4 ms·

Interestingly, I've heard many instances where interviewees asked startups about their revenues and the startups just wouldn't tell them, saying that it's growi

Interestingly, I've heard many instances where interviewees asked startups about their revenues and the startups just wouldn't tell them, saying that it's growing, or some other vague nonsense. Even in the case of inquiring about the amount of equity one gets, many startups would not tell them the actual percentage of the company they'd get, instead opting to tell them the number of shares, without actually telling them the total number of shares. Well, 1000 shares out of 10k is very different than 1000 out of 10MM. This is a huge red flag in my eyes, of not being open enough to see the books. It signals that something is quite wrong at the company, and even if it weren't, that they are not truly honest with their employees.

MAGZine 4y ago
It depends on the stage of the startup, but the books should probably be open to people who have made it to the offer stage until at least series b. if they're not, I'd be worried about the financials, the culture, or both. Refusing to disclose the number of outstanding shares is a huge red flag.
- blagie 4y ago
  It's a huge red flag, and it's a hugely common red flag. A startup was peeved I valued their equity at zero when they wouldn't share. I got strong hints my equity was worth at least $100k in extra annual salary, but they wouldn't budge on disclosing anything I could hold them accountable to. I think they were being honest, but I didn't take the job. I did take a previous job like that, and when the company sold, we were all surprised management was honest. Management gave a used-car-salesman vibe, which was just wrong. I think with transparency, people would have worked much harder. I don't have insights as to the reason for the extreme opacity.
  - ditonal 4y ago
    The reason for the opacity is obvious, they want you to think the equity is worth more than it is. People constantly assume good faith in these things when they shouldn’t. Obviously number of outstanding shares is a bare minimum, but things like cash reserves and cash flow should also be shared but they don’t want to share that information, often times because it’s not good, they just wasn’t people who believe in the “mission” or that it’s a rocketship or whatever. The secondary reason is that there are still too many naive engineers who assume good faith, drink the startup koolaid, and take these offers . Sometimes even declining public RSU grants to do so. One company out of ten thousand have ISOs that are worth anything but those are the only company in the headlines so the mystique continues. The only solution is education. ISO (Incentive Stock Options) are one of the biggest scams of all time and you’re financially illiterate if you value them more than zero. They are carefully designed by venture capitalists to screw employees. NFTs of monkey pictures are infinitely stronger financial assets than startup ISO - I mean, as least the monkey jpegs have liquidity and volume, and no liquidation preference coded in to screw you over.
    - otterley 4y ago
      > ISO (Incentive Stock Options) are one of the biggest scams of all time and you’re financially illiterate if you value them more than zero. They are carefully designed by venture capitalists to screw employees Given the number of millionaires and billionaires who can credit ISOs for their current wealth, I think that's too broad a statement. At the end of the day, a well-run company that can eventually go public because they have a strong business can be worth joining and the ISOs can be worth something someday. Admittedly, many will not, but if you pick the right one, you could do well.
      - scarface74 4y ago
        Survivorship Bias at its finest. You don’t hear about the other 90%+ who got absolutely nothing.
        otterley 4y ago
        > Admittedly, many will not
      - krasicki 4y ago
        You mean, "there's a chance".
    - blagie 4y ago
      That's the thing, though. It's not always a scam. You never know whether you're being scammed. I /didn't/ get scammed, but everyone working at my first company out of school thought we /would/ get scammed. We've all seen a lot of people get scammed.
      - stavros 4y ago
        Not everyone in a pyramid scheme loses money, but that doesn't make it not a scam.
    - MAGZine 4y ago
      ISOs worked out well for me. It wasn't a huge windfall, but the preferential tax treatment is actually quite nice. Really the best strategy is ISOs that convert to NSOs with 10y exercise windows when you leave. best of both worlds.
  - michaelcampbell 4y ago
    Have you looked to see if they're still around?
    - blagie 4y ago
      I just checked: * They IPOed and are still in business. * If I had taken the offer, the stock would have been worth between 50k and 150k per year, depending on when I sold it. Their estimate of 100k per year was spot-on. So they were being honest. Good to know! They were late enough stage when I was applying that they could do a fairly reasonable valuation. I think I would have been much more likely to take the offer if I had information like this in writing. I still think I was right to value the equity much lower, since I had no way to know if they were being honest at the time.
- geoduck14 4y ago
  The job I have now includes options. When the job offer was being negotiated, the recruiter called the options "monopoly money"- worthless and having no known value. Just 1000 pieces of nothing. I was frustrated at the time, and negotiated purely on salary. Ultimately, I came to respect their opacity. They didn't try and deceive me into "millions that could be mine if only X happens"
matwood 4y ago
One time I had a CFO yell at me for asking questions like you mention. I obviously passed on the job. The hiring manager called me soon after and said he respected my professionalism and understood my decline of their offer. They were out of business < 6 months later.
scarface74 4y ago
Ok. They tell you their revenues. What good does that do if they don’t have a profitable business model?
- TuringNYC 4y ago
  Because then you can at least choose the company with 50MM ARR over one with 5M ARR if you have multiple offers
  - scarface74 4y ago
    And what if that company with 5 million in revenue has a net profit margin of 20% and the company with 50 million in revenue has a negative profit margin?
    - TuringNYC 4y ago
      There are a lot of what-ifs. The point is you can only decide on information you have access to, not on secret information you dont have access to. The best thing would be to know someone at the company who can share more details informally.
sli 4y ago
Experienced basically this while working for a startup. Equity turned into shares, which turned into "incentive points" that could be revoked at any moment and for any reason and were otherwise worthless. Same deal, 15k "incentive points" out of some unknown number. We pressured them on that for a while, because it was completely unacceptable for the amount of work we'd done for them, but then the entire dev team left.
chinchilla2020 4y ago
I have been in this situation post-hire. I asked for outstanding shares and other documentation about my options. I never received anything. Just a single "You have X options" line on my pay summary. Unsurprisingly, my options turned out to be the typical startup-style employee incentive options which were invalidated/worthless upon the company being acquired. I was young and new to the industry so didn't know any better at the time.

MAGZine 4y ago

It depends on the stage of the startup, but the books should probably be open to people who have made it to the offer stage until at least series b. if they're not, I'd be worried about the financials, the culture, or both. Refusing to disclose the number of outstanding shares is a huge red flag.

blagie 4y ago
It's a huge red flag, and it's a hugely common red flag. A startup was peeved I valued their equity at zero when they wouldn't share. I got strong hints my equity was worth at least $100k in extra annual salary, but they wouldn't budge on disclosing anything I could hold them accountable to. I think they were being honest, but I didn't take the job. I did take a previous job like that, and when the company sold, we were all surprised management was honest. Management gave a used-car-salesman vibe, which was just wrong. I think with transparency, people would have worked much harder. I don't have insights as to the reason for the extreme opacity.
- ditonal 4y ago
  The reason for the opacity is obvious, they want you to think the equity is worth more than it is. People constantly assume good faith in these things when they shouldn’t. Obviously number of outstanding shares is a bare minimum, but things like cash reserves and cash flow should also be shared but they don’t want to share that information, often times because it’s not good, they just wasn’t people who believe in the “mission” or that it’s a rocketship or whatever. The secondary reason is that there are still too many naive engineers who assume good faith, drink the startup koolaid, and take these offers . Sometimes even declining public RSU grants to do so. One company out of ten thousand have ISOs that are worth anything but those are the only company in the headlines so the mystique continues. The only solution is education. ISO (Incentive Stock Options) are one of the biggest scams of all time and you’re financially illiterate if you value them more than zero. They are carefully designed by venture capitalists to screw employees. NFTs of monkey pictures are infinitely stronger financial assets than startup ISO - I mean, as least the monkey jpegs have liquidity and volume, and no liquidation preference coded in to screw you over.
  - otterley 4y ago
    > ISO (Incentive Stock Options) are one of the biggest scams of all time and you’re financially illiterate if you value them more than zero. They are carefully designed by venture capitalists to screw employees Given the number of millionaires and billionaires who can credit ISOs for their current wealth, I think that's too broad a statement. At the end of the day, a well-run company that can eventually go public because they have a strong business can be worth joining and the ISOs can be worth something someday. Admittedly, many will not, but if you pick the right one, you could do well.
    - scarface74 4y ago
      Survivorship Bias at its finest. You don’t hear about the other 90%+ who got absolutely nothing.
      - otterley 4y ago
        > Admittedly, many will not
    - krasicki 4y ago
      You mean, "there's a chance".
  - blagie 4y ago
    That's the thing, though. It's not always a scam. You never know whether you're being scammed. I /didn't/ get scammed, but everyone working at my first company out of school thought we /would/ get scammed. We've all seen a lot of people get scammed.
    - stavros 4y ago
      Not everyone in a pyramid scheme loses money, but that doesn't make it not a scam.
  - MAGZine 4y ago
    ISOs worked out well for me. It wasn't a huge windfall, but the preferential tax treatment is actually quite nice. Really the best strategy is ISOs that convert to NSOs with 10y exercise windows when you leave. best of both worlds.
- michaelcampbell 4y ago
  Have you looked to see if they're still around?
  - blagie 4y ago
    I just checked: * They IPOed and are still in business. * If I had taken the offer, the stock would have been worth between 50k and 150k per year, depending on when I sold it. Their estimate of 100k per year was spot-on. So they were being honest. Good to know! They were late enough stage when I was applying that they could do a fairly reasonable valuation. I think I would have been much more likely to take the offer if I had information like this in writing. I still think I was right to value the equity much lower, since I had no way to know if they were being honest at the time.
geoduck14 4y ago
The job I have now includes options. When the job offer was being negotiated, the recruiter called the options "monopoly money"- worthless and having no known value. Just 1000 pieces of nothing. I was frustrated at the time, and negotiated purely on salary. Ultimately, I came to respect their opacity. They didn't try and deceive me into "millions that could be mine if only X happens"

matwood 4y ago

One time I had a CFO yell at me for asking questions like you mention. I obviously passed on the job. The hiring manager called me soon after and said he respected my professionalism and understood my decline of their offer. They were out of business < 6 months later.

scarface74 4y ago

Ok. They tell you their revenues. What good does that do if they don’t have a profitable business model?

TuringNYC 4y ago
Because then you can at least choose the company with 50MM ARR over one with 5M ARR if you have multiple offers
- scarface74 4y ago
  And what if that company with 5 million in revenue has a net profit margin of 20% and the company with 50 million in revenue has a negative profit margin?
  - TuringNYC 4y ago
    There are a lot of what-ifs. The point is you can only decide on information you have access to, not on secret information you dont have access to. The best thing would be to know someone at the company who can share more details informally.

sli 4y ago

Experienced basically this while working for a startup. Equity turned into shares, which turned into "incentive points" that could be revoked at any moment and for any reason and were otherwise worthless. Same deal, 15k "incentive points" out of some unknown number. We pressured them on that for a while, because it was completely unacceptable for the amount of work we'd done for them, but then the entire dev team left.

chinchilla2020 4y ago

I have been in this situation post-hire. I asked for outstanding shares and other documentation about my options. I never received anything. Just a single "You have X options" line on my pay summary. Unsurprisingly, my options turned out to be the typical startup-style employee incentive options which were invalidated/worthless upon the company being acquired. I was young and new to the industry so didn't know any better at the time.