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Y Combinator Compensation Numbers
Does the compensation listed on YC jobs include stock converted to cash?
For example, Retool (https://www.ycombinator.com/companies/retool) claims to be paying $600k to someone with 6 years experience. I find this hard to believe.
- philip1209 3y agoFor late-stage startups like this, RSUs are common instead of options. Because stock is issued rather than purchased (like an option), I don't think this is dishonest. (If a company valuation stays flat, stock options are worthless - but RSUs have value). Either way: A thing to keep an eye out for is startups that describe the compensation value of stock using the preferred stock price, but then issue you common stock. I've personally seen one late-stage YC company doing this - you sign the offer letter with $Xk in stock, then the paperwork shows up later with $(X/4)k in the grant. If a late-stage startup is including stock-based compensation in this number, I think it's likely they are pricing the stock inconsistent with its class in the 409a valuation. Keep an eye out for this - I think it's a common and dishonest way to boost perceived compensation.
- zachthewf 3y agoYou are right, but using the 409a pricing would not really be honest either. (In the sense that the 409a is basically "as low as we could reasonably value this stock" in order to keep the strike prices low.)
- malfist 3y agoBut that is what the market will pay. No one goes onto the stock market and purchases orders above their ask
- singron 3y agoThe 409a isn't based on what the market will pay since private shares aren't on the stock market. It's a guess about what the market might pay, but since the shares aren't liquid, the guess can't be tested, so there is huge leeway to pick a favorable number.
- juancampa 3y ago409a value is determined by an independent appraiser though, not the market. And in my (very limited) experience the actual difference can vary wildly, especially since the appraisal happens only once a year.
- deleted 3y ago[deleted]
- philip1209 3y agoI understand the founder argument. "Our investors said our valuation was $XM, so we give you your stock grant based on that price." But, the investors don't take normal stock. They demand special ("preferred") stock with more voting power that can get paid first - before employees. So, the $XM valuation isn't fair between the different stock levels, and the employees are at the bottom of the food chain - most likely to walk away with nothing. Startups typically give their employees stock or options, and how you price the stock has tax implications. So, the IRS strongly suggests that you do something called a 409a valuation, where a neutral 3rd-party professional accounting firm determines the value of each stock type in your company. So, if your startup valuation is Schrodinger's Cat, then the 409a process is intended to have some trusted third party open the box and see what's happening. The problem arises when you report one valuation to the IRS, and another to employees. You can't keep two different sets of accounting books, and you can't represent two different sets of valuations at the same time. By having the third-party accounting firm issue a valuation and by issuing stock at that valuation, you're supposed to have eliminated uncertainty in your stock price - and if you haven't, then the tax treatment of your grant is at risk. That duality is made clear when your offer letter says "$X" and the stock grant says "$<X". That's dishonest and potentially fraud. You can say "Your stock is valued at $X based on a $Y liquidity event, and $Y is the post-money valuation of our last round of funding." But, that's not the same as "We advertise your stock as worth $X (but, shhh, that's not what we tell the government so keep it a secret)."
- milkshakes 3y agoIf anything, RSU compensation is worse than options because of the tax implications. With options you have the option of paying the tax before the appreciation of the equity. With RSUs, you pay at liquidity.
- toomuchtodo 3y agoIf issued ISOs that are QSBS qualified, no federal tax on the first $10M or 10x your cost basis, whichever is more. 83(b) election is sometimes an option too. RSUs are, as you mentioned, mostly cash comp due to valuation and tax treatment. (not tax advice, we're just talking lottery ticket mechanics)
- beambot 3y agoIIRC, you only get QSBS if you (a) exercise to purchase actual shares while the company is QSBS eligible; and (b) hold the resulting stock for 5 full years.
- toomuchtodo 3y agoCorrect. You’ll also want a QSBS attestation letter from the finance team or whomever handles equity admin if the IRS comes knocking. Save it with your options grant documentation.
- philip1209 3y agoI've seen RSUs issued with single-trigger acceleration on acquisition or IPO.
- milkshakes 3y agotypically, the liquidity event is the trigger that takes longer, not the vesting schedule. with options, you can exercise before the liquidity event, and pay taxes on a much smaller income (or none at all in the case of QSBS as a sibling comment noted)
- 3y ago
- temp_praneshp 3y ago>(If a company valuation stays flat, stock options are worthless - but RSUs have value) Can you help me understand why? I'd expect if you're granted options at a strike price of $Y, you will still make money as long as the valuation at liquidation time is more than $Y.
- yen223 3y agoIf the company value stays flat, that means its valuation at liquidation time is equal to $Y
- MrDarcy 3y agoPut another way, your capital gains are zero.
- temp_praneshp 3y agoBut in any offer I have received, I've seen two numbers: Preferred value(?): X, and strike price: Y, with Y well below X. In any case, you don't have to teach me all about options here, I was just curious :)
- deleted 3y ago[deleted]
- bfung 3y agoThe kicker is “at liquidation time”, which is unpredictable and unknowable. Most of the time, options go to zero due to company shutdown.
- zffr 3y agoWhere do you see the $600k figure?
- c2occnw 3y agoLooks like it was taken down.
- AnotherGoodName 3y agoIt probably is accurate for someone with stock grants from a while ago vesting now. For new hires I'd lower that expectation though.
- anotherhue 3y agoRemember that unless there's a market for those shares, they are effectively worthless. Check places like equityzen to see.
- ChrisArchitect 3y agoAsk HN:
- hiddencost 3y agoKeep in mind that the law only requires salary to be listed. Large companies typically only list salary, because it helps them hide the true compensation numbers.
- zerr 3y agoWhy don't they adjust the law so the total comp is also required to be listed?
- toomuchtodo 3y agoCall you state representative and ask them to. Legislation is iterative.
- altdataseller 3y agoBecause it’s not exact. Nobody knows how much your stock/options/RSUs will be worth x months from now. But they know what your base salary will be. Also, if I’m a candidate and the company has to tell me a number, I do NOT want to know the “total comp” because it might be 90% lotto tickets (ie startup options) and 10% base salary. Unless they explicitly break it down, I rather know the base salary
- sokoloff 3y agoIt's not even clear what they're worth at the moment of granting. There are multiple models for options valuation which have to be layered on top of multiple models for private share valuation.
- zerr 3y agoThe law could require listing of base salary, nbr of stocks/options/whatever, any other benefits such as PTO.
- altdataseller 3y agoReport them to the CA state government. It’s legal only if they have < 20 employees
- brigadier132 3y agoOn levels.fyi it looks like retool pays an median of $205,000 including salary and rsus.
- doctorpangloss 3y ago[flagged]
- samspenc 3y agoWait, I can't tell if you're being serious or sarcastic :)
- granshaw 3y agoIn the ZIRP era esp going into 2021 this could be taken seriously, but those days are long gone Average tech salaries have DROPPED to 2020 or before levels based on what I’ve seen lately
- test77777g 3y agoReally? For me it’s been true since 2018. Nobody is working for real.
- granshaw 3y agoMaybe, but the salary part is true if you’re a new hire
- opportune 3y agoThis is an attainable, but uncommon, TC for someone who joined F/G right out of college and got many promotions very quickly (much more attainable at F than G). At 6yoe even higher TCs are possible at certain financial firms. So it’s not-impossible that this is a non-appreciated offer designed to compete with/recruit away from such compensation.
- snir 3y agoOpportunistically chiming in :) I lead engineering here at Retool -- reach out to snir (at) retool if you're interested in learning more! We're hiring across several key roles, including AI, performance, our core products, and infra.
- rsweeney21 3y agoYou should answer the question...
- thraway3837 3y agoWhat is your company's remote work position? I could not find it on your careers page and only saw 1 remote position listed. Is it 100% in office? Or expected to come in 3 times a week, etc? Can you please tell us?
- snir 3y agoSure thing! We hire primarily out of SF, NYC, and Seattle -- in-person has boosted our productivity and been a lot more fun for us! Transparently, we have made a few exceptions, and are not entirely opposed to more, but it's really the exception rather than the rule. We are in-office 3 days a week, so there is some flexibility built in there, too.
- AzuraIsCool 3y ago[flagged]
- irq 3y agoTreating remote as the exception rather than the rule, or at least as a fully supported, equal labor force is the most common way I’ve seen companies get remote work wrong.
- thraway3837 3y agoRetool: Thank you for your response. irq: Agreed. It's just a roundabout way of saying they want everyone physically at work. Given that they're based in SF, and the real estate/rent is high and the need for a small group to boost downtown revenue, of course the investors will push for that since it benefits that group. Not having a clear remote only position for a 100% software company post pandemic is just not going to work for me, and there's no evidence that physically being together has any productivity gains.
- thehucklecat 3y agoIn my startup we track another number in order to normalize our compensation. We do a quick "expected valuation" calculation on the share price and use that, instead of the 409a or the valuation. This is how I actually value it in my own head, so we just kind of canonicalize. example: I think there's a 1% chance 1billion a 5% chance we make 100M. A 40% chance we make 20M. So that's a 23M and then I calculate the value of an option based on that. Using that, I can then try to "match" a salary from a public company. So we set our comp as 80% of the google levels.fyi data. (Chose google bc it has the fullest levels.fyi data). This gives us a full compensation benchmark for any roles / levels. ie a Sr engineers makes 263k. But we pay 140 in cash and 123k in equity. Then I can explain to an engineer. We feel like we're paying you as well as you would be paid at google, but you need to believe that we have a 1% chance at a billion. 5% chance at 100M etc. They can easily tweak these expectations too so they can compare offers. If they think there is a zero percent chance of 1B they can adjust the offer themselves in their head.