
Launch HN: Compound (YC S19) – helping employees understand equity compensation - jrdngonen
Hi HN, we&#x27;re Jacob and Jordan, the founders of Compound (<a href="https:&#x2F;&#x2F;withcompound.com&#x2F;equity" rel="nofollow">https:&#x2F;&#x2F;withcompound.com&#x2F;equity</a>). We help employees understand their equity compensation.<p>We started Compound after seeing way too many of our friends get screwed over by startup equity.<p>You hear the story often: wide-eyed engineer accepts an offer and 100,000 options from an exciting startup. Woohoo! Suddenly you must make what may turn out to be the most important financial decision of your life, whether you know it yet or not: should you exercise your options?<p>The answer to this question depends upon many nuanced factors. Does the company allow for early exercising? If not, how long should you wait to exercise your options? When will you owe taxes? What is the Alternative Minimum Tax? How long is the exercise window if you cease employment? Will you ever qualify for the QSBS tax exemption? Will this be a qualifying disposition? Does your...wait...could you have negotiated for more equity? Do you really believe in the company? Should you even be working at an early-stage startup that you do not believe in?<p>Equity is really confusing. There is no one-size-fits-all solution. However, your equity is a crucial part of your compensation and is worth being scrutinized as such. Many people miss out on significant upside because they fail to familiarize themselves with key terms before it is too late.<p>There are 300-page books written on options but _nothing_ is personalized. Large financial institutions won’t talk to you unless you have millions of dollars in liquid assets. To make things worse, most companies do a terrible job of helping their candidates and employees understand the value of their equity. What does 100,000 options even mean? HR teams are frequently asked about equity-and tax-related matters from their employees and are forbidden from sharing useful, true things.<p>Jacob and I got really interested in these problems during our final year of university. We read books, consumed the entire tax code, and talked with dozens of experts. We became the de facto equity resource in our circles and helped hundreds of people with everything from negotiating offers to exercising options. This led to the start of Compound.<p>Over the years, there have been many proposals to fix equity compensation. There is no obvious simple answer. What is clear is that today’s system will eventually break. We are hoping Compound plays a role in the solution.<p>Compound is entirely focused on helping you—the employee—understand and manage your equity. We provide forecasting tools that show you how much your equity is worth, display tax implications (AMT exposure, capital gains), and model exit scenarios. We help you understand the value of your equity to make more informed exercise decisions. For the HN community, we are offering free informational consultations at (<a href="https:&#x2F;&#x2F;withcompound.com&#x2F;?ref=hn" rel="nofollow">https:&#x2F;&#x2F;withcompound.com&#x2F;?ref=hn</a>)<p>We also encourage companies to adopt more employee-friendly equity procedures and policies. We build tools, like fair offer-letter templates and internal equity dashboards, to promote transparency within companies. If your team is interested, please send me an email to jordan@withcompound.com.<p>In the future, Compound will earn revenue by offering financial products. We are still hammering out these details—our mission is to help employees maximize their upsides by democratizing access to financial services currently reserved for the super-rich (tax planning, advisory, bespoke investment offerings, concierge services, etc.).<p>We will be releasing more guides around this topic in the near future and would really appreciate your feedback and requests. Eager to hear about HN users’ experiences, ideas, and know there is a ton of expertise among the community to learn from. Happy to answer any questions in the comments or via email jordan@withcompound.com. Thanks!
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simonebrunozzi
Some (IMHO) very relevant past conversations on HN about equity:

1) Introducing Progressive Equity – Increase employee ownership as company
grows:
[https://news.ycombinator.com/item?id=9336392](https://news.ycombinator.com/item?id=9336392)

2) What I Wish I'd Known About Equity Before Joining a Unicorn:
[https://news.ycombinator.com/item?id=13426494](https://news.ycombinator.com/item?id=13426494)

3) Open Guide to Equity Compensation :
[https://news.ycombinator.com/item?id=10880726](https://news.ycombinator.com/item?id=10880726)

4) Employee Equity (Sam Altman) :
[https://news.ycombinator.com/item?id=7610527](https://news.ycombinator.com/item?id=7610527)

5) Guide to Your Equity:
[https://news.ycombinator.com/item?id=10362141](https://news.ycombinator.com/item?id=10362141)

6) Holloway Guide to Equity Compensation:
[https://news.ycombinator.com/item?id=17717727](https://news.ycombinator.com/item?id=17717727)

~~~
jrdngonen
Thanks for these links.

Thinking we will see amplification of this topic as employees, founders,
investors, and hiring platforms bring more transparency to equity and
compensation. Would love to hear any ideas that stick out to you.

~~~
simonebrunozzi
If you're in SF, I'd be happy to chat over coffee - I have some ideas and
suggestions for you. $HN_username @ gmail

~~~
jrdngonen
Sent you an email!

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kevinflo
I'm shocked by the comments of those here that don't see why something like
this must exist and don't see that there is tremendous financial upside for
whoever cracks this. Employee equity can generate unbelievable amounts of
wealth as well as unbelievable tax consequences/missed opportunities. The deck
is mostly stacked against employees, and you're on your own navigating
treacherous waters with little information. A strong company in this space can
protect employees and ultimately advocate for them and improve the landscape.
Or it can augment the deck being stacked in favor of the investors etc.
depending on how things shake out for the winners in this space.

~~~
ryanmercer
>I'm shocked by the comments of those here that don't see why something like
this must exist and don't see that there is tremendous financial upside for
whoever cracks this.

Some of us don't live inside the Bay Area startup bubble. I've never worked
for a place that has offered equity, I've worked for publicly traded companies
and the government. For the vast majority of Americans (and the world) this is
a situation where we will never see ourselves in, so some of us see this as a
weird business idea given the incredibly limited market that relies on a
booming economy resulting in VC money funding startups to survive.

As someone else in this thread said, this is a startup for startups.

I can see why YC funded it "we exist to fund startups, startups offer equity
when they can't afford to pay employees fairly, of course we'll fund a startup
that helps employees of startups!".

However the problem here is, YC has never existed with their current model
during a recession. Y Combinator was founded in March of 2005 with what like 8
companies and a much smaller contribution, the recession started a few years
later.

Fast forward to last year and they had 273 companies present at demo days
between winter and summer batch, at what 150k a pop? What happens when we
enter the next inevitable recession? Will accelerators like YC have 50 million
dollars (given the events they put on, I imagine you can at least round up to
50 million) to fund startups at these levels? Or will they have to drastically
dial back and fund considerably less companies and focus more on the
continuity fund and additionally funding companies that are seeing growth?

Then enter Compound, relying entirely on startups popping up offering equity.
Enter a recession and a lot of startups are likely to fail during tha tperiod
because VCs will be less inclined to take on risky investments, companies and
consumers will be less likely to take on buy new goods or pay for new
services, and then Compound is suddenly like "whoa, if there's no startups
offering equity we have no customers, we don't have any other product
ideas!!!" _Press Release: Company Compound has shuttered, in a noble gesture
Compound posted all employee resumes on the website and urge companies to
consider interviewing these now unemployed persons_.

This is a problem I consistently see with YC companies and VC in general the
Bay Area exists in a alternate reality, or fantasy, bubble that does not
resemble the rest of the country or how most Americans lives are. That isn't
sustainable. I mean you have all these SaaS companies -most Americans have no
idea what software as a service is and doesn't need to have their toaster
tweet that it is toasting the 17th piece of toast this week so that D0ughb0x
can ship more artisanal gluten free free trade gmo free bread and notify the
Ca$#p@y app that the subscriber's digital life companion Phriendly should
request authorization for payment-.

Ok, maybe that example is a bit ridiculous but seriously, look at a list of
the companies for the past few YC batches... there are some absolutely
ridiculous ideas, most of these companies will fail miserably and would NEVER
have been seeded during a recession, what happens to Compound when startup
numbers plummet and they can't find customers to educate about equity?

~~~
CindyBiSV
Great to see such candid comments and this clearly shows you actually really
care about this startup's mission "Compound is entirely focused on helping
you—the employee—understand and manage your equity."

(Full disclosure: I've been following this founder for a while to see him do
great things)

"there are some absolutely ridiculous ideas, most of these companies will fail
miserably and would NEVER have been seeded during a recession"

So, to state the obvious here, recession is actually one of the best times to
start companies or join solid startups to earn early-employee equity: fortune
rewards the bold. And to some extent, that's the best concentrated personal
wealth investment if you choose wisely which early-stage startup to join,
especially when you don't have lots of cash sitting around to "buy the dip"
from public market. So why not "join the _dip_ " to take advantage of the
recession years (golden era, blessing in disguise) to become equity rich
coming out of the other side?

I believe it's true that many/most non-VC-funded startups don't give employee
equity, but don't you think this situation actually also needs to change? Just
like now remote/distributed work is all the rage, in 5-10-20-25yrs when
most/many other companies also give employee equity for them to have the
opportunity to "earn concentrated wealth" from 'investing in" what they work
on at the company?

I see Compound's mission very aligned with employees at all kinds of companies
of different time, start from a smaller focus market (VC-funded startups), to
serving majority of the planet in the future :)

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refrigerator
Seeing lots criticism in the comments, similar to the kind that Uber faced
when they were a private black cab app — "Yet another startup to serve rich
startup folk" etc.

I don't think it's entirely warranted here.

"Equity compensation" as a whole definitely seems like a large market (there
are many many many billions of $$$ tied up in employee equity), and becoming
the go-to experts on everything to do with equity compensation seems like a
solid foundation for building financial services + products on top. I'm sure
this can eventually extend outside of the SV ecosystem, and probably extend
outside of "equity compensation" too.

Congrats on the launch, guys! Look forward to seeing where this goes :)

~~~
jrdngonen
Thanks for the kind words!

We see many large && important problems to solve in this space. Successful
solutions will demand a long-term mindset but we are hopeful the right
combination of product + technology + capital will unlock tremendous impact
and value.

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geoffreyy
Congrats on making it to YC 19!

Love the idea, in fact I started something similar[1] in March 2018 when I was
switching job. I also heard too many stories of friends accepting early stage
companies offers with little to no equity and I was hurting for them.

I hope we (employees) will finally get our leverage back and fight for better
equity but ALSO better liquidity!

If founders get liquidity, employees should too, it's only fair.

[1] [https://reffo.us/](https://reffo.us/)

~~~
zuhayeer
Reffo.us is pretty cool, curious why you stopped (or is it still going?)

~~~
geoffreyy
Well I didn't manage to solve the chicken & egg issue where there was no value
for someone to put up their offer if there was no community adding feedback. I
reached 500 users by posting on Blind app but not enough stickiness. I am open
sourcing it next and hope to give it a new life!

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jedberg
I wish you all the best, but I worry that this is a case of a startup for
startups, except one level removed, because its a startup for startup
_employees_ , who are usually the first to go when the startup market turns.

I say this basically as a warning to be cognizant of this fact and make sure
to diversify away from SV startup employees as quickly as possible.

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ryanmercer
Do you have plans (even if only a few words of an idea) to do anything beyond
this?

I imagine this market is pretty small, sure YC funds a bunch of startups every
year but it seems like your business is almost entirely dependent on the Bay
Area and maybe a handful of other locations around the globe that consistently
produce startups that have to rely on compensating employees with equity
instead of competitive salary. When the next recession inevitably comes, and
VC money potentially dries up, it seems like your company won't fare well
without other services to fall back on.

The vast majority of Americans, or people on earth in general, aren't offered
equity as compensation (many aren't even offered stock purchase plans and for
that matter Pew found that 41 percent of millennials didn’t even have access
to an employer-sponsored retirement plan).

Not trying to be critical, just genuinely curious if you've thought about it.

~~~
jrdngonen
>Do you have plans (even if only a few words of an idea) to do anything beyond
this?

We believe the next generation of wealth will come from equity owners. There
are hundreds of thousands of people—across the US—who need helping managing
their equity.

Today’s financial industry is poorly set up to serve this growing set of
people who will have a wide array of complicated, expensive First World
Problems in the next 10 years.

We hope to fix this!

------
neilv
If you're affecting startup employees' (and prospectives') perceptions of
compensation, how do you deal with the appearance of potential conflict of
interest, as a YC startup (which presumably has an interest in hiring and
compensation by its startups)?

Also, do you have some kind of official fiduciary obligation, as part of
giving financial advice? And if so, to whom?

How will giving financial advice mesh with offering financial products?

(I mean these questions constructively, and I figure you have good intentions.
These are merely the kinds of questions that come to my finance layperson's
mind.)

~~~
jrdngonen
Thanks for the questions!

>If you're affecting startup employees' (and prospectives') perceptions of
compensation, how do you deal with the appearance of potential conflict of
interest, as a YC startup (which presumably has an interest in hiring and
compensation by its startups)?

Our customer is the employee. We're not going to put YC or employers ahead of
them.

>Also, do you have some kind of official fiduciary obligation, as part of
giving financial advice? And if so, to whom? How will giving financial advice
mesh with offering financial products?

We're not currently providing financial advice. We're purely focused on
education—helping people understand their equity. We anticipate this will
change in the future (and when that happens we will seek RIA certification).

------
kalbfled
This pitch reminds me of those commercials for weed whackers where people are
shown acting like replacing the string is on the level of rocket science.

[https://www.youtube.com/watch?v=p22T3ZypQtA](https://www.youtube.com/watch?v=p22T3ZypQtA)

After I left my last job, I had 3 months to decide if I wanted to exercise my
options. I looked at the company's financial statements, compared them to
publicly traded competitors, and made my decision. If I needed tax
information, I would have gone to the IRS website and called them if
necessary. (In my experience, they try to be helpful despite the hate they
receive.)

I wish you guys the best of luck, but ultimately your revenue model seems
predicated on the same strategy as the rest of the financial industry--
presenting a good marketing story to attract other people's money. Nobody has
a crystal ball.

~~~
dnjdrbdhdbs
To some people, what you just described reads no different from Lebron James
saying “dunking is as simple as shoving the defender out of the way, jumping
above the rim and jamming the ball down into the net.”

~~~
kalbfled
That's a fair comment, but I'm certain I don't possess Lebron-like ability
when it comes to equity analysis. For me, the moral of the story is that
people should go to the source material--contracts, laws, etc.--rather than
operate on tribal knowledge. I'm sure some people would find this service
useful, but will it be enough to sustain a business? Time will tell.

------
hobofan
> We provide forecasting tools that show you how much your equity is worth,
> display tax implications (AMT exposure, capital gains), and model exit
> scenarios.

That sounds like you would be cannibalizing your user base if you do a good
job. Every time I (or friends of mine) started modelling exit scenarios in the
past, it became very apparent that none of the realistic exit scenarios would
yield any significant payout. Often times this was one of the contributing
factors to leaving the company, and sometimes leaving the startup field
entirely.

------
IceDane
I'm pretty baffled someone thinks this is a sustainable business model, but
good luck regardless.

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calcsam
Thanks for building this! I spent a year building this as a side project and
never got anywhere in terms of adoption, so abandoned it. The world really
needs this and excited that you're picking up the torch.

Your vesting calculator is buggy, it vests 50% at the one-year cliff instead
of 25%.

[https://withcompound.com/g/understanding-equity-
compensation](https://withcompound.com/g/understanding-equity-compensation)

[https://imgur.com/a/ud87ehk](https://imgur.com/a/ud87ehk)

~~~
jrdngonen
Hey thanks for the kind words and for calling this out.

Perhaps it is a bit misleading but the calculator is working as designed. The
Vesting Start Date is the "first day your stock has vested" which, in that
example, would be at the one-year cliff.

Hope that makes sense, we will try to think of a better design so this is
clearer.

~~~
simonebrunozzi
Yeah I think it is not clear enough. I suggest you rephrase the description at
least.

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arcaninsanium
What incentive do you have to keep the information I provide you for a
consultation confidential? If I actually give you the information you're
asking for (strike price, shares outstanding, shares granted, company name,
etc), you basically know far more about the cap table than anybody outside of
the company should know. Additionally, most companies have NDAs that probably
prevent the disclosure of this information.

If you're not an RIA, how can I trust you with this information?

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bit_4l
This, if made right, is indeed helpful. I have some friends working at early
stage startups without understanding esop, even some can’t distinguish options
and shares.

~~~
jrdngonen
Thanks!

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milesward
I find the signup form hard to use on chrome/pixel 3; the "fill in the blank,
tell us about you" area was not selectable for me.

~~~
jrdngonen
Good feedback—we're fixing!

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benjiweber
FYI looks like a typo s/equtiy/equity/ on [https://withcompound.com/r/offer-
letter](https://withcompound.com/r/offer-letter)

~~~
jrdngonen
thanks, fixed!

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SirLJ
Peak VC?

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bluedino
Wow.

