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Whether you get answers depends a lot on the size of the company. Fewer than 10 employees... those interviewing likely know the answers and will share. Betwee

by buro9 4y ago

Whether you get answers depends a lot on the size of the company. Fewer than 10 employees... those interviewing likely know the answers and will share. Between 10-50 employees... those interviewing may still know the answers and may still be open to sharing them. Above 50 employees... it is increasingly likely that this information isn't known by more than a few people (those involved in the fundraising, accounts, senior leadership), and that your interviewers do not know it - if they know it at one point in time it's out of date quickly (next raise). It quick becomes something that only a very few people know and the information isn't useful/constructive to those focusing on execution (those who will be interviewing you). The questions are good... but if you don't get answers and would choose not to take the roles on that basis, then you might want to chat to a lot of people who have been early stage and done well - because very few got answers to those questions.

TimPC 4y ago
Start-ups who don’t solve these issues will see more knowledgeable potential employees walk away. The fact is start-ups pay a fair bit below the market wage and people have every right to know what sort of equity you’re getting in exchange for that. If a start-up is unwilling or unable to answer fairly basic questions about how their equity works it’s totally reasonable to not work for them.
- ttymck 4y ago
  Knowledgeable about their job != knowledge about corporate equity. There's a large share of capable engineers who are still wide-eyed over startup equity. Folks I know personally and greatly respect. Startups have had no trouble duping engineers into lower compensation while delivering serviceable results, and will continue to have no problem.
  - ryandrake 4y ago
    This might be a harsh, unpopular opinion, but if someone is going to accept a job where equity is a significant portion of their compensation, they really need to understand the essentials of equity, how options work, their tax implications, how to read basic financial statements, and so on. This is your livelihood we're talking about. Would you accept a job that paid in Bitcoin without understanding the basics of cryptocurrency? How about one that paid in Beanie Babies? I'm not saying go back to school and get a Finance degree, but people need to get informed about their compensation!
    - kjeetgill 4y ago
      As a wide-eyed engineer who absolutely should have the knowledge you're talking about but doesn't. Any good comprehensive resources? Random googling never gives me confidence I'm getting the right information when it comes to money, nutrition, and health.
      - prostoalex 4y ago
        The book I’ve seen recommended is “Consider your options” https://www.goodreads.com/book/show/1635049.Consider_Your_Options https://www.goodreads.com/book/show/1635049.Consider_Your_Op...
      - bcbrown 4y ago
        Learn the vocabulary. Look up things like 409a valuations, 83b elections, NSO and ISO stock options, the difference between long-term and short-term capital gains, strike price vs exercise price (plus how and when taxes on options are triggered and calculated), marginal tax rate vs effective tax rate. Probably also worthwhile to learn the basics of corporate finance, like annual recurring revenue (ARR), costs of goods sold (COGS), customer acquisition costs (CAC), differences between cashflow and profit, EBITDA (plus what each of those words mean), capital expenditure (capex) vs operational expenditure (opex). If you understand the vocabulary, it's a lot easier to evaluate whether a given source is authoritative or not. Sign up for Matt Levine's newsletter. He's perhaps starting to be a little overexposed on HN, but he's informative and humorous, and his newsletter is a good way to get a little exposure to finance every day. It's not not startup-equity specific, but check out Bogleheads for generic investing advice.
      - pretext 4y ago
        What I Wish I'd Known About Equity Before Joining A Unicorn: https://gist.github.com/yossorion/4965df74fd6da6cdc280ec57e83a202d https://gist.github.com/yossorion/4965df74fd6da6cdc280ec57e8... TLDR Stock Options: https://equity.ltse.com/calculators/tldr-stock-options https://equity.ltse.com/calculators/tldr-stock-options
    - scarface74 4y ago
      If your livelihood is based on equity in a private company, that’s already a problem.
mattficke 4y ago
A lot of this information is also available in the company’s Articles of Incorporation. Can’t hurt to ask in the interview, but it’s probably a good idea to pull the actual filing anywhere you’re seriously considering an offer (if it’s a Delaware corporation, you have to pay a registered agent to get these documents, it’s usually $50-$100.) Typically includes things like total outstanding shares, conversion price of the various preferred rounds, liquidation preference for the preferred shares, etc. The delta between the most recent preferred round and the 409a is the best approximation of the actual value of the equity at the time of the grant.
- ttymck 4y ago
  It's important to note that, unless I'm terribly mistaken, the articles of incorporation are subject to change. By a board vote, I presume. So your compensation is controlled, at the end of the day, by the investors. And any acquisition (change of ownership) likely renders the equity clauses null and void (at the discretion of the buyer).
kleinsch 4y ago
For any size company it’s a waste of time asking equity questions to most interviewers, just like it’s a waste of time asking questions about benefits. Assuming your interviewers are potential future teammates, ask them questions about work. Ask your recruiter or future manager benefits and comp questions. At most companies >10 people, your recruiter will have a packet with all the answers to equity questions.
- claytonjy 4y ago
  I agree, but I'm generally disappointed with the information the recruiter is able or willing to provide. Something I've noticed more recently is the standard equity info they send everyone is both light on details and heavy on "here's how much you stand to make if we exit at X". I can't blame them for selling it, but I shouldn't have to ask for shares outstanding, latest 409a or other simple numbers. I've also been screwed by joining just after a big raise and having my strike price end up much higher than I was told when interviewing.
  - gumby 4y ago
    > I can't blame them for selling it… Yes you can, and should. I don’t try to sell candidates on the possible stock upside because I don’t want to provide investment or tax advice. I’m not licensed to do so; I have a company to run. It’s up to them to decide if they want to early exercise or if they think it’s fair not. I do the opposite: tell the candidate the number (that’s what the board approves) and what FD percentage it represents. If they ask if it’s a reasonable amount I explain how much we give for a given position plus how that is modulated by company stage. I always allow early exercise. In 30 years of startups nobody has ever complained.
davedx 4y ago
Yeah this is why I work freelance (often for startups). The present value of cash flows is so much higher than the future value of some illiquid, highly speculative startup equity with way more restrictions than regular public stock equity.
- humbleguy 4y ago
  I contacted for 10 years and managed to save up about 200k. Started at pre IPO company and walked away with 2.5m after taxes in 7 years. Big difference.
  - scarface74 4y ago
    And I’m sure that some people who played the lottery actually won. That doesn’t mean that statistically counting on a payout from equity earned from a startup is worth it.
  - ipaddr 4y ago
    I worked at a startup for 9 month.. I left decided not to exercise any options and they got purchased very shortly after for a higher amount than anyone expected. I got a slightly higher paying position that allowed me to scrape together enough to qualify to buy a house in a large city. If I would have waited another cycle I would have been priced out. 10 years later I'm up 2 million on the house, lost 20,000-40,000 grand on the startup options. I wasn't forced to move in order to full vest and be tied to a dead product for 2 years while they figured out how to move anything of value into their applications. There are a lot of ways to earn a million and taking more cash and investing yourself could yield more.
    - sgtnoodle 4y ago
      Impressive gain on the house! If you didn't exercise the options, do you mean you lost out on the opportunity for 30k? Are you tapping into the value of your home with a mortgage? Otherwise, it seems like that's even less liquid than private stock (unless you move out.)
scarface74 4y ago
If you were asking these questions to a 10-50 person company, would it matter if they answered everything truthfully? All equity comp is lottery ticket in private companies.
- hef19898 4y ago
  I know people in listed companies, large, old ones, who were bitten quite badly by the stock going down. Treating everything besides your base cash pay as a bonus that can go to zero is the prudent thing to do.
  - scarface74 4y ago
    How many publicly traded old companies had illiquid stocks that you couldn’t sell for something when they vested - especially tech stocks? Yes I know about Enron. But that was both an outlier and over a decade ago. Yes, mine are down about 20% from the time I was awarded them. But at least I can sell them and not hope for an exit event. I don’t thing employees of FAAMG (not a typo, Netflix was never “Big”Tech with a 1 trillion dollar* market cap) have to worry about their stock going to $0
sgustard 4y ago
Companies will flat-out decline to answer most of these questions, citing the information as confidential. There's a reason most employees, not to mention competitors, potential investors, etc, don't know the intimate details of a private company's financing. So you're welcome to ask but naive to expect detailed answers. On the other hand, I always insist on talking to the CEO or the highest ranking exec you can during the interview process. It is absolutely in your best interest to hear the company's vision and path to success directly from the source. Again, this person will clam up when discussing financial specifics, but you should still expect them to make you feel secure about the company's potential.

by buro9 4y ago

TimPC 4y ago

Start-ups who don’t solve these issues will see more knowledgeable potential employees walk away. The fact is start-ups pay a fair bit below the market wage and people have every right to know what sort of equity you’re getting in exchange for that. If a start-up is unwilling or unable to answer fairly basic questions about how their equity works it’s totally reasonable to not work for them.

ttymck 4y ago
Knowledgeable about their job != knowledge about corporate equity. There's a large share of capable engineers who are still wide-eyed over startup equity. Folks I know personally and greatly respect. Startups have had no trouble duping engineers into lower compensation while delivering serviceable results, and will continue to have no problem.
- ryandrake 4y ago
  This might be a harsh, unpopular opinion, but if someone is going to accept a job where equity is a significant portion of their compensation, they really need to understand the essentials of equity, how options work, their tax implications, how to read basic financial statements, and so on. This is your livelihood we're talking about. Would you accept a job that paid in Bitcoin without understanding the basics of cryptocurrency? How about one that paid in Beanie Babies? I'm not saying go back to school and get a Finance degree, but people need to get informed about their compensation!
  - kjeetgill 4y ago
    As a wide-eyed engineer who absolutely should have the knowledge you're talking about but doesn't. Any good comprehensive resources? Random googling never gives me confidence I'm getting the right information when it comes to money, nutrition, and health.
    - prostoalex 4y ago
      The book I’ve seen recommended is “Consider your options” https://www.goodreads.com/book/show/1635049.Consider_Your_Options https://www.goodreads.com/book/show/1635049.Consider_Your_Op...
    - bcbrown 4y ago
      Learn the vocabulary. Look up things like 409a valuations, 83b elections, NSO and ISO stock options, the difference between long-term and short-term capital gains, strike price vs exercise price (plus how and when taxes on options are triggered and calculated), marginal tax rate vs effective tax rate. Probably also worthwhile to learn the basics of corporate finance, like annual recurring revenue (ARR), costs of goods sold (COGS), customer acquisition costs (CAC), differences between cashflow and profit, EBITDA (plus what each of those words mean), capital expenditure (capex) vs operational expenditure (opex). If you understand the vocabulary, it's a lot easier to evaluate whether a given source is authoritative or not. Sign up for Matt Levine's newsletter. He's perhaps starting to be a little overexposed on HN, but he's informative and humorous, and his newsletter is a good way to get a little exposure to finance every day. It's not not startup-equity specific, but check out Bogleheads for generic investing advice.
    - pretext 4y ago
      What I Wish I'd Known About Equity Before Joining A Unicorn: https://gist.github.com/yossorion/4965df74fd6da6cdc280ec57e83a202d https://gist.github.com/yossorion/4965df74fd6da6cdc280ec57e8... TLDR Stock Options: https://equity.ltse.com/calculators/tldr-stock-options https://equity.ltse.com/calculators/tldr-stock-options
  - scarface74 4y ago
    If your livelihood is based on equity in a private company, that’s already a problem.

mattficke 4y ago

A lot of this information is also available in the company’s Articles of Incorporation. Can’t hurt to ask in the interview, but it’s probably a good idea to pull the actual filing anywhere you’re seriously considering an offer (if it’s a Delaware corporation, you have to pay a registered agent to get these documents, it’s usually $50-$100.) Typically includes things like total outstanding shares, conversion price of the various preferred rounds, liquidation preference for the preferred shares, etc. The delta between the most recent preferred round and the 409a is the best approximation of the actual value of the equity at the time of the grant.

ttymck 4y ago
It's important to note that, unless I'm terribly mistaken, the articles of incorporation are subject to change. By a board vote, I presume. So your compensation is controlled, at the end of the day, by the investors. And any acquisition (change of ownership) likely renders the equity clauses null and void (at the discretion of the buyer).

kleinsch 4y ago

For any size company it’s a waste of time asking equity questions to most interviewers, just like it’s a waste of time asking questions about benefits. Assuming your interviewers are potential future teammates, ask them questions about work. Ask your recruiter or future manager benefits and comp questions. At most companies >10 people, your recruiter will have a packet with all the answers to equity questions.

claytonjy 4y ago
I agree, but I'm generally disappointed with the information the recruiter is able or willing to provide. Something I've noticed more recently is the standard equity info they send everyone is both light on details and heavy on "here's how much you stand to make if we exit at X". I can't blame them for selling it, but I shouldn't have to ask for shares outstanding, latest 409a or other simple numbers. I've also been screwed by joining just after a big raise and having my strike price end up much higher than I was told when interviewing.
- gumby 4y ago
  > I can't blame them for selling it… Yes you can, and should. I don’t try to sell candidates on the possible stock upside because I don’t want to provide investment or tax advice. I’m not licensed to do so; I have a company to run. It’s up to them to decide if they want to early exercise or if they think it’s fair not. I do the opposite: tell the candidate the number (that’s what the board approves) and what FD percentage it represents. If they ask if it’s a reasonable amount I explain how much we give for a given position plus how that is modulated by company stage. I always allow early exercise. In 30 years of startups nobody has ever complained.

davedx 4y ago

Yeah this is why I work freelance (often for startups). The present value of cash flows is so much higher than the future value of some illiquid, highly speculative startup equity with way more restrictions than regular public stock equity.

humbleguy 4y ago
I contacted for 10 years and managed to save up about 200k. Started at pre IPO company and walked away with 2.5m after taxes in 7 years. Big difference.
- scarface74 4y ago
  And I’m sure that some people who played the lottery actually won. That doesn’t mean that statistically counting on a payout from equity earned from a startup is worth it.
- ipaddr 4y ago
  I worked at a startup for 9 month.. I left decided not to exercise any options and they got purchased very shortly after for a higher amount than anyone expected. I got a slightly higher paying position that allowed me to scrape together enough to qualify to buy a house in a large city. If I would have waited another cycle I would have been priced out. 10 years later I'm up 2 million on the house, lost 20,000-40,000 grand on the startup options. I wasn't forced to move in order to full vest and be tied to a dead product for 2 years while they figured out how to move anything of value into their applications. There are a lot of ways to earn a million and taking more cash and investing yourself could yield more.
  - sgtnoodle 4y ago
    Impressive gain on the house! If you didn't exercise the options, do you mean you lost out on the opportunity for 30k? Are you tapping into the value of your home with a mortgage? Otherwise, it seems like that's even less liquid than private stock (unless you move out.)

scarface74 4y ago

If you were asking these questions to a 10-50 person company, would it matter if they answered everything truthfully? All equity comp is lottery ticket in private companies.

hef19898 4y ago
I know people in listed companies, large, old ones, who were bitten quite badly by the stock going down. Treating everything besides your base cash pay as a bonus that can go to zero is the prudent thing to do.
- scarface74 4y ago
  How many publicly traded old companies had illiquid stocks that you couldn’t sell for something when they vested - especially tech stocks? Yes I know about Enron. But that was both an outlier and over a decade ago. Yes, mine are down about 20% from the time I was awarded them. But at least I can sell them and not hope for an exit event. I don’t thing employees of FAAMG (not a typo, Netflix was never “Big”Tech with a 1 trillion dollar* market cap) have to worry about their stock going to $0

sgustard 4y ago

Companies will flat-out decline to answer most of these questions, citing the information as confidential. There's a reason most employees, not to mention competitors, potential investors, etc, don't know the intimate details of a private company's financing. So you're welcome to ask but naive to expect detailed answers. On the other hand, I always insist on talking to the CEO or the highest ranking exec you can during the interview process. It is absolutely in your best interest to hear the company's vision and path to success directly from the source. Again, this person will clam up when discussing financial specifics, but you should still expect them to make you feel secure about the company's potential.