So she did what every HN thread on the matter says, with good reason : focus on your actual job and salary, not on equity that may or may not have some value some day.
Dont get me wrong it appears the reason she ended up with none is not ok, but would that thread have been made if wework had ended up being one of those "failed" startup and those equities never gain any value?
Would she have preferred to get equity but a lower salary (either at that moment, or on further yearly negotiation) if wework had ultimately failed? Or if like here she left long before she could use it?
Don't think about what could have been with such things, equity as a lowly employee at a tech startup is very much like playing the lottery. If you're not directly invested in it such prefer the hard cash of your salary and don't let survivor bias make you regret that one time things could have been.
At the end of the day, the startup world is about creating opportunity where there was none before. It gets nasty, and even nastier when you realize the only personal recourse you will ever have for being in that world and not getting the opportunity despite doing the work is to go make your own opportunity, with even more work.
If it's crushing your soul to be there, then you really don't belong. That's the long and the short of it.
I personally look at the world of business as a necessary evil, that what makes business evil makes startups especially evil. But no less necessary because of it.
I don't think any attempts to make startups less evil will do anything but just make it more evil. The attempts will fool people into believing that evil has been conquered, when it's just been painted over with lip service.
HN threads focus on equity/salary tradeoffs, particularly for people joining a startup. This situation - where nobody was getting a salary 'cut' or negotiating a split, but where a startup was issuing equity to existing employees, is not what HN discusses, and her decision was not the same. Heck, her decision wasn't really a decision because a crummy company made it for her.
If you are joining a startup, you should be there to get equity. This is the main financial reason to join a startup. If you prefer cash, join a established company.
I think if the options are clear and up front, with the "exchange rate" between equity and salary laid out, what you said holds true. I think the tweeter is generally dissatisfied with how little transparency there was.
But then the fact that it is equity has no weight what so ever in the story, it works the same with regular salary : ask for what you want, evaluate properly your position and worth, negotiate, change job if you genuinely think you're worth more but he won't agree, and don't let your boss be the one in charge alone of deciding what's fair to say you're worth, not when he has vested interest in that being as small as possible and you in it being as big as possible. Your boss is not on your side during your contract negotiation.
Make the story about how they gave automatic raise based on position but she's not in the grid so don't get one and it's even something many have heard. Except maybe she would have reacted and argued more.
I think there’s a genuine problem with the way that compensation has evolved though. This is in the 2nd or 3rd thread tweet, she says perfectly upfront that she was 23 and had no idea. That is far from unique, I talk to all kinds of people commonly who have the same tales of their early career. And I don’t think it’s particularly healthy to have complex compensation structures where workers are unprepared to actually make intentional informed decisions. That is ripe for abuse and deserves some sunshine.
Right. The reason given “you don’t get options because you have a unique job title” is clearly total bullshit to those of us who have been around the block, but being naive she believed it. That’s the issue. Her boss knowingly and deliberately deceived her.
It's very common for young people to not understand financial matters like options grants. That doesn't mean it's okay to benefit from their ignorance, especially as the company is now making a large number of people very wealthy.
IMO it's a matter of doing the decent thing over the legal thing. Certainly if I was making a zillion bucks like the boss of WeWork I would find a way to pay the early employees who missed out.
I think it's common for young people to not understand: your employer is not on your side.
You are making a legal contract which your employer is trying to extract a maximum amount of profit from, while passing on risk, and has more experience and understanding of how to negotiate to that effect.
Maybe that's true for most venture-funding backed startups, but it's a bit of an unfair generalisation. There are plenty of employers out there that don't want to suck their employees dry. Some companies have a more long term vision, and the easiest way to retain employees for more than a few years is to not exploit them.
I agree that it's a somewhat unfair generalization that paints a harsh picture. The core point of the argument still holds though, I think. A cynical response might be to say that the difference is the employer is accounting for longer-term replacement hiring/training costs, rather than short term value extraction. The optimization has new parameters but the structure of the relationship is still fundamentally transactional. I don't really think that's how things generally run, though.
Both parties should want a place that's enjoyable to work over the long term, yet sometimes the company will have to make hard decisions. Priorities slip or people are straight-up unable to avoid, say, laying off half the staff. Framing and context matter, as always. "Your employer is not on your side" is hopefully not a statement about the day-to-day interactions with your boss, or even a statement about company values, but it can serve as a reminder that there's always a line somewhere, and, intent aside, your best interests may simply fall on the wrong side.
> a bit of an unfair generalisation... There are plenty of employers out there that don't want to suck their employees dry.
I think I generalised it correctly. I agree with this point - that it's often not the most profitable to suck your employees dry, as you say.
Your employer is not on your side, even if your goals temporarily align with their long term vision. That is almost the best you can hope for in employment.
If business has a time of crisis, for whatever reason, then it becomes a risk-minimising strategy to exploit staff - at least until the crisis is over or the business collapses.
Yes. Under capitalism, you will never see the full fruits of your labour, it goes first and foremost to the company and they will give you (theoretically) the smallest slice of it they can get away with. Of course, sometimes there are “nice” employers but they have the same interests.
There's nothing requiring that to be true. There are whole ranges of socialist ideologies based on removing the state, and so reducing or removing hierarchies, including pulverising large employers into smaller units.
There are others (with significant overlap) based around retaining market mechanisms, but externalising labour conditions and salary, and so using market mechanisms as a resource allocation mechanism. A market is only a threat to workers if there is a significant negative impact from being made redundant - some socialists believe society should strive for a system where we encourage businesses to make people redundant by making themselves more efficient; redundancy protections are a band aid for a lacking welfare system.
It's not for nothing that Marx and Proudhon violently agreed that one of the most radical policies you can pass is providing cheap credit (though they disagreed about agreeing...) - make credit cheap and you make exploitation of labour far harder because it becomes easier and lower risk to leave to work for yourself.
Sure, state socialist ideas ideologies would have the issue you describe, which is one of many reasons why a whole lot of socialists find them more objectionable than capitalism.
> That doesn't mean it's okay to benefit from their ignorance
Seems to me that a startup offering real pay is not taking advantage of anyone.
The shady way of doing things is to say "Hey, I'll offer you these options instead of real pay, and they will be worth X in a few years time". Then during work: "Hey, can you work a bit more, it's your money on the line too". That is how you take advantage of people.
You cannot be angry not winning the lottery when you didn't pay for the ticket.
> It's very common for young people to not understand financial matters like options grants. That doesn't mean it's okay to benefit from their ignorance, especially as the company is now making a large number of people very wealthy.
You have it backwards. If the person doesn't understand financial matters like options, a company could exploit that by offering them these complicated products in lieu of cash.
> It's very common for young people to not understand financial matters like options grants
Do you have any recommendations for learning more about that?
I recently started working full-time at a tech company and I feel like I also have too little understanding of those things.
I didn't come to it easily myself, and I would have thought my degree would have taught me something, but somehow they gloss over a lot of things in business school.
These days there's a lot more online that you can google. Here's the rough areas of coverage I'd go for:
- Corporate fundamentals. What is limited liability? How do I make a co in my country? What are the different types of co available? (GmbH vs AG, LLP vs Ltd, C-Corp vs S-Corp, Charities?)
- What are the financial and taxation setups? Basically, how are entities related to each other? Can I borrow money from my co? How are dividends treated. This is a thing you want an accountant to tell you, because they know the praxis, not just the headline rules of your jurisdiction.
- Finance. What does capital structure mean? What's the difference between equity and debt? What's the difference between your mortgage and your credit card? What are options and warrants? (I spent years trading vol, still there are differences between listed options and employee ones, esp wrt tax). What do junior and senior mean? What are preferred shares, and what are convertible bonds? Since we're talking here, HN people have written a load of articles about SAFE notes and similar. They are quite good about also explaining what your interest is in these situations, because it's often not obvious to a newbie.
Interesting article from a couple of days ago was about Toptal. Those kinds of articles should be read.
I started getting a “wrong pay” by a shark in Luxembourg, I was unhappy. But then, if you asked compensation for now knowing how to negociate this contract, how do you know how to negociate a contract for nuclear weapons or for the biggest commitment of your company?
You don’t. You never do. The only correct way is to repeat. And thus, if you sell billion dollar contracts, go lower and do it more often, never go for the biggest ever. Or at least, progress step by step, so you know most of the major tricks. But if a major contract is your biggest ever by a multiple, then you’ll always br cheated on tricks you don’t know yet. And on smaller contracts you’ll cheat the weaker person. Don’t abuse it, but it’s part of the contract theory.
Venture Deals (by Brad Feld) provides a great overview of startup finance matters. It is intended for founders and covers things other than employee equity. It’s an extremely useful read because it provides a holistic overview of the overall fundraising process and enables one to think about equity in a systematic way.
The new book Secrets of Sand Hill Road by Scott Kupor is slightly newer, a little more readable, and talks a lot about dilution, but otherwise covers almost the same ground.
Both books are great in understanding the space and motivations of various players.
That’s another great one! I would suggest reading the Venture Deals (which appeared quite practical to me) first and following it up with the Secrets (that’s great for understanding incentive structures and motivations of everyone involved).
> It's very common for young people to not understand financial matters like options grants. That doesn't mean it's okay to benefit from their ignorance,
Is that one reason for a sketchy company to prefer to hire new grads?
Someone please explain this to me: You apply for a job, you accept the job, and you work to perform your duties as is expected of you. Options are a perk that some companies offer. How is it acceptable in any way to believe you are owed something more than what was agreed upon? Personally I’m getting really tired of reading stuff like this where people see what others have and immediately feel they are owed the same or more.
I think it's the contrast between what she got vs what others got. The initial terms of employment don't have anything to do with it.
At some point wework decides to grant options to some of their 120 employees -- basically a form of bonus. From her perspective, she's been working just as hard, productively and creatively as many other people who were granted the bonus, and had been there longer than most.
The terms of the initial employment offer aren't really relevant since it sounds like various other people who weren't guaranteed options nevertheless received them (people couldn't have been guaranteed options under a plan that didn't exist when they hired).
Agreed. However, the company had the right to give or not. To assume you personally are owed something because someone else has it is a fairly new and large cultural issue within tech. You don’t see this coming out of any other sector. It’s like my children saying that they are owed my money in their inheritance. It’s my money, I can choose what to do with it. Within bounds, anyone has the right to disagree with their employer, change jobs, or start their own company. But never feel that you are owed something.
Of course they have the right. That doesn’t make it a good idea! A company should be smart, insightful and take the long view with compensation decisions.
Anyway, you’re using the word “owed” but the twitter thread doesn’t, so I’m not sure we’re talking about the same thing.
I did not read the article (WeWork is a joke of an overhyped company in most respects anyway, not sure why anyone bought into it to begin with) but it really depends does it not? You apply and accept but if you, for instance, find out later your colleagues get more for the same work or you take risks (coming from the EU, being able to lose your job at any moment is such a risk), that should be compensated with money or, if you like that kind of thing, options.
If she accepted and it is still a competitive salary for the position then you are right. But if that changed or somehow there is risk that is compensated at other corps (in options or money) then it would be a valid complaint.
You seem to imply in this case it is just whining or FOMO or something while being compensated properly. I think there are kind of cases worth reading about where it is actually simply unfair.
The way I read it - she was being not-so-subtly hinted to search for another job.
No way in hell the management wouldn't realize how refusing a 4-year old employee any options would look on her end. Zero is zero. It's like leaving a 1c tip at a restaurant. So this was most certainly done on purpose.
Or more likely management didn’t care whether she looked for new employment.
I’ve been through three of four of these situations and every time there is a list of positions that management deems important enough to grant options. It was always clear how not being on that list is perceived and that people might quit and some consideration was made to not risk losing some they considered important enough.
I bet it wasn’t the author’s title but the author. The COO knew who she was and didn’t think she was important enough to grant options. Saying it was because she had the wrong title seems like a coward move.
I never felt good being on or off the list or making the list. I think it’s better to award some amount to all early staff. One of the myths and legends of tech that I loved hearing as a kid was the Microsoft secretary who is not a millionaire.
Options grants like this describe the character of a company. I don’t think it’s impossible to work in an org like this, but it should be a factor in choosing to stay or choosing to join.
This is a good interpretation of the event as I understand it.
Culturally, it would be a good move to grant all employees before x date a token number of units so they felt validated. $1k worth of units to a few dozen employees is a rounding errors worth of dilution but would pay many intangible dividends to the culture.
I do think, ultimately, the bulk of incentive equity should go to those most likely to make significant contributions.
Issuing no options to a 4 year old employee can mean exactly one thing - it was not a very valuable employee that they weren't keen on retaining. That's about it.
I don’t know what an “Operations Associate” is but having a junior person report directly to the COO seems like a really junior admin/help with everything/type.
It’s weird that the COO wouldn’t give options to her admin, I think.
It could also be OP overestimating her value. When I was starting out I thought that working super hard and helping everywhere was the most important thing in the world to me. It took me a while to figure out how value is created for organizations.
She wrote in the thread that people received 1000, 2000 shares. They are trading at about 35$ now. Who knows, they could skyrocket a few years from now and be worth millions, but at the moment they are worth a good amount of money but not a life changing one. Nothing to be sad about.
I worked for a startup many years ago (so they called themselves but being a phone operator before virtual ones they had to start big, 2k people and more.) They offered me options but I asked for more salary and less options. It turned to be the right decision because they got close to the IPO but never really did it.
Are you entitled to equity in a startup for being there early on? How is being "naive" and accepting a contract an argument for being mistreated? Am I being too skeptical?
Her personal story aside, which I can imagine must feel a bit bitter, I am of the opinion that equity should only ever be given to employees who have a crucial and direct impact on the success of a business. If I join as a COO into an early startup then I take risks, play a crucial role in it's evolution and therefore deserve some equity to incentivise the best performance I can do. However, if I'm an account, even if I'm employee no 2 I would never expect equity. Doing accounts is not crucial and has nothing to do with the actual startup itself. If they pay a normal salary for an accountant then any accountant could just take that job and replace me. Why should the business owners who must have taken huge risks themselves ever give a piece of their hard earned cake to an accountant? Doesn't make sense, they get a fair salary for their work and that is all they deserve.
So there's always two sides to everything. Not everyone always deserves what others have. That's a common misconception today where everyone looks for reasons to claim how they've been treated unfairly.
EDIT:
Before more people jump at my throat, I want to clarify that I am not talking about not compensating employees well because of a stupid reason like they can get replaced or something. That's not at all what I'm saying and I thought that was pretty clear. EVERYONE should get a great salary and great work/life perks, BUT when it comes specifically to giving away OWNERSHIP of one's business, then IMHO just being a great employee is not reason enough. I just don't think that everyone should own some % of a company just for rocking up every day and being nice to their colleagues. That's all.. if you disagree with that, then fair enough, but then say that, and don't try to teach me that people should get compensated well, because I never said otherwise.
This comment is so horribly wrong that it's hard to know where to start.
1. "Doing accounts is not crucial". Um, yes it is. Doing accounts is very, very important. They are a way of understanding the truth of your business, keeping your cash under control, satisfying legal obligations.
2. "If they pay a normal salary for an accountant then any accountant could just take that job and replace me". People are not interchangeable. A good accountant (one who is competent at their job) is your table stakes, after that you have to consider how well that person works with others and how they contribute to the culture of the company. A start up is not about the visionaries or engineers it's about an entire team that makes a company grow and work well together. Viewing an accountant is not contributing to the company culture is not just plain dumb.
3. Also, accounting is way more than just filling in a spreadsheet. When you look at the effect of AR and AP on the business you quickly realize that this stuff matters.
4. Everyone in a startup could go somewhere else. And everyone is taking some level of risk (e.g. they could have gone to a more stable company that provided better long term job prospects). Everyone deserves to participate in the risk/reward.
So, reward people that you want to stick around at the company. Give everyone some equity, given everyone some upside. A business owner who sees someone like an accountant as a drone doing a job for pay is missing out on the larger picture of building a healthy company for the staff and getting the best from that person.
Having reliable employees is golden, I doubt anyone argues with that.
The argument goes is that an average office hand, a janitor, a driver (or an accounts receivable clerk for that matter) will not be a critical loss for the company regardless of how good they are at their job. Hence no inherent need to try and retain them as hard as those in executive and technical positions.
You can certainly sprinkle some options on them to try and make them feel good, but you should really consider how receiving 0.005% of a company would really feel for them.
People are not interchangable, but their skills very much are. Accountants are not being treated as drones. Whether you think their importance is extremely crucial in an early startup or less crucial it doesn't matter, because all of that is taken into account when paying them a fair wage. That is de facto the definition of fair. So nobody needs to feel offended. You deliver a great job and we pay you a great salary according to market rates and your experience. This is how the world works.
If a coffee fetcher or accountant would come to a startup owner and say I want a piece of your company for making you coffee or filing your tax returns then they better back up why the business owner will not just ask someone else to do it at this point. It's not that they don't value their contribution, but it's just not a reason to give away a piece of your ownership of your own company where you've put blood and sweat into it.
However, if a subject matter expert comes to me with the same request, and the market is such that there's already very little people of that qualification available anyway, and their contributions are seen as make or break the company, then the conversatoin will certainly be very different.
This is just the free market, no matter how you feel about this, it won't change. There's obviously the argument that the free market doesn't serve us well, but that's a different conversation and out of this context here.
I think you miss my point that the accountant is part of your team. They are doing more than just the job of accounting and help build the company culture. The culture, teamwork etc. are intangibles that will make a big long term difference.
You are certainly within your rights to decide to keep all the equity to a small number of people but you'll be building a very different company than one I would want to work for.
For example, I am very happy that my Executive Assistant has options in my company. She's an integral part of my success and doing my job every day. There were lots of candidates for her job but we chose her. And I'll be ecstatic if one day she sees upside from having taken the job working for me.
> She's an integral part of my success and doing my job every day. There were lots of candidates for her job but we chose her. And I'll be ecstatic if one day she sees upside from having taken the job working for me.
So why don't you give her that upside? As a business owner you can pay her whatever you would like her to see earn one day. Just do it, there's no inherent reason why equity has to be given away. Of course if you prefer to pay her a promise of maybe one day cashing out, but equally not cashing out at all, then I wonder if you really value her contributions today as much as you make it sound here. Honestly, people can run amazing companies and treat their employees really really well from day one, not one day when they win the lottery.
A startup is a huge risk regardless, so if I take a job at at a startup I want to be compensated for the risk. Even if I’m cleaning it fetching coffee. That doesn’t have to be equity but pay needs to be better than if I took the same job at the megacorp across the street, because the risk of suddenly being without a job when the company goes bankrupt is much smaller.
I would gladly accept lower pay at a startup than working at a megacorp.
In my view, the fact the megacorps offer better job security and still have to pay a premium for employees, just show that the jobs aren't that attractive/enjoyable etc.
If you are paid market rates, your career perspectives in the line of business you are in are typically not stellar and your career prospects improve by working in that company no matter how it does you are not taking a risk.
Work of almost all employees is “crucial” and “has to do with the actual startup itself” at an early stage. My experience with companies that don’t realise this is that they rapidly deteriorate because of a poor perception of value within the business.
Setting that aside, all employees at a startup take additional risk. Startup work is frequently harder, more complex, more time- and life- consuming than BigCo work, and runs a higher risk of suddenly coming to a stop when funding runs out.
If I am going to come and work for your startup, I will need one of a couple of things:
- The same pay and conditions I will get at a more established employer, including the expectation of value added, or
- A higher salary to compensate for the additional work and risk of a startup, or
- Equity to compensate for your inability to pay a higher salary, or
- In a very rare case, the fact that you are working in a particular field, area, or cause, for which I’m willing to accept lower rewards in order to participate.
Employment should as much as possible be a transactional process. Offer money in exchange for work and risk; if you can’t offer money, offer something else to compensate. Equity is a reasonable tool for cash-strapped startups.
Please remember, I am not saying people should not be seen as important or valuable, or not get compensated fairly. I am very much advocating ALL of that. But, when it comes specifically about giving away ownership of one's business, then I think there must be a good reason to do just that, because just being a great employee and doing a good job is IMHO not a reason to give away ownership. That's two different things. Please I am all up for everyone getting paid great salaies, getting amazing perks and what not, but ownership of the business should not be easily given away like that.
Ownership of the business is just a token of value that you control. If you can compensate everyone with adequate salaries—that means, higher than the equivalent at more stable companies—then that is totally fine. If not, then exchanging some of your control instead is a totally valid thing to do, and weird preconceptions about “your own blood and sweat” are just silly things to care about.
Frankly higher salaries are my preferred option and one I would always push for, for both myself and others, if possible - equity is essentially valueless at an early stage anyway.
Your arguments may be appealing, but looking back at your startups - did the receptionist, tech support or janitor receive options? Were they even employees?
Interesting view. Would you see engineers similar to accountants? Aren't they just as replaceable, not providing much value besides implementing ideas and specifications? Its just the founder that matters if I understood your comment correctly.
I think a startup is so much more then you are trying to make it to be.
The fundamental power dynamic of equity is always difficult for employees. Non C-level employees practically never have the negotiating power to demand equity. However, I've seen several occasions where founders have constantly promised their staff equity (whilst underpaying them) and never followed through. Dangling equity is a great tool for dick head founders.
If its true that everyone else at the company got options but her thats pretty upsetting. If she was reporting directly to the COO and they had a good working relationship then that person should have fought for an exercise grant or eliminated the position.
I fail to see her point. There’s always lack of transparency in equity allocation. If there exist a startup with a transparent cap table, that’s surely exceptional.
Equity is like a superpower in negotiation with employees. Because it is zero sum among them, it neutralizes collective bargaining—the most effective form of negotiation they have.
So it’s not as black and white as, she should have done this or that differently, or someone should have made this or that disclosure or even helped her out. Equity is pretty magical in how it makes people misbehave and turn on each other.
And feeling mad that she got a raw deal is the right emotion here.
For what it's worth for her peace-of-mind, I really doubt they would have given her options if she had made a push.
Essentially, the decision had already been made. It's not impossible that they could have been convinced to change their minds, but it would have required some new or unexpected leverage to make it happen. (They would have already factored in that she could have become disgruntled or quit.)
Well, pessimistically it might not matter much either way. The employees with stock currently will likely be subject to a six month lock-up period after the IPO date. And it’s quite likely that the house of cards that is WeWork won’t survive that much scrutiny as a public company, and the price might be so low by the time anyone below the executive level can sell.
Add to that dilution when owners can print more shares for investors and different types of shares (aka preferreds) when a common employee often gets nothing because all the money go to preferreds.
I understand this person is upset and likely bitter, but claiming that she remained "naive" about options after 4 years in a startup, when they started granting them (tweet #15), looks rather odd to me. There's gotta be more to the story than written.
I think she does come off as entitled. I also think she has every right to feel that way. #17 is really early. I'd go so far as to say she deserved it.
It feels like ops people are generally under-appreciated in tech.
Dont get me wrong it appears the reason she ended up with none is not ok, but would that thread have been made if wework had ended up being one of those "failed" startup and those equities never gain any value?
Would she have preferred to get equity but a lower salary (either at that moment, or on further yearly negotiation) if wework had ultimately failed? Or if like here she left long before she could use it?
Don't think about what could have been with such things, equity as a lowly employee at a tech startup is very much like playing the lottery. If you're not directly invested in it such prefer the hard cash of your salary and don't let survivor bias make you regret that one time things could have been.