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I imagine they raised that $42m at a higher valuation... giving investors preferred stock, meaning normal stock for employees was worth nothing.
by mathrawka 13y ago
I imagine they raised that $42m at a higher valuation... giving investors preferred stock, meaning normal stock for employees was worth nothing.
- Zelphyr 13y agoProof of why, as jwz says, stock options are a stupid tax and a lottery.
- mattmaroon 13y agoIt's not fair to call them a lottery because as a class they have a positive expectation. (At worst they are worth $0, but clearly some make money.) They're not a tax either. They're just a riskier form of compensation. Like any investment, you get a premium based on the level of risk. Their expected value is still pretty good though if you're working for a good startup.
- mathrawka 13y agoI think the stupid tax part comes from the daydreamers who believe if they work their ass off (more hours than a 9-5 job), they will get there millions. Hopefully after doing that once they realize it takes more than putting tons of hours in and you should focus on doing things you enjoy, both in and out of the office.
- Andnowfor 13y agoCorrection Matt, if you purchase them (as an employee) their cost is definitely not zero, therefore you can lose money.
- Zelphyr 13y agoAgreed. Also, when you choose options over salary then their cost is greater than $0 because thats money you otherwise would have received had you chosen salary. When the options cannot be exercised because they have little to no value (which, in my experience, is nearly always the case) then you actually lose money.
- Zelphyr 13y agoI think the point he (jwz) was trying to make when he used the words "tax" and "lottery" is that they are, on average, not things you want to spend money on. Not that options are an ACTUAL tax or lottery. "Stupid tax" meaning (quoting Urban Dictionary) the price you pay for ignorance. "Lottery" in the sense that, yes, someone is going to win it. Its just not going to be you, statistically.
- Andnowfor 13y agoDon't forget the founders, which likely had common. If current management has no desire to do right by early employees, common can be set to $0.