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Poll: How much did you earn from your stock options during exit?
Just want to see how much people earn actual cash from their employee stock options. If you joined a startup as an employee and had some stock options, how much did you earn during exit or IPO?
- davidhansen 15y agoI assume this poll is still valid with straight equity instead of options? I voted as such.
- dicroce 15y agoI think people should select the value they were able to sell their options for (post IPO) as opposed to the value of their options on IPO day... As lockout periods almost always keep employees from exiting for quite a long period after an IPO.
- frankus 15y agoNote: voted twice for two different exits. Fortunately for the poll they had different outcomes :)
- jdp23 15y agoAfter we got acquired by Microsoft the option were converted over to MS options and the strike price was something like $1.14. Yeah, the stock plunged; but I was pretty confident they'd never be underwater :)
- DarkShikari 15y agoIt might be interesting to split this by exactly what sort of exit -- a talent acquisition is just as much an exit as an IPO or a high-priced buyout, but probably won't give nearly the same payout.
- lutorm 15y agoMaybe there should be an option "None - never had stock options"?
- ahoysailors 15y agoThere isn't a $60K - $100K option, but that would be me.
- corin_ 15y agoI think the 61K - $150K option covers that pretty well.
- lanstein 15y agoThat wasn't there before, I'm almost positive.
- corin_ 15y agoActually there must have been, as new poll options go to the bottom and there's no way to re-order them, so it wasn't added afterwards. Apologies for the slightly snarky comment, thought you were for some reason complaining that your option was wider than you would have wanted it to be - not that I can think of any reason why anyone would whine about that.
- skanuj 15y agoYou need another option. None - Didn't consider it worth paying for options on exit.
- manuscreationis 15y agoCan there be a "Company folded, stock options got bought out from under me without my consent for pennies to give to the people who were buying the remains of said Company" option? If so, price it at $200 dollars, and i'll vote for it. On one of my final days I was handed a check for my shares, because I wasn't going with the new owners, and all stock was to be given to them. Was never asked if I wanted to sell, and it was valued extremely low for "accounting purposes"...
- asshammer 15y agoHow is that legal?
- tankenmate 15y agoDepends on the contract. It could be argued as unconscionable but that is a different matter.
- tptacek 15y agoYou're suggesting that having classes of shares is unconscionable? If the idea of preferred shares shocks your conscience, you should spend a lot more time studying how startup financing works (at a nuts and bolts level) before taking the plunge and working at one.
- jaxn 15y agoThere have been several comments on here lately that make me realize how few people actually understand how equity works in startups. I mean, if people are shocked to learn about preferred stock, what would they think about participating preferred?!? I guess this is really something you only learn when you are the one signing the financing docs.
- tankenmate 15y agoIt's not so much the fact that they are preferred stock but that you could argue that the stock is re-purchased at what could be considered to be less than market value. Imagine if you will a publicly traded company that repurchases preferred shares, right before the company agrees to be acquired, for substantially less than the post acquisition valuation. You bet there'd be law suits.... Nonetheless your point stands, if you are considering acquiring preferred stock (whether purchased with cash, other equity, or hard work) you should do so with your eyes wide open.
- davidjhall 15y agoHow about "Company folded; options worthless and owe $4000 in taxes" This was during the last Tech Bubble.
- landonhowell 15y ago"But... the movie The Social Network told me and showed me that..." -The thoughts of too many HN folks
- deleted 15y ago[deleted]
- bradhe 15y agopretty sure there is logic in place that automatically grays out any post with the words "The Social Network" in them.
- jpdoctor 15y ago> options worthless and owe $4000 in taxes Presumably you mean: stock shares worthless and owe $4000 in taxes. Without that correction, many people will wonder how you own taxes on unexercised options. (It is possible, but quite uncommon.)
- indrekju 15y ago"None - my stock option vanished and don't own any". What does this mean? How stock options vanish?
- krobertson 15y agoThis the more polite "I work at Zynga" option? More seriously... probably more along the lines of company fails, maybe left before vested, etc. Curious to see a list of ways though... or peoples experiences.
- bstewartnyc 15y agoIf options are "underwater" at the time of acquisition, it can be part of the deal that acquiring company does not need to honor those, and they are basically deleted. That happened to me, when options at a public company were acquired by another public company. All the vested but underwater options were simply deleted. When share price rose at the acquiring company my options would have been worth $600,000+. Oh well... ;(
- infinite8s 15y agoHow can the deletion be legal? Isn't the purchasing company required to honor all debts of the purchasee?
- nroach 15y agodebt != equity. see also bankruptcy discharge.
- spinlock 15y agoLots of companies have claw-back clauses where they buy the options back from you if you leave before they've vested. Or, in my case, the company was sold and the common stock (I bought the shares not options) was worthless.
- sethg 15y agoMy options per se were not worth anything, but the company that acquired my startup gave employees a bonus on closing and held out additional bonuses if we would stay for two years.
- tlrobinson 15y agoPerhaps a better question is "Was it worth it?"
- comatose_kid 15y agowe need a multi-level poll
- moocow01 15y agoIs this before or after taxes? In my case, the difference between 60% of $0 and the full $0 is drastically different.
- bdittmer 15y agoPerhaps there should be a "Haven't had an exit or IPO" so we can get a sense for how rare these events are?
- angelbob 15y agoThat'll need to be a different poll, partly because I've worked for a number of startups and only had one exit - in general, we'll need to vote in some other way to get a feel for that.
- maxklein 15y agoYou'd have to be pretty dumb to be an employee at a startup because of the money: bad hours, lots of risk, bad pay and lots of personal confrontation.
- achompas 15y agoMax, are you trolling here? This kinda smells like trolling, because I don't think you'd be the type to generalize across all startups like this.
- maxklein 15y agoIt's my opinion. Working at a startup, you're underpaid and overworked for very little financial benefit.
- moocow01 15y agoIll second that - skip the startups and work for yourself instead if at all possible
- drx 15y agoI have friends who love startups but would never start one. It's not for everyone.
- moocow01 15y agoAgreed - if someone enjoys their startup life, more power to them in that there is nothing that pays better than enjoying your situation. For someone who is looking at it as a financial play but sitting in a startup that is grinding them down to nothing, they are most likely making an extremely bad investment.
- drusenko 15y agoObviously, that's true of some startups, but very wrong in others. Working at Weebly, you have similar hours to BigCo (although you'll be 10x more productive), paid market rate (or slightly above), and receive your fair share of the outcome. You also get to work with a fun group of people who are obsessed with being productive, and not much else. Maybe we're the exception, but we don't care if you're a 9-5 type of person, if you're very productive during those hours. Working at a startup doesn't have to be shit, just because some startups are.
- absconditus 15y agoI believe that the exact amount was $112 (net). Unbeknownst to most, our executives screwed everyone over and issued preferred stock to a major investment bank. I, and many others, had thousands of options, but the share price for common shares was too low for most grants to be worth anything. The executives all received bonuses for the sale from the investment bank.
- trop 15y agoSimilar situation, though I must say that the CTO felt guilty and gave me an ipod. Then felt even more guilty and arranged for the company to give me $5000 and let me keep the ipod. This was, I must add, when ipods were expensive novelties.
- malbs 15y agoI had a similar experience, a VC bought "preferred stock" (I can't remember the exact jargon), when the company was sold, the payout went entirely to the VC, and no standard stock holders received anything.
- jpdoctor 15y ago> (I can't remember the exact jargon) And this is how most people are screwed. Most folks receive options and never even see the financing docs or stock plan, so they don't have a shred of knowledge about the capital structure. (Not picking on you, except by way of example. Your situation is all-too-common.)
- malbs 15y agoyeah I definitely walked into it with my eyes closed. My wife was telling me it was a bad idea, and I still didn't listen, but hey, who listens to their wife right? haha
- georgemcbay 15y agoPoor bastard. I'm sure every time you disagree with her about something you get to hear about how she was right about the stock options.
- lordmatty 15y agoI got stock options in exchange for sweat as a consultant in what is now a NASDAQ listed company. Great deal, which netted about a 10x profit over the money Id have been paid. Of course, not without it's risks, but as a freelancer I feel my risk was limited.
- betaCHZ 15y agoHow about, company was acquired by public company, employees were convinced to transition options into a promissory note that would eventually convert to more stock with more value, company folds, employees get sued for value of promissory notes? They tried to sue me for $113,000. We settled for $500 in lawyers fees. Never trust anyone in your company when it comes to this stuff, always get outside legal advise. I've been a millionaire on paper 3 times now?
- artursapek 15y agoInteresting curve.
- rickette 15y agoSo, who are the lucky few to have earned more than 11M :)
- moocow01 15y agoProbably venture capitalists trying to sway the poll to sell the startup dream
- lpolovets 15y agoThink of all the companies with successful exits in the last 15 years, or companies that are not public but whose shares can be sold in private markets like SharesPost. Depending on the size of the company, each exit event probably generated between 1 and several hundred (in the case of Google) multi-millionaires. I'm sure a non-trivial fraction of those people read HN.
- jen_h 15y agoI voted three times...but this is missing a negative entry - you know, the scenario where you pay an obscene amount of taxes on the ridiculously inflated price of your shares when you exercise (and can't sell yet while awaiting a liquidity event), but the shares are later downgraded to 1/10th taxable estimate...so you get to hold on to that loss for years, hoping at some point to be able to be in the position to write off the tax loss! Yay, equity! ;)
- asmithmd1 15y agoOr even worse exercise your options when the company goes public but do not sell the stock. Watch the stock plummet to less than a dollar. Now you have a big tax liability and no way to pay it off!
- ChuckMcM 15y agoAgreed, there should be a 'I'm writing of $3,000 a year" option. I had a lot of room to cover gains by that for a while. But its an area where tax law has changed a bit so its useful to check with your accountant to see if you can write off gains on current stock against previously realized losses. That way you get to keep more of the money from selling the current stock. Exercises are still regular income (grrrrr!) but gains on like investments (stock for stock) are generally offsetable. Check with your accountant.
- spinlock 15y agoWait. Why would you do this? Can't you hold your options as, well, options until you want to exercise and sell them? I don't get why you would convert options to stock unless you wanted to sell them right away. I'm sure I'm missing something. Thanks.
- mp3tricord 15y agoThere are a couple reason you might exercise you options. First is that options come in two flavors ISO and NSO (or Non-Qualified). If you are issues ISO options then you could exercise and hold to qualify for long-term capital gains. http://www.startupcompanylawyer.com/2008/03/05/whats-the-difference-between-an-iso-and-an-nso/ http://www.startupcompanylawyer.com/2008/03/05/whats-the-dif... 2. Your options are going to expire and you need to convert them to shares. 3. You are leaving and want to hold on to your shares. Typically you need to convert them within 3 months.
- kstenerud 15y agoWould be more interesting to see values divided by founders, early employees, late employees.
- dlevine 15y agoProbably something like 95%/4%/1% That's not percentage of the company - that's percentage of the equity held by employees. In some cases it might actually turn out a bit better, like 90/5/5 or something like that. Regardless, the outcome seen by founders is orders of magnitude better than even early employees. This can be exacerbated by a bunch of games that can be played at an exit to make the disparity larger. For example, you can cancel all unvested options. Founders have likely been around longer than the employees, so they have more stock vested, plus they typically get some acceleration upon change of control. For example, imagine that a founder has 25%, and employee number 1 (who was hired 6 months after the company started) has 2%. That they sell to Google after the company has been around for 2 years, and that all unvested shares are cancelled. Employee 1 gets .75%, and the founder, who has 1 year acceleration on change of control, has 18.75%. On top of that, the founder probably gets long-term capital gains treatment because he exercised his shares immediately, where the employee didn't exercise any of his shares and treats the gain as income (if he had a 1-year cliff, he probably couldn't exercise for a year, at which point it didn't matter, because he had only held the shares for 6 months when the company was sold). So the employee ends up with 0.5% after taxes, and the founder ends up with 15.63%. Which means that he ends up doing about 30x as well as the first employee.
- jaxn 15y agoThat founder number changes quite a bit if there was investment capital involved, whereas the employee percentages stay about the same.
- jdfreefly 15y agoAt the time I didn't realize how rare this was, but the company was sold for cash, all options were accelerated to vest at close and people were payed with a check. There was a 50/50 chance we could have grown the company to be very cashflow positive (ie - we sold too soon) and there was a 50/50 chance we would have folded (ie - we sold at just the right time). We were bought for our novel technology and the engineering team was for the most part kept around and given good incentives to stay on for a bit. That job and the acquisition kind of launched my career so I don't spend too much time worrying about whether the CEO or the board pulled the trigger too early.
- copper 15y agoIndeed - I don't think this happens very often. I was a small beneficiary of this kind of deal, and even at the time it struck me as an excellent deal. Mind you, I attributed it to working with really good VCs and founders.
- moocow01 15y agoThere actually should be a negative category for all those that got hit with taxes after excersizing and then couldnt cash out. This unfortunately happens more frequently than you might think.
- dkd903 15y agoAre the ones, towards the end of this list, Google employees?
- fourk 15y agoFirst employee hired at a startup. Paid for my options before leaving the company. Six months later the company was acquihired by Google. Three months after that I was given paperwork informing me that those shares are now worth exactly $0.00/each. Founders made out well enough from the deal to pick up high-end luxury sports cars though, which is the important part of an exit, right?
- cloudhead 15y agoMaybe you should let us know what the startup was, as well as the people behind it, so we can avoid working with them.
- fourk 15y agoI'd prefer to be the better person here rather than defame them publicly. If anyone would like more information or to discuss this privately, however, my email is in my profile.
- cloudhead 15y agoI respect that, but maybe people wouldn't get away with this kind of thing if it was made more public.
- deleted 15y ago[deleted]
- tdfx 15y agoI don't like that this position is assumed by default by so many wronged parties on HN. If you're really eager to take the noble path, explain the story as objectively as you can and let other people decide. Letting other people get burned when they easily could've learned from your experience is not a noble thing.
- Klinky 15y ago
- xbryanx 15y agoProud non-profit hacker.
- cpeterso 15y agoFrom the stories people are sharing here, it sounds like a lot of startups are "non-profits". ;)
- mcherm 15y agoWhen the company was wound down, the VCs got back a significant amount (I think it was somewhere between 1x and 2x original investment, closer to 1x). The employees who had stock or options got zero.
- bilbo0s 15y agoWow...I have a whole new appreciation for how unbelievably lucky I got. Never even worked in Silicon Valley and had multiple exits that were, judging from this poll data, quite anomalous. Even when I was the employee. When I started out I had no clue about exits or options or any of it. It was just another number on my offer letter. I took the job because I wanted to learn and do some fun graphics programming. It really is a Christmas miracle that I was able to do that and not even live in San Fran. Based on my experience, I would say a good number of the votes you see represent pure, dumb, luck. Without question my votes do. Maybe some people were able to steer themselves to those exits, but for many, I'm betting they just got lucky as well. This data is really only showing you the likelihood of getting lucky. It is better than anywhere else in the economy. But it is not something that you should plan on. I think that is the "take-away" as the business guys would say.
- rdouble 15y agoDo any startups still do reverse vesting with an 83b filing?
- bankim 15y agoDo you mean do startups allow employees to forward exercise options and file for 83b? If yes, I'm interested in knowing that too.
- rdouble 15y agoYeah. I had one like that but have really never heard of it happening anywhere else.
- bankim 15y agoMay be this deserves to be a separate question on HN :)
- jconley 15y agoYup, I had one recently. The company had buyback rights at the strike price of the options that were equivalent to typical vesting terms. So, a 1 yr cliff, 4 year monthly vest. I.E. Any time in year 1 they had the right to buy them all back for exactly what I would have paid to exercise.
- emeltzer 15y agoThe company was Scoopler. Please keep in mind that all you have here is one persons account of what happened--still, let's not beat around the bush.
- goodweeds 15y agoSoon Zynga employees might want an option which says "$n but our ceo threatened to fire me if I didn't give $n*50% back".
- smattiso 15y agoFor the startup founders out there - Is it getting harder to find talent? Are you having to pay more? Are employees more well informed in matters related to equity?
- kbutler 15y agoTwo experiences: - Employee # <125. Exercised options on a vested block of pre-IPO stock before leaving. After IPO and waiting period, sold a chunk for low-mid 5 figures, wanting to spread the sales and capital gains over multiple years. Later that year, sold the rest for 1/4 my exercise price. - Employee # <20. Exercised some ISOs. Company acquired, all value went to preferred share holders, I received an education in classes of stock and AMT credit carryovers. Got some incentive bonuses to stay with the acquiring company. Takeaways: - Work your job for salary. Don't expect stock options to pay off. - Sell some periodically, even if it's going up.
- darien 15y agoI wanted to graph the results thus far. Pretty interesting... About 20% of responders claim exit yields of over $150k. Check it out here https://docs.google.com/spreadsheet/ccc?key=0AlQ_IeF38HHndGoxLUIyUThuRTBGeFBiY1ptbENNcWc https://docs.google.com/spreadsheet/ccc?key=0AlQ_IeF38HHndGo...
- jjm 15y agoThe numbers for 150k through 11m are very believable. However the 'greater than $11M' is really looking like a totally anomaly. http://opani.com/dirk/crunch-acquisitions/results/#key=(reduce) http://opani.com/dirk/crunch-acquisitions/results/#key=(redu...
- earle 15y agoHow did 51 people on here get more than $11m out of their ownership? Calling BS w/o references.
- moocow01 15y agoI would be highly suspicious of the greater than $11M category. You'd have to have one hell of an exit to get $11M as an employee and according to the poll about 1 / 16 people on hacker news have been through this or more. From my experience and those of my peers I'd put it at somewhere betwen 1/100 (being extremely optimistic) to 1/1000 (probably still being optimistic) - and yes there are the google, facebook etc. stories but for each there are the 1000 other untold stories that didn't pay anything sizeable.
- wavephorm 15y agoI suspect most of the people answering in the millions were founders and not employees. Employees usually have less than 1% equity, and there just aren't that many multi-billion dollar exits.
- nandemo 15y agoAnother option: "never got any stock or stock options". I'm not talking about vesting. I mean not getting even unvested options. Rather common in Japan, unfortunately.
- verroq 15y agoWe seem to have a lot of millionaires on this site.
- sliverstorm 15y agoI'm surprised how many are in the "greater than $11M" bucket. Was that perhaps just multiple people from a small handful of companies?
- danssig 15y agoIt's founders or BS.
- sambeau 15y agoI have had options in three startups and have never seen a penny. I am now convinced that options are a con trick. Founders would make far better hiring choices if they had to give real stock. Employees, too, would make far better hiring choices if each new employee diluted their stock (especially if all employee stock came from one significant pool,say, 25%): do you dilute to complete or work even harder to keep your share? This question would motivate staff as much as it would motivate founders not only to create a successful company but to hire the kind of people who would see it through. It would also show a level of trust that, generally, would be repaid. If people did leave, keeping the stock, you may have made a hiring mistake (or some bad luck) but you will still have a champion who will help bring goodwill, customers and new staff.
- HelgeSeetzen 15y agoI am surprised by the distribution. Does the upper end (>$11M) represent founders or really just non-founding employees (I guess the Google-generation?)? I see 66 votes but not a single comment from anybody in that bracket. It's unfortunate that ESOP has such a bad reputation. I have never been a non-founding employee, but my last venture paid out about $3M net to about 20 non-founding employees and 30 interns (about $4.5M gross before strike price). Roughly 10%/15% net/gross of the exit value. Ranging from high 66 digit all the way to 3 digits (for late-stage 4 months interns). In my latest venture we simply give common shares to employees (reverse vesting but otherwise the same as the rest of the cap table).
- MercuryPDX 15y agoThe only company that I was working for that did offer stock options required that we rescind them (two years short of when most of us were to be considered vested) in order to participate in the new company matched 401K program. They never wound up going public and got bought out by a larger company.