After I left, 18 months later, the company sold and my options would have earned 10x the $34k of the strike price. I.e., I would have made $300k if I could see the future. I just find it painful that at that moment, all your time is effectively worthless, and only the $34k would have counted for anything, even though I gave far more than that in extra hours.
Needless to say, I am somewhat hesitant to put in too many extra hours anymore and almost never work weekends or holidays.
That's ~25K/year so if you would've worked a regular 40 hour week, 20 hours of contract work at anything more than $35/hour would have put you ahead. And you would've still had weekends, nights and vacation.
"Under capitalism, man exploits man. Under communism, it's just the opposite." which seems to be attributed (without any sources) to John Kenneth Galbraith:
I've also seen it as "Under capitalism, man exploits man - under communism it's the other way around." I always assumed it was a translated Russian proverb, along the lines of: "No truth in the news and no news in the truth" (Major Soviet papers were "Pravda" (the truth) and "Izvestia" (the news).
superqd mentioned he would have made $300K more (i.e. in addition to the fixed salary he was earning) if he had bought the options. I assume that after paying for taxes, he would have still made $200K. Since he worked for 8 years, this is indeed $25K of additional income for every year. If he worked for $35/hour for 40 hours/week for say 50 weeks in a year, his total income would have been 35 * 40 * 50 = 70K. How is this better than his original job which was probably paying him say $80K or greater than $80K as fixed salary every month? It sounds like it would have put him behind by at least $10K. What am I missing?
There are many good reasons to join a startup but if the financial motivation is the main one then it's probably not the best route.
(1)Other than a feeling that I'd joined the Witness Protection Program when I fled after an engineering walkout.
(2)Offset by literally years of damaged self-esteem. Pedigree is heavily overrated - with one exception, all the famous people were pretty awful.
Enjoy your personal time, leave at 6PM, turn off work email/slack/anything and do things that make you feel better as a person.
Sure there is always the possibility of landing work at a unicorn that is worth billions, but I think the problem is that many of us are too willing to give up parts of our lives in the hope of some very unlikely return. Either the industry needs to figure out how to value time as an asset in a meaningful way, or crazy startup-hours need to stop.
Yep, that's exactly what your management was counting on.
The only reasonable expectation should be 40 hours a week.
When I came back, they'd moved and I had the best cubicle reserved for my return. They missed me but only because I forced the issue.
No small thing on a place parent presumably spent a lot of time.
Don Knuth said something (about TeX): never spend more than 2 years of your life on something. I've broken that rule several times but I'd counsel following it on startups, especially someone else's startup.
I now also regained my stamina to work hard and long hours but I know where my red line lies and take it easy when necessary. I also make "enjoyable work" for myself and our employees a priority. Call it naive or stupid but life is too short to slave away without enjoying the day-to-day of it.
I have started to think about these points a lot.
Given I basically have a coworking workshop (it's a 3 friend little webdev company), there is a lot to consider.
Solving and handing over of my current obligations, dedicating to my shop, or starting a new one my way, or finding a new place to soak in more experience (I'm 32, but somehow my brain still works well enough to quickly absorb new stuff).
It got exponentially harder to get out of bed and get to work. I just had to quit because I couldn't show up. I didn't give anytime to interview or find an offer. I was also in a weird situation with regards to immigration. So it was reckless but goes to show how much I had to leave.
>How did you approach your recovery?
Joined a big company, got myself on a path to be comfortable financially, took every weekend off. Picked up hobbies, coded for fun. Worked out, visited doctors, changed my eating habits -- got healthy.
>How much time and effort did you put into getting your business off the ground?
Part of 2015 and 2016 I started working and growing on an old side project of mine until got to a point where I knew I could raise money for. I quit in April 2016 and worked like crazy for a month to raise enough money to hire a couple of engineers, get to feature complete, and start selling (which is what we're still working on now). I wrote about it here: https://amasad.me/2016
>How do you manage to combine enjoyable work with delivery (nowadays it is the mantra - everything has to at least help provide value for customer)?
If you're building a startup it's one of the hardest thing you'll ever do so in my opinion you need to align the mission, the product, and the market you're going after with what you care about. Whether that social good, tech, or business. Given that, it's builtin the company that you should enjoy what you're doing. Then hire people that enjoy that too and it all (seems) to fall into place naturally. To sum up, you're in a position to design your ideal work environment -- do it! (You may fail, but that's better than being stuck with something you don't care about).
>How do you handle employee's failures and your own?
I'd be lying if I said I don't push myself and others around me to be the best they can be. You just need to give feedback regularly so that there are never no big surprises (this is something that you can learn by being at one of the good big companies) and always be kind.
Good luck with your workshop.
Assuming they're willing to do the deal, if your alternative is letting the options expire worthless, it seems like a no-brainer to take a loan with no recourse unless there's a liquidity event. You wouldn't have made the full $300k, but at least a solid portion of it.
Because you may also have lots of shares in companies in an aggregate fund (e.g. in a a pension) but you aren't working for free for those companies.
However people do get caught up in the emotional 'but I own a bit of it', and I think companies exploit this.
One person can make a difference in the value of a 20-person company, and if that person has a 1% stake in the company it can be rational to work longer hours to make that happen.
On the other hand, there is very little that a shareholder of a public company can do to materially affect the bottom line of that company. And as the owner of perhaps .000001% of that company, that person would see very little financial benefit from such effots.
A 1% option seems more like the poker game ante, but you need to keep putting more in (time, effort or even cold hard cash) to stay in the game :-)
However, and I don't know how to put this more kindly, but I can't help but wonder if you understood how options work while employed at the company?
A simple technique to avoid having to quickly come up with a lump sum is to set aside enough money to excercise your options as you accumulate them.
In this case putting aside $4,250/year earmarked for exercising your stock options would have allowed you to save the $34k required.
In the end though it might be wise to hedge a bit and at least buy some of your options as you go if you believe the company is worth something eventually.
I was stunned by just how many of the long-time employees had no understanding of stock options. One was actually flabbergasted to learn that each funding round was creating new shares and diluting the value of existing ones; he thought the founders were selling their own shares to raise the money!
The ignorance was due in part to the company being in a region where startups and stock options are not common. Another big factor was willful deception by the founders, who had been promising to start the IPO process for three years, and frequently estimated that their IPO valuation would be equivalent to Facebook's.
Options are underwater if the strike price is less than the current market price; shares in private companies might not have an actual market price but you can estimate them. Underwater options still have >0 value since there's a non-zero chance the stock price will decrease before the expiration date -- of course, if the expiration date is close by and the strike price is much higher than the current price, the option value might be very close to 0. Still, you practically never exercise underwater options (there are some rare exceptions not very relevant here).
In grandparent's case, the issue is not underwater options; they are about to exercise the options and get stock.
At the time they left the company, the stock price was presumably way above the ~$1 strike price. They could have bought (say) $60k worth of stock for only $30k, making a profit on paper. The problem is, as the article says, you have to pay taxes on capital gains AND that stock is illiquid (you can't easily sell it if at all).
And yet, we still get posts like this one, and comments like yours, that make it seem like somehow the employees are the ones who are getting shafted.
Could equity deals be a little more clear and fair? Sure, absolutely. Maybe make the window for options something more like 6-12 months. It's entirely subjective. But when the "make or break" lifecycle of a startup is 5 years, waiting 6 months to make a critical hire because you have options tied up in people who don't even contribute to the organization anymore is detrimental AND unfair to the current employees.
It shouldn't make you sad that you couldn't exercise your shares. It should make you sad that you didn't work more effectively the capitalize on your options sooner.
Of course, nobody gives employees options on preferred shares.
It seems like you're whining about something that you had complete control over, and chose not to exercise.
1/3% (and that's generous) of a potentially $1B dollar company might seem like a lot, but after 10 years of dilution how much will you really have left? If your options dilute by 1/4 (also generous), you've made about an extra $80k a year, and that's not even with taxes subtracted. And don't forget the likely higher salary, raises, bonuses, stock grants, and medical care you get at a big 4 company.
It's possible that you can be be assured to make no extra money working for a startup, even with all the extra risk, depending on how those factors play out.