4 ms·

the lottery ticket analogy doesn't quite hit the mark imho. I've been seeing really shitty vesting schedules more often these days. a year in an early stage st

the lottery ticket analogy doesn't quite hit the mark imho. I've been seeing really shitty vesting schedules more often these days. a year in an early stage startup is often more intense than years in larger companies, yet they feel the need to push vesting schedules like 5/15/30/50 on people. even if you do stick it out and exercise those options and eat the tax burden, those shares can still be ignored in an acquisition or diluted into oblivion in an IPO if the agreements are structured to allow that. with a fat carrot dangling at the end of year four and the promise of an IPO Soon™, a lot of people will be more than happy to ignore important parts of their lives and financial well being for the chance of maybe, just maybe, getting access to that lottery ticket. I think a better analogy might be like gambling in a casino. investors get to write the rules and hold all the leverage. the worst places are mobbed up, the rest might be legit but either they have every incentive to keep selling you the dream of winning big. in all likelihood, if you keep making that bet you'll walk out worse off than you were when you walked in. if a startup or VC truly gave a shit about anyone outside the c-suite, they'd have an employee ownership program of some form and assign actual equity, not just options. I've yet to see many of them do this though because founders are the most likely ones to be gambling in those kinds of casinos.

xandrius 2y ago
What would you suggest to someone who wants to work at interesting (non-evil) companies, wants a decent comp ($200k+) and doesn't mind being one of the first to lay the foundation with the possibility of upward mobility in the future?
- inhumantsar 2y ago
  be a founder or a consultant, not a founding engineer. build up a set of specialized skills in something you love doing, network your face off, keep lifestyle inflation under control, and keep a large amount of your savings liquid(ish). if the right people and opportunity comes along, be ready to tap those savings and live off them for at least a year while you build the company or be selective about your next consulting job. like the old cliche says, luck is where opportunity meets preparation. if you're not that ambitious and simply want to live comfortably, then go to those early stage startups and negotiate for higher cash comp and a smaller slice of the options. you can make great money as a SWE, but there's a massive leap between that rung on the income ladder and the ones above it. it takes a dedicated effort to get there.
  - xandrius 2y ago
    That's great advice! How would you get into good consulting gigs? Is it networking again or some other approach?
deleted 2y ago
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torginus 2y ago
Sorry I'm a total dumbo when it comes to startups, but what do you 'vest'? I thought vesting is for stock options (maybe stake?). And your startup is not on the stock market, and won't ever be unless it gets a billion-dollar valuation. Even stake might be worthless, if the company fails, despite you building a kickass backend for it.
- munchbunny 2y ago
  Yes, you vest stock options, and given that risk for startups is very much front-loaded, vesting schedules that are back-loaded are a big red flag for incentive misalignment. And that's ignoring all of the problems with stock options as opposed to RSU's. The baseline is something like a 4-year vesting schedule with a 1 year cliff and monthly after that, uniform distribution. Anything more back-loaded or worse than that is a red flag.
- inhumantsar 2y ago
  most startups don't offer actual equity even though that's what everyone calls it. they offer options. the idea is that the options you'll receive will have a strike price much lower than what the stock will be worth in future funding rounds or when the company is acquired or IPOs. the vesting schedule defines when you can start to exercise those. typically you'll receive 25% of your options after the first year, then the other 75% will vest every month after. and yes, liquidity in a private company is always going to be an issue. all of this is why I tell everyone that their options are worthless right up until they're not. anyone who's burned out or looking at a new opportunity shouldn't include them in their decision making process.

xandrius 2y ago

What would you suggest to someone who wants to work at interesting (non-evil) companies, wants a decent comp ($200k+) and doesn't mind being one of the first to lay the foundation with the possibility of upward mobility in the future?

inhumantsar 2y ago
be a founder or a consultant, not a founding engineer. build up a set of specialized skills in something you love doing, network your face off, keep lifestyle inflation under control, and keep a large amount of your savings liquid(ish). if the right people and opportunity comes along, be ready to tap those savings and live off them for at least a year while you build the company or be selective about your next consulting job. like the old cliche says, luck is where opportunity meets preparation. if you're not that ambitious and simply want to live comfortably, then go to those early stage startups and negotiate for higher cash comp and a smaller slice of the options. you can make great money as a SWE, but there's a massive leap between that rung on the income ladder and the ones above it. it takes a dedicated effort to get there.
- xandrius 2y ago
  That's great advice! How would you get into good consulting gigs? Is it networking again or some other approach?

deleted 2y ago

[deleted]

torginus 2y ago

Sorry I'm a total dumbo when it comes to startups, but what do you 'vest'? I thought vesting is for stock options (maybe stake?). And your startup is not on the stock market, and won't ever be unless it gets a billion-dollar valuation. Even stake might be worthless, if the company fails, despite you building a kickass backend for it.

munchbunny 2y ago
Yes, you vest stock options, and given that risk for startups is very much front-loaded, vesting schedules that are back-loaded are a big red flag for incentive misalignment. And that's ignoring all of the problems with stock options as opposed to RSU's. The baseline is something like a 4-year vesting schedule with a 1 year cliff and monthly after that, uniform distribution. Anything more back-loaded or worse than that is a red flag.
inhumantsar 2y ago
most startups don't offer actual equity even though that's what everyone calls it. they offer options. the idea is that the options you'll receive will have a strike price much lower than what the stock will be worth in future funding rounds or when the company is acquired or IPOs. the vesting schedule defines when you can start to exercise those. typically you'll receive 25% of your options after the first year, then the other 75% will vest every month after. and yes, liquidity in a private company is always going to be an issue. all of this is why I tell everyone that their options are worthless right up until they're not. anyone who's burned out or looking at a new opportunity shouldn't include them in their decision making process.