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Over many years as an employee for startups, I was employee number 24 of a $30M cash acquisition exit. The result was 6 figures, but just. Effectively it was

by MCRed 11y ago

Over many years as an employee for startups, I was employee number 24 of a $30M cash acquisition exit. The result was 6 figures, but just. Effectively it was a year's salary. That's all my options were worth and to get that return, I worked for about 20 startups over 2 decades... only one paid off.

walshemj 11y ago
To put this in perspective that's a lot less than last years share options (5 year plan) at BT. The last sharesave to vest returned >£100,000 Tax free if you had the max amount.
- jackgavigan 11y ago
  BT as in British Telecom?
  - walshemj 11y ago
    Yes though the changed to just BT for branding purposes a while back.
- dogma1138 11y ago
  BT is a multi billion dollar company, not to mention that sharesave isn't the same as an equity compensation. Share As You Earn SAYE is a savings plan in the UK which allows employees to save money from their salary in company shares. The UK has really weird schemes because people have historically had no pension or savings plans from their employees (most PAYE workers still do not have pension as the date mandated by law is always being deferred). With SAYE as far as i know the employer is not allowed to grant you equity, what they can do is give a fixed yearly rate (usually heavily discounted) for share purchases, but it's not as sweet as it seems. The dividends and the equity rights from the shares belong to the employer not the employee, this is basically a way to allow employers issue shares (in large volumes) without losing control over the company, having to do payouts, and decreasing the market value of their normal shares as SAYE shares are not tradeable. It also allows employers to bypass various laws preventing normal employees from having too high of a share of the company, and ties employees to their employer since not only do they rely on it for their salary but also as their investment/savings provider and since SAYE plans are either 5 or 3 years long it pretty much means that invested employees will not living the company during the SAYE period unless they want to lose their investment (and yes they will lose it). BT's Sharesave is also a "unicorn" and from the current buy-in value it will probably won't repeat it self, yes a few people who saved up the max amount (225 GBP a month) gotten about 80K in return. But and this is a big but those were the 1st shares issues at 80p per share, when they matured the shares closed at over 300pp/s the last round of the SAYE program had a buyin of 250pp/s so pretty much no one will see these returns again. P.S. The money you gain for SAYE Isn't tax free you pay capital gains tax on it if you sell them once they are matured. Also since SAYE with all of it's bells and whistles is a company options plan (with heavy tax incentives to the employer) it's still a risk, some people got huge returns others didn't since the share price was lower than the option price.
  - walshemj 11y ago
    Err no the UK used to have very good pensions schemes. BT has a FS scheme unfortunetly now closed to new entrants and its DC pension matches up to 8 or 10% The shares you get from share saves are real shares none of this multiple share lasses with different voting powers. And I certainly get the divi from mine. And yes this years BT is a v good one. And I did 400% roi from my REL shares a couple of years back and you can normaly mitigate any tax by sensible use of ISAs and using your CGT Alowance. And there are share schemes for high performers on top of that I know people that got some the share save is what everyone gets.
    - dogma1138 11y ago
      I think you are confusing state pension with employer pensions, employer pension contribution are only now being mandated by law, and most companies which use PAYE and are under 50 employees still do not have to do it, the dead line now is 2018 but it's been pushed back all the time. The shares you got from Sharesave would be "real" shares only if you bought them at the end of the maturation period if you cashed out you wouldn't get to keep any shares, and you don't have voting rights or dividends for those shares while they are in Sharesave. There are quite a few schemes for this https://www.gov.uk/tax-employee-share-schemes/company-share-option-plan https://www.gov.uk/tax-employee-share-schemes/company-share-... But any how, this again ins't the same thing as the equity most people get for startups, so again not really a good comparison.
      - batou 11y ago
        That's because the options for mandatory pensions are: 1. High risk fund backed pension. Probably will decline in value due to fund saturation. 2. Low risk fund backed pension. You pay more in yearly fees and decline in value. I killed mine dead. Stupid idea. If base rate was higher, perhaps but its a stupid stupid idea now.
        walshemj 11y ago
        You do know that in the UK you get a massive boost via tax relief to your contributions for pension contributions
branchless 11y ago
That says it all really. $30M and you see under $100k as 24th employee. So 0.3%.
- harryh 11y ago
  What % of the company do you think the 24th employee should get? Obviously it's highly variable depending on the role. #24 could be a COO or could be a receptionist. But for the sake of argument let's assume they're a mid level engineer (taking a stab at what MCRed might have been at the gig in question).
  - branchless 11y ago
    It's true we don't have enough info. I'm assuming he's a dev but I don't know.
    - harryh 11y ago
      I don't think that 0.3% is radially out of line. It sounds completely in the ballpark of reasonable to me.
      - serge2k 11y ago
        I think it depends on the risk. Getting hired at #24 might be a much less risky proposition than number 10 or 15.
        tptacek 11y ago
        Assume we're talking about a senior developer and come up with math that reasonably gets #24 above 100 basis points. It's not impossible, but it's pretty tricky. Remember, in a lot of companies, the founders are diluted way back below 10%.
  - pzb 11y ago
    The percentage really doesn't matter. Assume that you could get a $150K cash/stock at a public company (meaning concrete valuation). A startup offers you $80K and says "here is equity to make up the difference". If you assume three years and a 10% chance of them being worth something that means you need RSUs worth at least $2.1M to meet expected loss of salary. I highly doubt you are getting that.
kamaal 11y ago
Factor in taxes and that would be way less. More like six months salary. Factor in inflation on top of it and that would be more like four months salary. Its all about luck. Things can go either way.
kzhahou 11y ago
The founders received (probably) an amount equal to all employees combined. Do you know?

by MCRed 11y ago

walshemj 11y ago

To put this in perspective that's a lot less than last years share options (5 year plan) at BT. The last sharesave to vest returned >£100,000 Tax free if you had the max amount.

jackgavigan 11y ago
BT as in British Telecom?
- walshemj 11y ago
  Yes though the changed to just BT for branding purposes a while back.
dogma1138 11y ago
BT is a multi billion dollar company, not to mention that sharesave isn't the same as an equity compensation. Share As You Earn SAYE is a savings plan in the UK which allows employees to save money from their salary in company shares. The UK has really weird schemes because people have historically had no pension or savings plans from their employees (most PAYE workers still do not have pension as the date mandated by law is always being deferred). With SAYE as far as i know the employer is not allowed to grant you equity, what they can do is give a fixed yearly rate (usually heavily discounted) for share purchases, but it's not as sweet as it seems. The dividends and the equity rights from the shares belong to the employer not the employee, this is basically a way to allow employers issue shares (in large volumes) without losing control over the company, having to do payouts, and decreasing the market value of their normal shares as SAYE shares are not tradeable. It also allows employers to bypass various laws preventing normal employees from having too high of a share of the company, and ties employees to their employer since not only do they rely on it for their salary but also as their investment/savings provider and since SAYE plans are either 5 or 3 years long it pretty much means that invested employees will not living the company during the SAYE period unless they want to lose their investment (and yes they will lose it). BT's Sharesave is also a "unicorn" and from the current buy-in value it will probably won't repeat it self, yes a few people who saved up the max amount (225 GBP a month) gotten about 80K in return. But and this is a big but those were the 1st shares issues at 80p per share, when they matured the shares closed at over 300pp/s the last round of the SAYE program had a buyin of 250pp/s so pretty much no one will see these returns again. P.S. The money you gain for SAYE Isn't tax free you pay capital gains tax on it if you sell them once they are matured. Also since SAYE with all of it's bells and whistles is a company options plan (with heavy tax incentives to the employer) it's still a risk, some people got huge returns others didn't since the share price was lower than the option price.
- walshemj 11y ago
  Err no the UK used to have very good pensions schemes. BT has a FS scheme unfortunetly now closed to new entrants and its DC pension matches up to 8 or 10% The shares you get from share saves are real shares none of this multiple share lasses with different voting powers. And I certainly get the divi from mine. And yes this years BT is a v good one. And I did 400% roi from my REL shares a couple of years back and you can normaly mitigate any tax by sensible use of ISAs and using your CGT Alowance. And there are share schemes for high performers on top of that I know people that got some the share save is what everyone gets.
  - dogma1138 11y ago
    I think you are confusing state pension with employer pensions, employer pension contribution are only now being mandated by law, and most companies which use PAYE and are under 50 employees still do not have to do it, the dead line now is 2018 but it's been pushed back all the time. The shares you got from Sharesave would be "real" shares only if you bought them at the end of the maturation period if you cashed out you wouldn't get to keep any shares, and you don't have voting rights or dividends for those shares while they are in Sharesave. There are quite a few schemes for this https://www.gov.uk/tax-employee-share-schemes/company-share-option-plan https://www.gov.uk/tax-employee-share-schemes/company-share-... But any how, this again ins't the same thing as the equity most people get for startups, so again not really a good comparison.
    - batou 11y ago
      That's because the options for mandatory pensions are: 1. High risk fund backed pension. Probably will decline in value due to fund saturation. 2. Low risk fund backed pension. You pay more in yearly fees and decline in value. I killed mine dead. Stupid idea. If base rate was higher, perhaps but its a stupid stupid idea now.
      - walshemj 11y ago
        You do know that in the UK you get a massive boost via tax relief to your contributions for pension contributions

branchless 11y ago

That says it all really. $30M and you see under $100k as 24th employee. So 0.3%.

harryh 11y ago
What % of the company do you think the 24th employee should get? Obviously it's highly variable depending on the role. #24 could be a COO or could be a receptionist. But for the sake of argument let's assume they're a mid level engineer (taking a stab at what MCRed might have been at the gig in question).
- branchless 11y ago
  It's true we don't have enough info. I'm assuming he's a dev but I don't know.
  - harryh 11y ago
    I don't think that 0.3% is radially out of line. It sounds completely in the ballpark of reasonable to me.
    - serge2k 11y ago
      I think it depends on the risk. Getting hired at #24 might be a much less risky proposition than number 10 or 15.
      - tptacek 11y ago
        Assume we're talking about a senior developer and come up with math that reasonably gets #24 above 100 basis points. It's not impossible, but it's pretty tricky. Remember, in a lot of companies, the founders are diluted way back below 10%.
- pzb 11y ago
  The percentage really doesn't matter. Assume that you could get a $150K cash/stock at a public company (meaning concrete valuation). A startup offers you $80K and says "here is equity to make up the difference". If you assume three years and a 10% chance of them being worth something that means you need RSUs worth at least $2.1M to meet expected loss of salary. I highly doubt you are getting that.

kamaal 11y ago

Factor in taxes and that would be way less. More like six months salary. Factor in inflation on top of it and that would be more like four months salary. Its all about luck. Things can go either way.

kzhahou 11y ago

The founders received (probably) an amount equal to all employees combined. Do you know?