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I think the main thing to remember is that you should assume they are worthless. There's probably something like a 99% chance they are worthless, a 0.9% chance

by crote 2y ago

I think the main thing to remember is that you should assume they are worthless. There's probably something like a 99% chance they are worthless, a 0.9% chance they are worth a decent holiday, a 0.09% chance it'll let you retire early, and a 0.01% it'll make you somewhat rich. Worst of all, unless you're the CxO you have very little control over the outcome. Equity is a nice bonus, but you might just as well treat it like the company giving you a lottery ticket for Christmas. Nobody is going to take a significant pay cut or work 80 hours a week for a lottery ticket, so don't do it solely for the stock options either.

sharkweek 2y ago
I’m 0 for 3 on startup equity being worth anything and have since left the industry. One of the startups I did some time at was as close to a sure thing as one can hope for (unicorn valuation at one point) but it still went to zero in a very public flame out. It’s still impossible not to get imaginative about what could have been as I was a very early employee… such is life. The most lucrative stretch of my career was working for a big company that paid good base salaries.
- datadrivenangel 2y ago
  Same. 1 startup is dead-dead. 1 startup is now a husk of itself used by the CEO for fractional CxO consulting, and 1 is down from unicorn status to limping along with 1/5th the staff. The primary benefit of startups is getting to do more work to learn more faster and not deal with Process.
aetherson 2y ago
I've worked at 8 companies, 3 have resulted in value from equity (all granted pre-IPO), all of them in certainly much larger than "a decent holiday" level. I think people have updated to be much too negative on the prospect of equity paying out. It's obviously much better than 1%, at least if you work at anything other than extremely early-stage companies.
- cyanydeez 2y ago
  [flagged]
  - aetherson 2y ago
    The rate of having a liquidity event for startups, particularly startups past the A stage, is just obviously not ultra low. Like, is it better than 50%? Reader, it is not! But it's not sub 10%, either. People can make intelligent decisions about equity without hyperbolically insisting that the chance that that equity will be worth money is one in a million.
    - ziofill 2y ago
      Are there statistics about funding round (A, B, C, etc) and getting good value for options?
      - aetherson 2y ago
        It's not really possible to have nice uncontested stats about this because the definitions of the rounds aren't fully neat, there are potentially generational effects, and how you divide up industries isn't fully neat either. In a typical year, a double-digit number of tech companies IPO (there was a big jump in 2021 and then a crash in 2022/2023, with 2024 seemingly back in the double-digit range). https://www.visualcapitalist.com/charted-four-decades-of-u-s-tech-ipos/ https://www.visualcapitalist.com/charted-four-decades-of-u-s... Let's be really clear, though: there's "getting good value for options" and then there's "getting some value for options." It is straightforwardly true that in general big public companies have better comp than pre-IPO companies: the guaranteed value of equity in your Metas or Googles or even lower-tier public companies is generally higher than the expected value of pre-IPO equity, even if you are relatively risk-insensitive. That is importantly different from "the value of pre-IPO equity is zero," or "it is a one-in-a-million event to get value from pre-IPO equity."
        dcow 2y ago
hibikir 2y ago
It really depends of the stage of the startup. I recall reading someone doing analysis on this (unfortunately I don't have a link) showing that joining a company that isnt public yet, but is already large-ish and showing some real product-market fit gets people better payouts. Yes, employees 1-40 of a future unicorn will to great (if they could afford to buy the shares, and AMT doesn't kill them which is another story), but it's relatively safe to get into a company that hasn't IPO'd yet. Imagine say, that you joined Stripe in 2014. By then, probably 500-1000 employees and a a real name on the industry, yet private. It's perfectly reasonable to not consider the stock they might have offered at that time as straight out money, like you'd have treated Google RSUs. But discounting the shares to zero, or just "a nice bonus" is also silly. I bet anyone that got a year or two of stock in that era is well into the retire-early/somewhat rich cadre, and that wasn't all much of a risk.
- disgruntledphd2 2y ago
  > By then, probably 500-1000 employees and a a real name on the industry, You're wildly exaggerating here (but unsurprisingly). I know someone who joined Stripe in 2015, and he said there were about 300 employees globally at the time. But I do generally agree with the rest of your point, I'm just contextualising the information.
randerson 2y ago
> you should assume they are worthless. I had this mindset at a startup and decided not to risk any of my money exercising my stock options. They eventually expired. Years later the company IPO'd and I would have made a lot of money had I exercised. Waiting for more certainty before exercising means the fair market value will likely be higher then and you'll have to pay AMT. I now approach a job with the mindset that stock options are probably worthless, but I'll risk what I can afford to by exercising as soon as I can.

by crote 2y ago

sharkweek 2y ago

I’m 0 for 3 on startup equity being worth anything and have since left the industry. One of the startups I did some time at was as close to a sure thing as one can hope for (unicorn valuation at one point) but it still went to zero in a very public flame out. It’s still impossible not to get imaginative about what could have been as I was a very early employee… such is life. The most lucrative stretch of my career was working for a big company that paid good base salaries.

datadrivenangel 2y ago
Same. 1 startup is dead-dead. 1 startup is now a husk of itself used by the CEO for fractional CxO consulting, and 1 is down from unicorn status to limping along with 1/5th the staff. The primary benefit of startups is getting to do more work to learn more faster and not deal with Process.

aetherson 2y ago

I've worked at 8 companies, 3 have resulted in value from equity (all granted pre-IPO), all of them in certainly much larger than "a decent holiday" level. I think people have updated to be much too negative on the prospect of equity paying out. It's obviously much better than 1%, at least if you work at anything other than extremely early-stage companies.

cyanydeez 2y ago
[flagged]
- aetherson 2y ago
  The rate of having a liquidity event for startups, particularly startups past the A stage, is just obviously not ultra low. Like, is it better than 50%? Reader, it is not! But it's not sub 10%, either. People can make intelligent decisions about equity without hyperbolically insisting that the chance that that equity will be worth money is one in a million.
  - ziofill 2y ago
    Are there statistics about funding round (A, B, C, etc) and getting good value for options?
    - aetherson 2y ago
      It's not really possible to have nice uncontested stats about this because the definitions of the rounds aren't fully neat, there are potentially generational effects, and how you divide up industries isn't fully neat either. In a typical year, a double-digit number of tech companies IPO (there was a big jump in 2021 and then a crash in 2022/2023, with 2024 seemingly back in the double-digit range). https://www.visualcapitalist.com/charted-four-decades-of-u-s-tech-ipos/ https://www.visualcapitalist.com/charted-four-decades-of-u-s... Let's be really clear, though: there's "getting good value for options" and then there's "getting some value for options." It is straightforwardly true that in general big public companies have better comp than pre-IPO companies: the guaranteed value of equity in your Metas or Googles or even lower-tier public companies is generally higher than the expected value of pre-IPO equity, even if you are relatively risk-insensitive. That is importantly different from "the value of pre-IPO equity is zero," or "it is a one-in-a-million event to get value from pre-IPO equity."
      - dcow 2y ago

hibikir 2y ago

It really depends of the stage of the startup. I recall reading someone doing analysis on this (unfortunately I don't have a link) showing that joining a company that isnt public yet, but is already large-ish and showing some real product-market fit gets people better payouts. Yes, employees 1-40 of a future unicorn will to great (if they could afford to buy the shares, and AMT doesn't kill them which is another story), but it's relatively safe to get into a company that hasn't IPO'd yet. Imagine say, that you joined Stripe in 2014. By then, probably 500-1000 employees and a a real name on the industry, yet private. It's perfectly reasonable to not consider the stock they might have offered at that time as straight out money, like you'd have treated Google RSUs. But discounting the shares to zero, or just "a nice bonus" is also silly. I bet anyone that got a year or two of stock in that era is well into the retire-early/somewhat rich cadre, and that wasn't all much of a risk.

disgruntledphd2 2y ago
> By then, probably 500-1000 employees and a a real name on the industry, You're wildly exaggerating here (but unsurprisingly). I know someone who joined Stripe in 2015, and he said there were about 300 employees globally at the time. But I do generally agree with the rest of your point, I'm just contextualising the information.

randerson 2y ago

> you should assume they are worthless. I had this mindset at a startup and decided not to risk any of my money exercising my stock options. They eventually expired. Years later the company IPO'd and I would have made a lot of money had I exercised. Waiting for more certainty before exercising means the fair market value will likely be higher then and you'll have to pay AMT. I now approach a job with the mindset that stock options are probably worthless, but I'll risk what I can afford to by exercising as soon as I can.