You should include a Standard Offer Letter example showing employees what their stock/etc. will be worth under various exit assumptions. Showing/including the employee handbook at the same time is great, too.
(I'd like to make this a standard thing; would be happy to help with this. Would need to find a lawyer willing to contribute time. I'd love a Standard Human Readable Offer Letter Builder.)
> Every employee will be offered 41,963 Clef stock options (~.9% of outstanding shares, including the option pool these are drawn from). As mentioned above, they can also choose to reduce their salary by $5k/year in exchange for 4,663 more options (totalling ~1% of outstanding shares).
This is a genuinely impressive commitment to transparency.
I want there to be an offer letter plus other materials which explain it. It's meaningless to say something like "12000 shares of stock, vesting over 4 years." That may be the legally binding part, but there should be an appendix or model which shows what that actually means.
The problem with making that a separate unsigned/etc. document is it isn't legally binding in the same way an offer letter is.
There's additionally the insanity around "stock options must be approved by the board at the next meeting after you're hired", which could be a quarter. That seems stupid. There should be some cleaner way to handle that.
Oh yeah, usually i just send a spreadsheet. Even the stock options aren't legally binding usually... they still get approved by the board after the hire is made. It is not possible to pre-approve them, but you can do it but UWC (unanimous written consent) without holding a full board meeting. That's what we do.
No, founders usually BUY restricted stock, not options. This can be offered to employees, too, as long as the price is reasonable.
At the beginning, a company is usually $100 or so in total, and the founders pony up $20 or so each to buy their shares. The company can buy back the portion of unvested stuff for the balance of the $20 until it vests.
That is correct, but the difference between the instruments is not relevant to my statement. I bought restricted stock when I founded a company, which vested over four years, and have taken options when joining as an employee. Almost chose to do an 83b election on my options using a loan from a startup I joined, in order to improve my tems, but I am happy I did not do so. Considering the risk of failure it is generally advisable to diversify your investments more than that.
Edit: rdl , for the loan from the company to do the 83b election to be a considered a loan by the irs it must have almost full recourse. You will be liable for it and the creditors will ask for the loan amount in case of failure.
Yeah, but in an early company it shouldn't matter as much -- these guys are pre-409A so you could easily argue $500k corp valuation and thus the guy with 1% of the company has $5k of options to exercise. And in a later company you probably don't get 1%. It's probably in the $1k-50k to exercise options in most companies.
A loan which is somehow forgivable for the stock seems like it could solve this; if the stock is worthless, return it instead of the loan. (I thought you can do that? But I guess you can't?)
"Here is how it works: The employer transfers the stock to the employees at no cost, and the employees make the Section 83(b) election to accelerate the taxable event to the date of transfer. That requires the employees to recognize ordinary income in an amount equal to the value of the stock and enables the employer to report an ordinary noncash deduction equal to the same amount.
The employer then finances the employees’ income-tax liability with a nonrecourse loan to the employees (at today’s low interest rates) secured by the restricted stock. Since this doesn’t involve the financing of the employees’ purchase price of the stock, the restricted stock grant would be considered a “transfer” of the stock, thus closing the compensation element of the transaction upon transfer because the Section 83(b) election is made. This avoids the tax uncertainty created by financing the actual stock acquisition with a nonrecourse loan and the requirement of a substantial cash down payment by the employees or, alternatively, a substantial portion of the acquisition note’s being recourse.
Although employees must still pay the ordinary income tax incurred on the date of grant, they have deferred the payment of the tax by means of the employer’s nonrecourse loan. The employer is permitted a noncash deduction in the same amount and at the same time, while the employees are required to include the compensation element of the restricted stock grant in income."
Is there anything YC could do to help YC companies with housing? It's not trivial for teams during YC to get housing in SFBA, but they have enough upside to put up with a lot, and usually figure out something.
It's really hard for employees 1-N, especially at sub-market salaries, but without 10% equity stakes, to move to SFBA. It pretty much restricts you to people already-here, people who will live college dorm style, or people who are already well off. Too much of the money raised goes out the door in salary (taxed) to pay for housing.
As a non-YC founder living in SF, I'm really disappointed by this answer.
Above, you mentioned a "bandaid" solution of increasing funding for YC founders to account for skyrocketing rent - but this only exacerbates the problem for everyone else, including YC companies' employees and the entire ecosystem that supports them.
Tech workers' willingness and ability to pay ever-increasing rent, underwritten by salaries drawn from irrationally exuberant venture capital investment in tech (low interest rates elsewhere), is driving a housing bubble that, in a vicious cycle, is then further fueled by property investment justified by ever-increasing rents.
I guess I was looking more for YC to take a leading role here in proposing solutions, rather than passively hoping for a fix. The simplest, as it seems to me: open a bleeder valve by providing incentives for successful YC companies to "settle" other startup hubs, or even just acting as a broker for bidding by those locations. I'm sure there are smarter fixes, but I can't see the harm in enacting these.
Those are good ideas. (I'm a YC alum; I'm looking forward to applying and doing another YC startup at some point in the future, and I personally dislike SFBA.)
YC has done a little bit of this informally (Alexis as "Ambassador to the East"), and a lot of YC founders are from other places and retain hiring/offices/etc. in those other places. There are lists, support networks, etc. I know of for YC companies resettled in Seattle, and probably in other places.
There are also some YC companies which are explicitly "X for India", "Y for Brazil" where they obviously are based in those other places.
There ARE a lot of YC companies which want to remain in SFBA, though, so looking at options like Campus (RIP; wonder what happened; would love to talk to the founder for a post-mortem) makes sense, too.
I think everyone agrees that a fix at the root cause (local governance) is better but YC can only do so much, so what Sam said about increasing the funding for their startups is really what's directly under their control. I suppose they could join up with other VCs and do some lobbying to propose better solutions though.
Startups aren't going to move, like you suggest, although the bigger companies are willing to open offices elsewhere.
So much horrible stuff is lost, too. Commute, distraction, ambient paranoia and discomfort, resentment, etc. The bullshit where someone comes in with the flu and everyone else gets sick, progressively, over the next month.
And the huge things: inclusive workforce (people with kids/sick relatives, mobility or other disabilities, etc. -- this will predominantly hurt women). Visa problems largely eliminated. Global talent pool.
You could make up for the positives by having scheduled in-person sessions with your team (if you live genuinely remotely, do it for a week or two at a time, or longer; if you live in the same metro, do "in-person Wednesdays".
A pathologically bad environment is an open plan with a bunch of disparate teams in the same space. Coworking spaces across several (potentially competing!) companies are the worst, but in a larger company, having relatively separate teams in the same space is almost as bad.
Open plan is pretty much a personal instapass. If it's not worth spending +$1k/mo per employee on office space (even in the worst markets, it's +100sf/mo, which is about $500-700/mo), the employees are probably not contributing much value. Being in an environment where people are making $3-5mm in value is key. Don't be a junior callcenter employee (even those are moving remote, for cost saving reasons). Exceptions for temporary onsite engagements with clients, or something crazy like "we're on a warship" or "enroute to Mars", or <10 people in a single office during early days of a startup, but volitional shitty open plan is just insane. (Unfortunately this basically rules out the majority of Silicon Valley companies these days.)
I do agree that corner offices as status for useless mid-level managers are ALSO bad, but the correct solution is offices for all, or at least anyone who wants them, some kind of dynamic environment, etc. It's entirely reasonable to have ICs in offices and managers in open areas.
Anytime someone complains about recruiting/hiring/retention in a company with work-in-office, open plan, one or two high cost locations, it's hard to not bring this up. A few companies at a time can get away with it, but not everyone. It would be an easy way for companies to differentiate themselves in hiring; if even 25% of workers would rather have a private office, you would get first pick of those employees.
Open plan offices are not always about cost. Microsoft has famously had private offices forever, but many younger employees have indicated that they would prefer semi-shared space. I agree that the "football field" plan has no redeeming qualities.
I mean, we're past that discussion aren't we? Uber and other rideshares are going to have to start classifying drivers as employers eventually (at least until self-driving cars get here). Legal determinations are already headed in this direction.
It'd be interesting if someone got in front of that and ran Uber-Prime with Uber-Prime, Inc. employees as drivers, driving vehicles leased by Uber-Prime, Inc. Maybe go upmarket of Uber by offering a 100% guaranteed rape-free experience for your minor children, borderline medical transport, incapacitated people, rich/scared people, etc.
Tesla is on its way to doing this, no driver required.
"As Tesla Motors Inc. develops self-driving technology, an analyst asked Chief Executive Elon Musk a provocative question Wednesday: Will his company sell cars to a transportation service like Uber, or try to start something similar on its own?"
"Morgan Stanley analyst Adam Jonas posed the question to Musk in an earnings call Wednesday afternoon, noting that Uber CEO Travis Kalanick has reportedly said he would want to buy Tesla’s self-driving cars when they are released."
Musk called it “an insightful question,” then added, “I don’t think I should answer it.”
Wouldn't work because Uber pays per person, not to a company. You'd have to get drivers to voluntarily give a cut of their take home to pay for insurance, the car, etc. without having a way to track what they actually make.
>You'd have to get drivers to voluntarily give a cut of their take home to pay for insurance, the car, etc. without having a way to track what they actually make.
This is exactly what they do now, they just don't pay Uber, they pay those companies directly. But as a company with employees, they could negotiate a deal to get cars for cheaper, negotiate a better insurance rate, and save the driver the hassle.
But then we've come full circle, inviting regulations that drive up costs. This is an attempt to stay on the edge of that.
Yes, that's precisely what I mean. And that's what makes this kind of move from Lyft so interesting. They're walking a fine line. Banking on the time it takes to be regulated as runway for pivoting to automation. Google says they'll be delivering fully autonomous cars by 2020. If we give Google til 12/31/20, that's more than 5 years out. Seems like Uber/Lyft will be regulated hard before that, unless they've got something up their sleeve.
Off topic: I'm always looking for ways to make myself better understood. I think by using the term "we", I gave the impression that I'm personally concerned about costs and that I actively support businesses skirting labor laws to save costs. Not my intention, but I can see how one could concluce that.
No, I meant Uber-Prime, Inc., a competitor to Uber, Inc. Every driver for Uber-Prime, Inc. would be a direct W2 employee of Uber-Prime, Inc. and would offer a premium service to displace/defeat the evil communists at Uber, Inc.