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> I tend to think of options as worthless That's why they are trying to pay you with them. For them it's a one-way bet. It's sadly just another case of pushing

> I tend to think of options as worthless That's why they are trying to pay you with them. For them it's a one-way bet. It's sadly just another case of pushing risk onto the worker and not really passing on much of the upside.

nissimk 11y ago
It's also information asymetry. A classic financial arbitrage move. The founders offering the employees options understand all of the terms and scenarios that people in this thread are discussing, but most potential employees are not aware of these factors. Many potential employees will discuss their offer with trusted "experts" in their personal network who also are not familiar with the multiple scenarios that can devalue these options. Making complex financial deals with another party who is less sophisticated is always great for business. That's why employees should be even more careful when negotiating compensation with startups. If you can't spot the sucker at the table then the sucker is you.
- danielweber 11y ago
  And if the company decides to screw you over, it's really easy. If the pie is so huge that it's worth you getting a lawyer to fight back, generally 1) they aren't so selfish, and 2) they realize you will get that lawyer to fight for your piece. There's 10 ways for you to get devalued to 0 and you have to avoid all of them to make a payout.
tptacek 11y ago
In my experience it's the opposite: the fact that employees generally either (a) regard options as worthless or (b) round allocations down to the nearest 100 basis points is a reason not to use them in compensation: the implied discount employees give them makes equity comp very expensive. In fact: for this reason, I'd be especially wary of companies trying to buy a few thousand dollars of annual fully loaded cost with large amounts of equity --- it suggests extreme naivete.
- DenisM 11y ago
  Or plain lack of money to pay more. In the life of every company there is a moment when there is not enough money to hire the next two people, but there is also a feeling that hiring those two people would take the company to the next stage so much faster as to make the hiring worthwhile. At that point you either raise more money directly from investors, or offer more equity to prospect employees, or hold back on the growth. Raising extra money takes time, so it may not fit with the timing of things. Holding back should probably be preferential to giving away equity, however somethings growth is unusually important, for example when you're in the middle of a land-grab.
  - s73v3r 11y ago
    And sometimes a family needs to pay rent and buy food but doesn't have the money.
whitneyrzoller 11y ago
I have a friend who was ridiculed by a founder recently for not understanding the concept of equity. She had rejected his salary + equity offer which was a %50 salary cut from her current position. Irrespective of what the equity portion was I thought the founder's response was disgusting and pretty much validated her decision to pass.
- JoeAltmaier 11y ago
  I think is endemic to founders that they think this way. Else they'd not be founders.

nissimk 11y ago

It's also information asymetry. A classic financial arbitrage move. The founders offering the employees options understand all of the terms and scenarios that people in this thread are discussing, but most potential employees are not aware of these factors. Many potential employees will discuss their offer with trusted "experts" in their personal network who also are not familiar with the multiple scenarios that can devalue these options. Making complex financial deals with another party who is less sophisticated is always great for business. That's why employees should be even more careful when negotiating compensation with startups. If you can't spot the sucker at the table then the sucker is you.

danielweber 11y ago
And if the company decides to screw you over, it's really easy. If the pie is so huge that it's worth you getting a lawyer to fight back, generally 1) they aren't so selfish, and 2) they realize you will get that lawyer to fight for your piece. There's 10 ways for you to get devalued to 0 and you have to avoid all of them to make a payout.

tptacek 11y ago

In my experience it's the opposite: the fact that employees generally either (a) regard options as worthless or (b) round allocations down to the nearest 100 basis points is a reason not to use them in compensation: the implied discount employees give them makes equity comp very expensive. In fact: for this reason, I'd be especially wary of companies trying to buy a few thousand dollars of annual fully loaded cost with large amounts of equity --- it suggests extreme naivete.

DenisM 11y ago
Or plain lack of money to pay more. In the life of every company there is a moment when there is not enough money to hire the next two people, but there is also a feeling that hiring those two people would take the company to the next stage so much faster as to make the hiring worthwhile. At that point you either raise more money directly from investors, or offer more equity to prospect employees, or hold back on the growth. Raising extra money takes time, so it may not fit with the timing of things. Holding back should probably be preferential to giving away equity, however somethings growth is unusually important, for example when you're in the middle of a land-grab.
- s73v3r 11y ago
  And sometimes a family needs to pay rent and buy food but doesn't have the money.

whitneyrzoller 11y ago

I have a friend who was ridiculed by a founder recently for not understanding the concept of equity. She had rejected his salary + equity offer which was a %50 salary cut from her current position. Irrespective of what the equity portion was I thought the founder's response was disgusting and pretty much validated her decision to pass.

JoeAltmaier 11y ago
I think is endemic to founders that they think this way. Else they'd not be founders.