it didn't specifically say salary.
- OJFord 5y ago
  I would object to 'paid' sure, but to me 'package' immediately implies (a focus on) not cash. Even for non-exec employees in sectors where shares would be highly unusual/not happen, it's used to mean the whole deal, benefits, pension, etc.

refurb 5y ago

I found this confusing too. It’s not pay, it’s a stock grant or options grant. They are also selecting for amazingly successful companies AND likely companies that didn’t have to raise a ton of money (this dilute founder equity). It shouldn’t be surprising the founders end up with a big % of equity and massive payouts. If the companies had failed and the 20% equity was worth $0 and the founder wasn’t getting paid, not sure WSJ would do an article called “Tech founders are left with almost nothing to show for years of work” This seems similar to a headline that says “Winners of lottery jackpot walk away with huge payouts”. I mean yeah, you only focused on the biggest winners.

mind-blight 5y ago

For later stage companies, these are likely in the form of RSUs over options. That makes it a lot closer to giving cash based incentives than stock, especially when compared to owning the company outright from an early stage. If a CEO owns 60% from the beginning, that's already built into the cap table no matter how big the company gets. If they get RSUs as incentives later on, the company is still footing the bill for giving them an $500 million in stock - an asset the company owned that could have otherwise been converted to cash. The article doesn't do a great job explaining why giving bonuses later is so much more expensive for the company and its shareholders