

Employee Equity - DanielH
http://www.avc.com/a_vc/2010/09/employee-equity.html

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joezydeco
I'd like to know more about the downsides of RSUs.

I've been offered some recently, and I feel like it's just a way of saying
"yes, you can have some equity... _someday_. Meanwhile, you're still in the
dark on shareholder issues and you can't see the balance sheets. Keep up the
good work".

Is that a wrong way to look at this?

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gaius
Wasn't there a case not long ago where option holders got basically raped by
the taxman? They were taxed on their options as if they'd been exercised at
their peak value, but by the time they vested they were worth a lot less.

AMT I think it was called.

~~~
kscaldef
The situation where you can (could?) get screwed by AMT is if you exercise and
hold, and the value of the stock drops. This isn't universal and there are
different rules for different types of employee stock options, so make sure
you know the rules that apply to you if you are considering an exercise-and-
hold.

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silvajoao
This comes at a curious time for me. Just recently a startup didn't start at
all, because I and the other would-be co-founder couldn't agree on how to
split the equity.

Can someone enlighten me please: is a 50/50 split reasonable for 2 founders of
a coding-heavy startup, where each founder has roughly the same background?
That is what I was asking for. My friend was asking to have 100% equity and I
would get a sizable share of sales as a contractor for his company. It was our
first startup, neither of us has previous experience running a startup or a
business at all.

I'm very sad it didn't work out because we worked on the technology for almost
4 weeks and it was promising, and now I feel a bit "guilty" about not having
"cooperated", but I just couldn't invest the effort, resources (we have no
investment; we would be burning our savings for some months) and yet have no
ownership at all of what I was creating and risking into.

Any thoughts into this will be greatly appreciated, as I have no other sources
of feedback to evaluate my decision.

~~~
robfitz
Depends on the people, but him wanting 100 is a good warning sign that you
should quickly get un-involved. 50/50 is what I would expect in your
situation, where neither person is obviously going to be carrying the company.

If you give a founder (or early employee) more than they're going to be worth
in the long term, you'll feel increasingly motivated to fire them and recover
their un-vested stock. If you give them too little, they become increasingly
motivated to quit and start something they can own.

From what you described, you were at a lose-lose impasse. One or other of you
was going to end up unhappy, in a company-destroying sort of way. I would have
quit also and would make sure to sort the ownership question out earlier next
time.

Somewhat tangentially, people also tend to over-value the ownership that their
"idea" should entitle them to. If someone spends 3 months thinking day and
night and you just started, it can seem like they deserve a big chunk. But you
have to remember, standard vesting is 4 years, so their 3 months of thought is
only about 6% of the time you're each committing to the business.

~~~
timdellinger
"If you give a founder (or early employee) more than they're going to be worth
in the long term, you'll feel increasingly motivated to fire them and recover
their un-vested stock."

I'm surprised that I don't hear more horror stories about co-founders and
early employees being kicked out just to get their un-vested stock. That's the
one thing about 4 year vesting that always seemed risky to me.

~~~
robfitz
You have to burn a lot of bridges to do it and it leaves a mercenary mark on
you and the company. I think it's more likely to destroy morale by making you
bitter about each other's ownership than to actually get you to fire each
other as an economic choice.

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hyung
"If the founders are the top managers in the company, then the typical "non
founder employee ownership" will tend to be between 10% and 20%."

Does this mean that all the "non founder employees" would split the 10-20% of
the equity?

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3pt14159
That is what he is saying, yes. Although I think this varies greatly with
region, because in Toronto it is more like 4-11% for an ESOP.

~~~
ojbyrne
"Employee ownership levels are higher in well developed startup cultures like
the bay area, boston, and NYC. They are lower in less developed startup
communities"

~~~
3pt14159
Yeah I saw that, I just wanted to give people an idea of how much it can
range.

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gacba
I'd really like to know this since none of the startups I've been involved
with have had positive outcomes (buy out, IPO, merger etc).

If you're part of the 10-20% employee ownership, assuming that you have an
"average" stake, what percentage of the overall deal do you usually walk away
with?

I'm expecting this number to be painfully small and hardly f#ck you money, but
I'd like to hear from those who have direct experience on this.

NOTE: I'm not asking about _founder_ exits, because those are adequately
covered in the media and other places. I want to know about all the folks who
are in that magic 10-20% of employees. Outlier anecdotal evidence (e.g. Google
secretaries, Microsoft mail room folks) need not be mentioned. :)

~~~
3pt14159
If you are one of their favored employees (multiple bonuses of additional
options) and you got in before they hit 50 people you can expect about
0.1-0.3%. I know employee 1000 at Google walked away with about $2 million.

