6 ms·

Expensify surprised all employees with a 10% stock grant on IPO day

41 points by raviparikh 5y ago

phnofive 5y ago
Thick, jewel-encrusted platinum handcuffs: > But there are a few catches. Those shares will fully vest over eight years with a one-year cliff, meaning employees get nothing if they leave before the first year. Because the stock grant contains a type of share called a long-term 50 — which gives employees startling voting power at 50 votes per share — employees need to notify the company of their intent to sell. They then must wait a minimum of 50 months to sell. So the soonest an employee could sell their first tranche is after five years. If an employee decides to quit, their shares stop vesting, but they can still sell their vested shares after 50 months. Overall, feels mutually beneficial, but why surprise everyone? SEC thing?
- actually_a_dog 5y ago
  Mutually beneficial? Forget the vesting schedule, the fact that these shares aren't sellable for 5 years means you get stuck with an illiquid asset you still have to pay taxes on at grant time. That doesn't sound like a good deal to me. With regular stock compensation, I can sell a portion of what I've been granted immediately to cover my taxes. With these, I can't.
- twalla 5y ago
  I'd be interested in what that intent to sell stuff looks like. Do I have to specify how many shares I intend to sell and when I intend to sell them? Can I change my mind about selling them down the line?
- runnerup 5y ago
  Those seem like pretty onerous restrictions compared to usual vesting schedules.
- deleted 5y ago
  [deleted]
- curryst 5y ago
  My guess is so that no one would get pissed off at the rules that come with the stock grant and use the extra comp to get an equivalent per-year salary from someone else. If you get a million dollar stock grant that vests over 8 years, that's $125,000 in stock per year. Startups don't usually pay super well, so I wouldn't be surprised if you could get something equivalent from Google or Facebook. Especially if you come in with the stock grant paperwork, effectively making that your current compensation. You could maybe even get a raise. They only have 140 employees; if 10 get pissed off an leave, that's 7% turnover right before their IPO, which is bad. This will still likely lock a lot of their employees in, without the risk of them quitting right before the IPO.
xt00 5y ago
It seems over the past few years the incentives to work at a startup seemed fairly weak if you could easily get a job at Facebook paying a salary maybe 2X what the startup would pay.. I could imagine something like what happened here to be an incentive — you start with say 0.1% equity or something but if the company goes public the company reserves enough equity so that everybody can get their existing equity multiplied by number of years with the company or something..
- kesselvon 5y ago
  It seems like its very rare for anyone outside the immediate founding team to get enough equity to make an exit worthwhile. It's not like back-in-the-day where places like Google gave equity to their chef
  - toomuchtodo 5y ago
    Facebook gave their graffiti artist David Choe what turned out to be $200 million worth of equity. From Wikipedia: Although he thought the Facebook business model was "ridiculous and pointless," Choe chose to receive company stock in lieu of cash payment for the original Facebook murals. Luck is a heck of a thing. https://en.wikipedia.org/wiki/David_Choe https://en.wikipedia.org/wiki/David_Choe
- actually_a_dog 5y ago
  That's interesting, but, what's the definition of "everybody?" Everybody who ever worked at the company? Everybody working at the company on IPO day? Rewarding only those people present on IPO day seems like it just screws early employees, whereas rewarding everybody who ever worked for the company sounds infeasible due to the number of shares you'd have to hold in reserve to do it. Companies aren't IPO'ing in 4 years anymore, and that's a large part of of what's screwing up the calculus here. I don't recall exactly what the median founding date to IPO date is these days, but, IIRC, it's a bit over 10 years. Time value of money means that money in 4 years is worth a lot more than money in 10 years.

41 points by raviparikh 5y ago

Thick, jewel-encrusted platinum handcuffs: > But there are a few catches. Those shares will fully vest over eight years with a one-year cliff, meaning employees get nothing if they leave before the first year. Because the stock grant contains a type of share called a long-term 50 — which gives employees startling voting power at 50 votes per share — employees need to notify the company of their intent to sell. They then must wait a minimum of 50 months to sell. So the soonest an employee could sell their first tranche is after five years. If an employee decides to quit, their shares stop vesting, but they can still sell their vested shares after 50 months. Overall, feels mutually beneficial, but why surprise everyone? SEC thing?

actually_a_dog 5y ago
Mutually beneficial? Forget the vesting schedule, the fact that these shares aren't sellable for 5 years means you get stuck with an illiquid asset you still have to pay taxes on at grant time. That doesn't sound like a good deal to me. With regular stock compensation, I can sell a portion of what I've been granted immediately to cover my taxes. With these, I can't.
twalla 5y ago
I'd be interested in what that intent to sell stuff looks like. Do I have to specify how many shares I intend to sell and when I intend to sell them? Can I change my mind about selling them down the line?
runnerup 5y ago
Those seem like pretty onerous restrictions compared to usual vesting schedules.
deleted 5y ago
[deleted]
curryst 5y ago
My guess is so that no one would get pissed off at the rules that come with the stock grant and use the extra comp to get an equivalent per-year salary from someone else. If you get a million dollar stock grant that vests over 8 years, that's $125,000 in stock per year. Startups don't usually pay super well, so I wouldn't be surprised if you could get something equivalent from Google or Facebook. Especially if you come in with the stock grant paperwork, effectively making that your current compensation. You could maybe even get a raise. They only have 140 employees; if 10 get pissed off an leave, that's 7% turnover right before their IPO, which is bad. This will still likely lock a lot of their employees in, without the risk of them quitting right before the IPO.

xt00 5y ago

It seems over the past few years the incentives to work at a startup seemed fairly weak if you could easily get a job at Facebook paying a salary maybe 2X what the startup would pay.. I could imagine something like what happened here to be an incentive — you start with say 0.1% equity or something but if the company goes public the company reserves enough equity so that everybody can get their existing equity multiplied by number of years with the company or something..

kesselvon 5y ago
It seems like its very rare for anyone outside the immediate founding team to get enough equity to make an exit worthwhile. It's not like back-in-the-day where places like Google gave equity to their chef
- toomuchtodo 5y ago
  Facebook gave their graffiti artist David Choe what turned out to be $200 million worth of equity. From Wikipedia: Although he thought the Facebook business model was "ridiculous and pointless," Choe chose to receive company stock in lieu of cash payment for the original Facebook murals. Luck is a heck of a thing. https://en.wikipedia.org/wiki/David_Choe https://en.wikipedia.org/wiki/David_Choe
actually_a_dog 5y ago
That's interesting, but, what's the definition of "everybody?" Everybody who ever worked at the company? Everybody working at the company on IPO day? Rewarding only those people present on IPO day seems like it just screws early employees, whereas rewarding everybody who ever worked for the company sounds infeasible due to the number of shares you'd have to hold in reserve to do it. Companies aren't IPO'ing in 4 years anymore, and that's a large part of of what's screwing up the calculus here. I don't recall exactly what the median founding date to IPO date is these days, but, IIRC, it's a bit over 10 years. Time value of money means that money in 4 years is worth a lot more than money in 10 years.