
Let employees sell their equity - craigkerstiens
https://kevin.burke.dev/kevin/let-employees-sell-equity/
======
rectang
As an individual negotiating compensation with a company, you are at a
structural disadvantage: the company does this all the time, and (lacking a
union to negotiate on your behalf) you do this rarely.

Unless you are an elite negotiator (and if you can hire a lawyer you are elite
already), the complexity of any compensation package works in the company's
favor.

For almost all of us, equity is a vehicle to get screwed over. Articles like
this one only to serve to perpetuate startup mythology and inflate false
hopes.

Theoretically, a startup that actually wants to compete on compensation by
sharing in good fortune could craft an equity package which is simple and
standardized enough to be comprehensible by ordinary humans. But so long as
employees keep snapping at the vaporous bait of deceptive equity packages,
there's not much incentive to do so.

~~~
kelnos
> _an equity package which is simple and standardized enough to be
> comprehensible by ordinary humans_

> _deceptive equity packages_

What do you mean by "deceptive"? The standard for pre-IPO seems to me to be N
number of options, at a particular strike price, 10-year expiration (or 90
days if you leave the company). That doesn't seem all that complicated to me,
or deceptive.

What _can_ get deceptive is if the company is trying to lowball you on salary
and tell you that your equity will become worth millions some day as if it was
a sure thing, which is of course a scummy practice. And the whole expiration
after 90 days thing is garbage. But deceptive? Complicated? I don't think it
is.

I really don't see what's not simple or standardized about what I described
above. Granted, the last time I joined a startup (which is not a startup
anymore) was 9 years ago, but I haven't read anything to suggest that this has
changed drastically.

~~~
switch11
Your answer illustrates what he's talking about

You are not even realizing what he's actually saying

HE's not talking about lowballing on salary

He is talking about what percentage of the company you are going to get, how
soon you will get it, and other details

 __*

Most people won't get this. I will still try

A) What percentage of the company are you getting?

B) What dilution is going to happen?

C) When can you sell your stake in the company?

D) How soon and in what manner does it vest

 __* People fixate on things like 1,000 options without considering what it
really means

Please consider what you wrote:

The standard for pre-IPO seems to me to be N number of options, at a
particular strike price, 10-year expiration (or 90 days if you leave the
company). That doesn't seem all that complicated to me, or deceptive.

NOWHERE in that is

What value do I bring the company

IN RETURN what percentage of the company am I getting

AT WHAT RATE will I be given that share of the company

~~~
alonmower
You should absolutely ask about A) and be very suspicious if they refuse to
tell you. No one can answer B) with any real confidence because they don’t
have a crystal ball. C) is almost always going to be at IPO or when the
company sells, though maybe if you’re extremely important they’ll let you
negotiate to sell some at a later round, though given this complicates things
in most cases they’ll likely not want to bother with it unless you have a ton
of leverage. D) is almost always going to be one year cliff, then rest monthly
over four years. That should also be extremely easy information to get.

~~~
kibibyte
What is a reasonable range for an answer to (A)? I know it's going to depend
on what stage the company is at, and I figure 1% is probably going to be the
upper bound, but I don't know what the lower bound should be.

~~~
jariel
A is one area for which there seems to be some very rough standards, if you
visit Angel List you might see job offers with % equity listed, and it's
usually in % terms not number of options.

1% would be quite a lot for an employee. Once the team is past the founders
plus a few more, the only people getting more than 1% would be key executives.

------
malisper
I've had a number of chats with Dan Luu about this. If you want the high risk,
high reward of a startup, while earning the total comp of a FAANG, you can
work for FAANG and angel invest on the side. If out of college, you work for
FAANG for ~5 years, you'll be able to meet the requirement for an accredited
investor by making over $200k a year. At that point, you can invest any
disposable income into early stage startups.

In addition to getting the benefits of both working at a startup and working
at FAANG, you also get the benefits of an investor! You are able to diversify
your portfolio across several different startups and you are able to get
liquidation preference in any startup you invest in.

~~~
chii
> you work for FAANG for ~5 years...meet the requirement for an accredited
> investor...you can invest any disposable income into early stage startups.

if you worked for $300k a year (total compensation) for 5 years, you would
have accumulated $1.5m dollars. But you would have an outflow due to cost of
living. Let's say it's 50% of your income goes to cost of living. Then you
would have only $750k left to invest after the end of your 5 year tenure.

Even if you managed to keep your stock based compensation (rather than selling
it), or you picked some other stocks to purchase during your tenure, it's
unlikely to have more than a 100% gain. Let's say you did, and end up with a
$1.5m pot at the end due to lucky picks.

> You are able to diversify your portfolio across several different startups

A $1.5m is barely enough to invest in one early stage startup these days. And
not to mention it's such a small amount that a private equity investment
firms/VC firms would likely consider it not really worth the trouble to court
you over. So it's likely you have to DIY everything yourself - from finding
the startup, to hiring the lawyers and bankers to deal with, as well as learn
the domain (which you may or may not already be an expert). Or you will have
to take a much more unfavourable term with the PE/VC firms as a small client
(you have no influence over the conditions of your investment).

~~~
emit_time
False.

Angel investors frequently invest at the level of thousands of dollars.

~~~
myblake
Have done so personally.

------
necubi
Things are broken in startup compensation. FAANG (and other large bay area
tech companies) pay mid six figures for senior engineers. A startup will offer
you equity that in the 95% outcome nets you that much, and only after 10+
years (with a large chance that's it's worth zero). Oh, and you have a to take
a huge financial risk when you leave due to the 90 day exercise window,
potentially paying hundreds of thousands in tax on an illiquid (and
potentially worthless) asset.

This used to work when companies IPO'd within a few years, but now that 10-15
years is common the system has broken down. As a personal example, neither of
the two startups I've worked for (14 years and 9 years old) are anywhere close
to an exit.

Letting employees sell their equity would definitely help, but typically the
equity packages are too small for this to make them directly competitive. An
offer at a $20M series A company might be 0.5% equity over 4 years, but a
FAANG offer will be 10x that with little of the risk.

Removing the 90 day exercise window or granting employees money to early-
exercise would help reduce this risk somewhat, but doesn't help with the
limited upside.

Eventually, statups are going to have to realize that if they want to attract
good employees they're going to have to either massively increase cash
compensation (which means raising more) or give dramatically more equity
(which limits how much they can grow pre-exit).

Personally, I think it's gotten so bad that the only way I would join a
startup again is as a founder.

~~~
marcinzm
>FAANG (and other large bay area tech companies) pay mid six figures for
senior engineers.

FAANG (and every other similarly paying company) accounts for at most 5-10% of
the engineering talent in the US. Using them as a benchmark for how all
companies should compensate engineers seems silly. A startup that needs at
best an 80th percentile engineer has no need to meet FAANG compensation to get
one hired.

~~~
necubi
This is pretty specific to the bay area market (should apply as well to
Seattle and New York, but I'm not familiar enough with the hiring markets in
other areas to comment). But I think for the average engineer getting a job at
FAANG/equivalent is not very hard if you're willing to prepare for the
interviews.

~~~
marcinzm
If the average engineer could get a job at FAANG then they presumably would
since their total comp would go up 2x. In my experience most engineers can't
get one of those jobs despite trying. So they circle around non-tech companies
and startups for lower compensations. I've observed this both in the Bay Area
and New York. People who are in the FAANG bubble don't notice this in my
experience (or the difficulty of FAANG interviews for many engineers) as they
don't interact with that part of the engineer population.

~~~
twblalock
> If the average engineer could get a job at FAANG then they presumably would
> since their total comp would go up 2x.

A lot of them don't actually know that.

Every time someone posts one of those developer salary articles here, from
levels.fyi or similar sites, there a long line of naysayers who just can't
believe the numbers are real -- but they are real.

~~~
necubi
Yep, that was me for a long time.

------
kevindong
I value my equity grant (in my privately held company) at $0. If it turns out
to be worth something someday, great. But until then, I just don't consider it
a part of my compensation.

My company has a policy (that HR has made very, very clear can be changed at
any time) where for RSUs that are vesting, the company will pay the income
taxes for the employee in exchange for withholding/essentially buying back a
portion of the vested shares (the exact mechanism by which this is done isn't
something I really looked into).

This policy opens up a backdoor way of essentially liquidating my vesting
shares: I can simply file a new withholding form just before the vesting date,
claim way fewer tax exemptions, and the company will withhold a higher portion
of the vesting shares/remit more cash to the tax authorities. Upon filing my
tax returns at the end of the year, I can receive the excess cash remitted as
a refund.

~~~
fossuser
I get this trope of valuing equity at $0 because a lot of people have been
burned, but it’s bad advice.

The fastest way to wealth is through equity.

Yes, it’s hard to value but that value is not zero. Spending effort trying to
value it is worth it, and picking companies where you think the equity will be
valuable is worth it.

Also worth considering the character of the founder and the other directors.
There’s a lot of ways to get screwed out of equity, working with good people
is important.

~~~
m00x
> The fastest way to wealth is through equity.

The fastest way to wealth is actually through winning the lottery. Equity is
kind of a lottery, but with you having an influence in the odds.

It's important and could definitely make you rich, but it shouldn't be counted
on.

~~~
fossuser
Counted on no, but you should try to value it and try to pick winners if you
can.

Just pretending it’s $0 is a mistake.

I live in Palo Alto and I’ve seen many people get rich through equity, people
who just read HN outside of startups don’t think it’s possible, but it is.

I didn’t realize how possible until I moved out here. FAANG salaries have
tempered that a bit since you can just get rich on that income, but even a lot
of that comp is equity too (and most of the people I know got most of their
wealth from that equity).

I’m just telling people reading this in college to take equity value seriously
and not dismiss it as worthless because people on HN say to do that all the
time.

~~~
rectang
> _I’m just telling people reading this in college to take equity value
> seriously and not dismiss it as worthless because people on HN say to do
> that all the time._

The vast majority of those people who you are giving that advice to will be
played for suckers. It is good advice only for a tiny fraction that have the
capacity, the opportunity, and the resources to negotiate a non-exploitative
equity package. It is terrible advice for all the rest.

~~~
opportune
I mean it might be rude to say "if you're able to get hired at top startups of
a certain kind the equity might be nonzero" but for the people that applies
to, it's not terrible advice. Like, high school kids in general should not
assume they can count on a career in the NBA, but if you're a 7' tall human
male you have a >10% chance of playing in the NBA in your lifetime, so for
them knowing that they have greater odds of success could be valuable
information.

~~~
rectang
> _for the people that applies to, it 's not terrible advice._

The advice being dispensed is superficially applicable to _everybody who gets
offered an equity package_ , and it is terrible advice for most of those
people.

It's like giving high school basketball players advice which assumes they'll
make it to the NBA.

------
thundergolfer
> For most of the offers I received, the company valuation would need to
> increase by 8-20x for the yearly compensation to achieve parity with the
> first-year offer from a public SF-based company, let alone to exceed it.

Damn, what a terrible deal, particularly for Series-C. As one data point, my
company's stock has 5x from my initial grant value, and that has been enough
to push my compensation above an equivalent position in Google Sydney, which
is probably the highest paying public tech company in the country. That is _if
I can sell my equity though_. So yes, please let employees sell their equity.
I don't want to have to wait for the dream IPO.

Edit: Actually, given Google's very strong YTD stock gains, maybe it's
borderline whether I come out ahead.

~~~
alfalfasprout
Unfortunately this has ultimately led me to conclude that, purely from a
monetary standpoint, it is just not worth joining a startup unless you're
joining as a C-level employee or director and receiving several % of equity
(which again, is going to be rare outside of that level). Otherwise the
risk/reward makes little sense.

There are other reasons to join a startup of course-- more autonomy, you
believe in the product, etc... but they come at a cost (lower TC and usually
much worse WLB).

~~~
opportune
I think this is true in many ways but lately I've realized there is a
sweetspot of career (pre or just barely L5 at FAANG) and startup (founder
previously successful, raised well from top funds, early traction) where it
can make sense. Just as an example maybe your TC is currently $250k and you
get an offer for a startup at $165k salary and 0.3% over 4 years of a series A
company valued at $40m. That's a TC of $195k but your salary is still pretty
good and if you think the startup is promising, it's basically a way to
"invest" your time in it.

The math starts breaking down if your opportunity cost gets high. However out
of the people I've known who have worked at startups, a decent chunk of them
made much more money than they would have at FAANG (and yes, for some of them,
lifechanging amounts as just low/mid level engineers). So it makes sense to
treat the equity/options as $0 for financial planning/budgeting purposes for
sure, but from an expected value standpoint, I don't think it does.

~~~
necubi
If you're L5 at FAANG you're going to be making more like $400k, so the math
starts to break down pretty quickly.

~~~
shostack
Only certain roles. Not everyone is getting that at L5.

~~~
alfalfasprout
That's pretty low for software L5 at FB/GOOG/NFLX. Probably not AMZN.

------
maerF0x0
It's not much better with RSUs, I've had both the experiences where a
company's RSUs declined (so total comp fell) and they said "That's the risk we
all take to have skin in the game". And I've had the experience where my RSUs
have done well, and so they said "no raises or refreshers for you because your
total comp is very high" ... So basically my risk if they decline and their
gain if they rise...

It's frustrating because it was my capital risk of additional salary to take
those RSUs (which only pay infrequently, not like salary)... Taxed at same
high rates as salary...

------
gregrata
On another side of this - I've seen places where employees were essentially
locked in - unable to leave, because they couldn't sell any stock, and
exercising cost too much, or, more likely, would be a taxable event (and
again, they couldn't cover taxes by selling so it's a huge cash hit to buy the
paper)

I get at one level a company might like this - it's a "good" way to keep
people from leaving. In reality, this means you have people that really want
to leave and can't - which does not make for a happy, good employee.

Let them sell at least a portion of the stock back to the company. Or sell
some during a funding round, at least enough to cover their taxes so they can
take their stock and go.

------
thinkingkong
Equity at a startup is essentially worthless. Exercise prices, taxes, 90 day
max exercise windows, asymetric price information, preference stacks, all
contribute to a lack of clarity.

Of course eveyone _thinks_ their company will be worth a cool billion but
thats rarely the case. Plus founders and investors are incentivized for your
options to expire; they go back into the pool.

Startup compensation needs a refactor pretty badly.

~~~
mrnobody_67
You forgot venture debt, warrants, & management carve-outs during M&A.

------
fizixer
Tangentially related: I often get super pissed when my employer, or a friend's
employer internally announces that employees should suggest ways to improve
the bottomline of the company, think outside the box, be proactive etc, etc.

Like, I just work here. I know jacksh-t about how _you_ are running the
company, how many stupid internal decisions _you_ are making everyday that's
screwing all of us over like slow poison, what financial info _you_ have
access to about the company that you would never share with me in a million
years.

And then you want me to magically solve your problems, and I'm the one who's
not thinking outside the box?

------
tyre
> I was stunned at how paltry the equity offers were from private, Series A-C
> companies. For most of the offers I received, the company valuation would
> need to increase by 8-20x for the yearly compensation to achieve parity with
> the first-year offer from a public SF-based company, let alone to exceed it.

That’s what early stage startup equity is though. It’s specifically a high
risk, high reward form of compensation.

It’s rarely going to double in worth. Either it’s worth a _lot_ more or it is
worth zero. And it’s almost always worth zero.

~~~
logicslave12
It’s not high risk high reward, it’s high risk low reward

~~~
mlthoughts2018
Exactly. 8-20x is a _massively unlikely outcome_ so there’s huge risk. What do
you get for taking a bet on that risk? _Mere parity with annualized first year
compensation elsewhere_. That is a very low reward for such dramatic risk.

~~~
e1g
Some people might think "10-20x growth sounds likely for a startup, no?".
Frequently, at "Series A" a startup is valued at $20-40M. Getting a 10-20x
multiple on that means it should get to $200M-$1B range. Only 5% of all
YCombinator companies hit that milestone (~100 companies from ~2,000 deals).
Odds for a startups not backed by YC & co, would be lower. So no, not that
likely, even if you're as early as day 1 of Series A.

~~~
Judgmentality
You're comparing seed funding (Y Combinator) and series A funding - most YC
companies have yet to raise a series A. The other thing is that most YC
companies are young and still have time to grow.

I think you're comparing apples to oranges and trying to make a quantitative
conclusion.

~~~
e1g
It's fair to point out that if a company gets to Series A, it is substantially
de-risked. IIRC, ~30% of YC startups get to Series A, so this milestone is
material.

------
macklemoreshair
Having seen exit packages for director/ executive level individuals at a
successful startup even, there’s a lot that doesn’t make sense. Early
employees work really hard and are rarely promoted to important positions
internally.

I’ve seen equity turn out well. It obviously can. And being open to those
opportunities that might change your life can be valuable. But most likely it
won’t - be an investor, do due diligence and make sure it’s really a rocket

~~~
swyx
can you offer more detail on director/exec startup comp please? not something
we get to see often. even a range would be nice

~~~
mackle_hair
$20 million for 2 years of being with the company as cto $3m for the earliest
employees that had been there 6 years. for all the other engineers, a down
payment on a nice house ~$300-500k for 4 years.

~~~
swyx
thats a nice payday for the CTO. not sure its fair for the earliest employees.
thanks for the datapoints anyway!

------
dangus
Screw equity, pay me in cash and 401k matching.

I’d love to find a company that actually goes above and beyond on 401k and
uses it as a piece of salary rather than just a paltry little matching
contribution. A company can legally contribute so much more money than an
individual can, the overall limit is $57,000 but my individual limit is less
than half that.

~~~
sokoloff
See if your company permits after-tax contributions and in-service rollovers
to Roth 401(k).

[https://www.nerdwallet.com/blog/investing/mega-backdoor-
roth...](https://www.nerdwallet.com/blog/investing/mega-backdoor-roths-work/)

I think you should expect income taxes to go up (likely substantially) over
the next 40 years, making Roth attractive to those who will retire with
substantial income streams in retirement.

------
gghootch
At Secfi we 100% agree. Employees should: (a) have the knowledge to fairly
assess their equity, and (b) have the option to cash out before an exit. We're
working hard to fix this information asymmetry, and try to offer a way out of
the equity-golden-handcuffs with a win-win structure to as many people as
possible. Our financing product is not cheap, but it's a great option for a
lot of startup employees that aren't able to sell their stock today. Sadly,
that's still the reality at the moment, and as other commenters remarked it's
likely to stay that way because individual employees are at such a negotiation
disadvantage.

With all that said, there's still heaps to be done to fix this issue and we'd
love to get feedback from the community on some of our material:

1\. Stock option starter guide: [https://www.secfi.com/academy/stock-option-
guide](https://www.secfi.com/academy/stock-option-guide)

2\. Exercise guide: [https://www.secfi.com/academy/exercise-
guide](https://www.secfi.com/academy/exercise-guide)

3\. Exercise tax calculator: [https://www.secfi.com/products/exercise-tax-
calculator](https://www.secfi.com/products/exercise-tax-calculator)

------
BrandonM
One roadblock, I think, is that the IRS requires 409(a) valuations every year
to set a value for common stocks and thus the strike price for options. During
those valuations, most startups strive to paint their value as being very low:
“Seriously, folks, the market could dry up and leave common shareholders with
nothing.” The resulting common share value is often pegged at 1/10 to 1/3 of
the preferred share value implied by the most frequent fundraising round.
Lower strike prices make it easier for employees to exercise their options and
provide more upside.

My understanding is that a sufficient volume of equity sales can force new
409(a) valuations. These would require more payments to an external accounting
firm, and 4x the work to do it quarterly, work that often consumes leadership
cycles. Moreover, these valuations would likely have the effect of narrowing
the gap between common and preferred share values, elevating the strike price
and squeezing potential profits out of employee equity.

It’s probably different once a company is large enough that it’s granting
RSUs. For companies at the ISO stage, I’m not sure the upsides outweigh the
downsides.

------
dccoolgai
Sad truth that kinda hit home a little: the part about not being able to have
more than a one percent impact unless you are a c-level.

~~~
kelnos
I think it depends on company stage and size, though. If you're a part of a
5-person shop, then you'd _better_ be able to increase the value of the
company by way more than 1%, or the company made a really bad hire.

Even through 50 and maybe even 100 employees, I'd think it's possible to have
a meaningful impact on the company without having to destroy your work-life
balance. But of course as the company grows, your influence gets smaller and
smaller unless you become an executive.

~~~
xtracto
It also depends on what you do in the company.

On my last startup, we were about 100 people, and I lead the Data Science team
(doing Machine learning models for risk evaluation of loans). One of my more
Jr. data scientists (a guy who had came out of the Uni, constructed a variable
for one the models that improved the separation a lot. IIRC He single-handedly
decrease our default from 20% to something like 17% (with the same acceptance
%). That was huge.

------
Galanwe
You don't need a public market to sell your shares. The company itself could
buy back the shares, or an other employee could buy them from you.

Actually, I think most C level officers in a startup would be quite happy to
buy lower level employees shares.

Of course this would have to be possible considering the shareholder
agreement, but I don't see any reason it would not.

~~~
3gjg3j3g3h3h3
Stack Overflow prohibited employees from selling shares privately, while also
setting an expiry date on the options that has forced some of the company's
longest-serving employees to choose between surrendering their equity, or
paying a ton to exercise options that they may never be able to sell.

~~~
worker767424
Startup options have been like this forever. Maybe you could theoretically
sell, but no one did, and marketplaces like Forge and Equityzen didn't exist.

~~~
hkmurakami
Startups used to IPO or fail much faster

~~~
marc__1
The time from founding to IPO is a stat that is widely misrepresented by well-
educated people who may not have had the time to check the numbers.

See for instance the graph Company Age (Years) shared by Meritech. There are 8
companies in the cohort that are 20+ years, only 1 (Salesforce) that IPOed
with less than 10 years. In fact, from the entire comps (20+ public SaaS),
only Salesforce IPOed at year 5.

[https://www.meritechcapital.com/public-
comparables/enterpris...](https://www.meritechcapital.com/public-
comparables/enterprise#OperatingMetrics)

~~~
hkmurakami
Looked at the graph you're referring to.

This looks like it's a very narrow set of companies. We should be looking back
farther, and wider. Recall that, for example, Netscape IPO'ed after 18 months
and Amazon IPO'ed after 3 years. For better or for worse, 90's companies
generally IPO'ed much quicker than the SaaS cohorts mentioned in the data you
linked to. Back then, 10+ year timespans until IPO were rare.

~~~
marc__1
The graph shows 50 companies (they don't do a good job at scaling the site,
but the data is there).

Netscale and Amazon are only anecdotes and pure exceptions of the dot.com era.
The set of companies that went burst during this period because of bad
management is composed of at least 15 publicly traded companies. If your
compensation included shares of any of these quick IPOs (AOL, Yahoo, pets.com,
Global Crossing, etc.) your shares would have ultimately be zero as well
(compounding interest is what makes you wealthy with these long-term horizon
packages and you wouldn't have sold all your shares at ipo).

~~~
hkmurakami
Yes those 50 companies are very recent in SV history. Hence we need to look
back farther to see the change, because our standards were set many decades
ago.

And whether a company goes bust post IPO isn't really the issue here since
liquidity is what we're discussing.

------
sgtnoodle
I've perhaps been very lucky and fortunate enough to be picky, but when
negotiating for a new job, I've always just made a spreadsheet with a bunch of
expected value calculations and then used that to counter as appropriate. For
both my current job and the new offer, I'll calculate total expected
compensation after 3 years from now assuming bad performance, realistic
performance and best performance. Those numbers alone can be very
enlightening. If the offer's realistic projection is less than the current
realistic projection, I politely let the negotiator know that their offer will
need tweaking to have parity with my current situation. Either way, I'll
suggest a counter offer that puts the realistic compensation at least 1.2x
current if it isn't already, then play it by ear from there. The composition
of salary vs. equity really just depends on my current risk tolerance. The
more equity, the higher the best case upside.

This all happens after the company is serious about hiring me and I'm serious
about joining them. It's nice to have a spreadsheet because it avoids appeals
to emotion. I wouldn't share the formulas or numbers, but rather only the high
level methodology and the conclusions you've drawn from it. It's your tool and
confidential info, not theirs. If you feel like you've made a strategic error
and asked for too much, you can easily backtrack and laugh it off with the
negotiator by saying you had a typo somewhere. More likely, the negotiator
will consult their own spreadsheets or board, and they will tell them that
your counter offer is acceptable.

One time I simply mentioned to a recruiter that I might need to take out a
loan to leave my current job due to AMT (since the options were actually worth
something), but I was still trying to find a tax consultant to crunch the
numbers. She came back right away with a pre-offer for a larger starting bonus
pending approval. I later told her that the AMT worked out okay without it,
but she still got me the starting bonus since it got approved. It never hurts
to ask politely for something!

------
baron816
I think the most compelling reason for a company to go public now is that it
means they can off recruits liquid equity.

I wouldn’t be surprised if the recent wave of filings was partially driven by
a sense that star employees were being poached by FAANGS that could
effectively pay double, mostly on account of being public.

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nfriedly
One thing I really liked about Tanium was the way they handled employee
equity.

First starters, they granted RSU's instead of ISOs, so when you leave the
company you just get to keep whatever stock you've earned without needing to
write a big check and pay a bunch of taxes all at once.

Secondly, they did something like what the article suggested and every time
the company raised fumding (about once a year), they allowed employees to
participate and sell stock (with some restrictions.) In fact, the company has
been profitable for a while, so I think allowing employees to sell stock is
the _primary_ reason they still do regular funding rounds.

I ended up leaving for other reasons, but I always felt like they treated me
well in that regard.

~~~
Cd00d
I was at a company that issued me an generous RSU package each year. Roughly
$60k/year equivalent.

When my department was made redundant and we were laid off, turns out I didn't
actually have any stock. The account reverted to $0.

Though, true, I never needed to write a big check or pay a bunch of taxes.

~~~
nfriedly
Ouch. I think Tanium's was initially like that, ("double trigger") requiring
both vesting time and a liquidity event (acquisition, IPO, etc.) But they
changed it to just vesting time ("single trigger") while I was there.

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edelans
Very interesting point of view ! I'm a French engineer owning "BSPCE" (stock
option equivalent for french startups), I wonder if I can exercise those and
sell the stock privately (obviously, the company is not IPO'd). If any other
french HNer is reading this and has experience with this subject, I'd be
interested to talk about it !

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eyelidlessness
Alternate: stocks are gambling; startup stocks are gambling with money you
don't have; startups are so prevalent that the incentive to gamble money you
don't have is harmful to a larger set of people than would accept the gambling
risk under normal circumstances.

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swyx
as a holder of some employee stock now actually worth six figures (bc company
raised a round and is offering to buy back my shares) I have been confronted w
the opposite question: do I want to sell it? I did not. reason being that I
didn't need it right this second and it wasn't a life changing amount yet and
it could be. I think the illiquidity helps in that I'm not tempted to
reevaluate this decision every trading day and likely make a bad decision at
the first negative data point.

at some point a company is clearly on the "will probably exit for non zero
amount" track and the standard "its probably worth 0" advice does not apply.
I'm not sure HN agrees with this.

~~~
thundergolfer
I was recently in the same or similar position (partial buy-back) and opted to
sell.

Tax concerns aside, your essentially betting that the stock will do better
than an alternative investment. That might be the case, but taking the money
and then reinvesting it is also a valid “I don’t need this money right now”
option.

There’s also the factor that you’re more “eggs in one basket” if you keep the
stock.

I personally pulled mine out to donate it, as it is potentially life-changing
money in other people’s hands.

~~~
swyx
very noble of you, great option.

yes, i do think this stock has potential to at least 2-4x in 2 years from
where it is today, and if things go south will at least be acquired for
current valuation. so its probably better than any alternative investment i
can do.

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spurdoman77
Or written other way "go public". To have liquidity for a company you need to
be listed at some marketplace and be interesting enough so that people will
trade tour stock.

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itronitron
The primary investors should care about this as it can give great insight into
how the rank and file feel about the long term prospects of their company.

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bravoetch
The trap is in the title. "Let employees". As long as you're just an employee
you're at the mercy of these absurd mechanics. Opt out.

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paxys
From what I remember (and I may be wrong) companies can't actually stop you
from selling your shares to someone else right? That is why so many private
secondary markets exist?

~~~
kelnos
Sure they can. Nearly all standard pre-IPO equity comp contracts state that
any sales may only be done with board approval. And pretty much no board ever
approves that sort of thing.

One potential option is that you could enter into a contract with a third
party to sell your shares to them after a liquidity event, but they'll give
you cash right now. There's a risk to the buyer that the shares might end up
being worthless (but that's the price you pay for a speculative play), and a
risk to the seller that the shares might be worth quite a bit more at
IPO/acquisition (but that's the price you pay for early liquidity).

Not sure if any equity comp contracts stipulate that you can't do _that_ , but
presumably they _could_ prohibit you from doing that as well.

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zerr
How do you covert equity to passive income?

