Golden Handcuffs(avc.com)
avc.com
Golden Handcuffs
https://avc.com/2021/05/golden-handcuffs-2/
273 comments
> Employees deserve high-quality equity on par with investors.
There is no reason that labor and time couldn't build equity, it's just that our current system favors those who use capital to build wealth over those who need to sell their time and labor to build wealth.
A common reason I hear for the fact that investors get more equity is because of the "risk" they take on, as if losing some money is the only risk on the table should a business go under. What is ignored, or outright dismissed, is the risk borne by those who invest their time and labor in a business for little to no equity.
When a business goes under, the employees have just lost their abilities to feed themselves, keep a roof over their heads, see doctors, buy medicine and provide for their families.
Workers sacrifice time that they can never get back working for one business when they could have spent that time working at another. While money invested can be earned back, employees can never earn their time back. Sometimes, those workers are paid below market rate while they help make a business successful, but don't see much or any equity as a result.
It seems to me that there is more risk on the shoulders of employees than those of investors, and they should be compensated accordingly.
There is no reason that labor and time couldn't build equity, it's just that our current system favors those who use capital to build wealth over those who need to sell their time and labor to build wealth.
A common reason I hear for the fact that investors get more equity is because of the "risk" they take on, as if losing some money is the only risk on the table should a business go under. What is ignored, or outright dismissed, is the risk borne by those who invest their time and labor in a business for little to no equity.
When a business goes under, the employees have just lost their abilities to feed themselves, keep a roof over their heads, see doctors, buy medicine and provide for their families.
Workers sacrifice time that they can never get back working for one business when they could have spent that time working at another. While money invested can be earned back, employees can never earn their time back. Sometimes, those workers are paid below market rate while they help make a business successful, but don't see much or any equity as a result.
It seems to me that there is more risk on the shoulders of employees than those of investors, and they should be compensated accordingly.
The more amusing (or disturbing thing) is that we have created an environment where, practically speaking, investors have less risk than everyone else. We were just hit with one of the largest global disasters of the past century last year and the immediate reaction was flood equity markets with $3 trillion to prop up financial markets. Owners of capital cannot lose.
Even before these last few years of craziness, what I will never be able to get out of my mind is the story of Frank McCourt. I'm a lifelong Los Angeles Dodgers fan. He bought the team from Fox in 2004 and proceeded to treat a storied franchise in the nation's second largest city like it was his personal credit card. He didn't even use his own money to make the purchase. It was entirely with loans. He then proceeded to spend 8 years gradually bankrupting the organization until the league kicked him out and forced him to sell.
What was his loss? Nothing. The team sold for 8 times what he originally paid, not because of anything he had done, but just because television contracts for the entire league had become so much more lucrative over that time. The man put up $0 of his own money and made $2 billion by being one of the worst team owners of all time and making the organization he owned literally bankrupt.
I will never again in my life accept these econ theory gibberish about all the "risk" faced by business owners. If you own a salon or a restaurant or something, fine, I accept you might actually be out on the street. But if you're the right class of person that the banking system has accepted into the club, you can get infinite loans to buy whatever you want with no collateral, drive a business into the ground while spending the bulk of your time with hookers and blow, and make out with billions anyway.
Even before these last few years of craziness, what I will never be able to get out of my mind is the story of Frank McCourt. I'm a lifelong Los Angeles Dodgers fan. He bought the team from Fox in 2004 and proceeded to treat a storied franchise in the nation's second largest city like it was his personal credit card. He didn't even use his own money to make the purchase. It was entirely with loans. He then proceeded to spend 8 years gradually bankrupting the organization until the league kicked him out and forced him to sell.
What was his loss? Nothing. The team sold for 8 times what he originally paid, not because of anything he had done, but just because television contracts for the entire league had become so much more lucrative over that time. The man put up $0 of his own money and made $2 billion by being one of the worst team owners of all time and making the organization he owned literally bankrupt.
I will never again in my life accept these econ theory gibberish about all the "risk" faced by business owners. If you own a salon or a restaurant or something, fine, I accept you might actually be out on the street. But if you're the right class of person that the banking system has accepted into the club, you can get infinite loans to buy whatever you want with no collateral, drive a business into the ground while spending the bulk of your time with hookers and blow, and make out with billions anyway.
The best part is that he sold the franchise and donated $100M to Georgetown University so that his wife wouldn't get as much of the divorce proceedings.
Saul Katz is the east coast Frank McCourt. Many years of mismanaging the Mets. Suspicious involvement with Bernie Madoff. All floated a long with generous debt finance. Sold the team last year for $2.4B
The Times 03/Jan/2009 Chancellor on brink of second bailout for banks
> The team sold for 8 times what he originally paid, not because of anything he had done, but just because television contracts for the entire league had become so much more lucrative over that time.
And what about your part in this play? The brand is valuable because of its fans. I assume you continued to support this brand, and by extension, this man you seem to despise. People like yourself directly contributed to his wealth — you might just as well not have.
And what about your part in this play? The brand is valuable because of its fans. I assume you continued to support this brand, and by extension, this man you seem to despise. People like yourself directly contributed to his wealth — you might just as well not have.
And thus… the system isn’t flawed? We can criticize the system and the rich without needing to apologize for it.
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You’re right. The “system” is flawed. The poor knowingly enrich the wealthy and then whine about it. Seems to be happening more and more nowadays.
What is the alternative? Give up on all sports teams? Give up on all goods altogether?
I think the point people are making is that the system in general is so rigged and there are so many bad actors that it’s basically impossible to find something else that is more ethically managed while getting a very similar good/service/whatever.
Do I support the US giving Israel billions every year that then gets used to kill and rule over Palestinians? Nope but I still have to pay my taxes! If I decided to not pay because of that, I’d go to jail. So even though I’d like to not support such a system, the effects of not supporting such a system are too much of a cost for myself. (In the same way for others with goods or services or whatever - penalty for non-participation in whatever is too high)
I think the point people are making is that the system in general is so rigged and there are so many bad actors that it’s basically impossible to find something else that is more ethically managed while getting a very similar good/service/whatever.
Do I support the US giving Israel billions every year that then gets used to kill and rule over Palestinians? Nope but I still have to pay my taxes! If I decided to not pay because of that, I’d go to jail. So even though I’d like to not support such a system, the effects of not supporting such a system are too much of a cost for myself. (In the same way for others with goods or services or whatever - penalty for non-participation in whatever is too high)
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I think the point is that if the team got more valuable while he owned it, it certainly wasn't from his contribution. Maybe that money should go to the people who actually did the work that made it more valuable.
They aren't saying the team shouldn't exist, or be more valuable. They're saying he shouldn't get the reward, just because he was the capitalist at the top.
They aren't saying the team shouldn't exist, or be more valuable. They're saying he shouldn't get the reward, just because he was the capitalist at the top.
First, this isn't true. The MLB operates like socialism for the owners. The value of the television contracts are overwhelmingly due to a very small number of franchises, but the revenue is split between all owners to subsidize markets with small fanbases. So you don't need to directly support a specific team for the owner of that team to get rich anyway. This is effectively why rich people bother to buy teams like the Marlins and Rays, gut the entire roster, get by paying the minimum payroll the league collective bargaining agreement allows playing to empty stadiums with no fans, and sell for a profit anyway.
Second, I haven't lived in Los Angeles for a long time and have never bothered to pay for any sort of subscription service that allows me to watch the games anyway because they tend to air well past my bedtime, so no, the value of MLB and LAD television contracts is not in any way directly contributed to by me personally.
Second, I haven't lived in Los Angeles for a long time and have never bothered to pay for any sort of subscription service that allows me to watch the games anyway because they tend to air well past my bedtime, so no, the value of MLB and LAD television contracts is not in any way directly contributed to by me personally.
When I said "your", I was really talking about the group "lifelong Los Angeles Dodgers fans", and you seemed to include yourself in that group.
However, you raise a good point that people in the same group exhibit different behavior and values.
However, you raise a good point that people in the same group exhibit different behavior and values.
> When a business goes under, the employees have just lost their abilities to feed themselves, keep a roof over their heads, see doctors, buy medicine and provide for their families.
Yes, but that's always the risk of working at any company (and it's a risk the investor may also have if the company goes under). You can typically just get a new job and get these things back.
I think an even more compelling argument here is the one of opportunity cost when working for a startup vs big FAANG company.
Early startup tech employees not only invest their time but also lose out on real money they would have earned at another (bigger) company.
Yes, but that's always the risk of working at any company (and it's a risk the investor may also have if the company goes under). You can typically just get a new job and get these things back.
I think an even more compelling argument here is the one of opportunity cost when working for a startup vs big FAANG company.
Early startup tech employees not only invest their time but also lose out on real money they would have earned at another (bigger) company.
| Early startup tech employees not only invest their time but also lose out on real money they would have earned at another (bigger) company.
Isn't that by design? With greater risk comes the potential for greater reward. If someone doesn't want the startup risk, they can choose to pursue a job at FAANG. If your goal is to minimize risk, then choose a job as a schoolteacher or the post office. That's the nice thing about freedom of choice.
https://www.linkedin.com/pulse/charlie-ayers-made-millions-c...
Isn't that by design? With greater risk comes the potential for greater reward. If someone doesn't want the startup risk, they can choose to pursue a job at FAANG. If your goal is to minimize risk, then choose a job as a schoolteacher or the post office. That's the nice thing about freedom of choice.
https://www.linkedin.com/pulse/charlie-ayers-made-millions-c...
This presumes that early employees are getting a fair shake. In many cases they are being sold a lottery ticket with a value of only a few thousand dollars even when the company sells/IPOs.
Isn't that exactly what "risk" means in this context? Sometimes you get very rich (see the early google/microsoft employees), usually you get nothing or almost nothing. If you don't want to play the lottery there is nobody forcing you to work at startups.
If you were promised 0.1% of the company and the company ends up worth $0, that's just the risk of taking equity.
If you were promised 0.1% of the company then some financial shenanigans with 'dilution' or 'liquidation preferences' mean the company gets acquired for $200,000,000 and you don't see any of it, then you got taken for a fool.
If you were promised 0.1% of the company then some financial shenanigans with 'dilution' or 'liquidation preferences' mean the company gets acquired for $200,000,000 and you don't see any of it, then you got taken for a fool.
Yes, if you don't know the rules of the game you will often lose because you did not see some (legal) move coming. Investing is the biggest game in the world and big boy rules apply. People who are unable or unwilling to learn how options and startup equity work should not take payment in equity, because they will get cleaned out as predictably as a drunk guy at a poker table.
At the end of the day, any business partner can choose to screw you. VCs/Investors have additional protection by way of retained legal council, clawback clauses and occasionally debt based positions and liquidity preferences.
An employee will simply never have access to that, the fact that it's been normalized for founders/investors to actively attempt to confuse and fool employees will simply drive skilled employees out of startups.
An employee will simply never have access to that, the fact that it's been normalized for founders/investors to actively attempt to confuse and fool employees will simply drive skilled employees out of startups.
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Only of they are paid partly in equity. If they are getting a lower comp package than FAANG because of intangibles they value highly (perhaps developing skills FAANG will pay more for later) that's their choice.
> Sometimes, those workers are paid below market rate
I like this justification above all the others; it seems both fair and easy to reason about. If I quit a $200k/yr job to work at a startup for $100k/yr in cash comp, then my time investment, or risk, is $100k/yr, and my stock compensation should reflect that financial value based on today’s valuation of the stock.
I like this justification above all the others; it seems both fair and easy to reason about. If I quit a $200k/yr job to work at a startup for $100k/yr in cash comp, then my time investment, or risk, is $100k/yr, and my stock compensation should reflect that financial value based on today’s valuation of the stock.
You are the ultimate check on that. If the compensation package makes the startup not attractive compared to staying put, you should stay put.
It’s up to the startup to put the offer to you, but up to you whether to take it.
It’s up to the startup to put the offer to you, but up to you whether to take it.
Oh, totally agreed 100%. I’m just saying that there is a way to value a time investment that is on par with what financial investors are buying into. It doesn’t need to be some hand-wavy idea of who’s ‘risking’ more due to the unknown chance the startup might fail, and it doesn’t need to speculate about who would be hurt worse. It can be a purely fair and financial idea for early devs; their stock compensation value is the discrepancy between what the startup pays and what their market rate is.
I'd be fine with it not matching exactly. I'm willing to pay some amount of opportunity cost in lost comp elsewhere as an investment in the company. I'd just like the ROI on that investment to not be like 5-10x worse than a VC's.
I’m also fine with it not matching exactly. In fact, I have only ever accepted offers where it doesn’t match exactly. :) But, one thing to keep in mind is that the value of a time investment in a company naturally goes down over time as the company grows larger, and as the company is able to pay more competitively. Investors will get a larger stake because of when they put the money in, all up front. Devs typically won’t get the same stock compensation dollar for dollar, only because the time investment is spread out. My time during the third year might be measured against a company with a much higher valuation than my first year there.
> based on today’s valuation of the stock.
This is the tricky part, especially if you are very early.
Really what you want is the (statistical sense) expected value of the equity be something like the opportunity cost, for it to make sense for you. But until the company has been around for a while and through a few rounds, valuation is mostly a fantasy...
This is the tricky part, especially if you are very early.
Really what you want is the (statistical sense) expected value of the equity be something like the opportunity cost, for it to make sense for you. But until the company has been around for a while and through a few rounds, valuation is mostly a fantasy...
It’s not that tricky, because the investors are getting a valuation. The money I risk/invest/forego now because it’s a startup maybe ought to get the same valuation the investors are getting, that’s all.
> It’s not that tricky, because the investors are getting a valuation
That works ok in theory if you are signing a contract at the same time a round is finalizing... otherwise it remains tricky.
That works ok in theory if you are signing a contract at the same time a round is finalizing... otherwise it remains tricky.
I really agree with your point. I don't see how most startups could make competitive offers with unicorns/FAANG, unless it was for non-monetary reasons like a promotion.
Because there are considerably more jobs outside of FAANG then within it.
Give out way more stock options, so that the pay is the same risk-adjusted.
Early stage startups should be showering employees with high risk equity and paying less cash compensation. This saves the company money and allows them to hire better talent. Having highly skilled engineers/bizops/designers/sales staff who are incentivized to make the company successful is a huge win.
Not just early stage startups. Any startup that's competing with FAANG for talent should be competitive with FAANG on compensation, on a risk-adjusted basis. Which means if there's a successful exit, everyone makes more than they would have than if they had just worked at FAANG. Early-stage employees should make a lot more, and later-stage employees should make somewhat more.
I'm not really sure how options should be valued, and I haven't negotiated from a position of have a ton of unvested equity. But if an engineer got extremely lucky by joining the right startup, say Coinbase, leaving early might mean giving up a few million in unvested equity.
That's a lot of equity if the startup treats that lost income as if the engineer had invested that amount in the last fundraising round. Options instead of stock, common instead of preferred shares, and risk adjustment should all probably increase the equity amount. I'm not sure that most startups would give mid-level engineers millions in equity.
That's a lot of equity if the startup treats that lost income as if the engineer had invested that amount in the last fundraising round. Options instead of stock, common instead of preferred shares, and risk adjustment should all probably increase the equity amount. I'm not sure that most startups would give mid-level engineers millions in equity.
so the key question here is what a "mid-level" engineer can do for your company early. An engineer with 5 years of experience at FAANG will easily make ~200-250k, competitive scaling startups and public companies will compensate equivalently withing ~30% in liquid compensation.
If that engineer instead works for 100k and takes 100k in illiquid equity which may or may not be worth something in 10 years, they are losing well over a million dollars in opportunity. Given that 5 more years at a top-tier firm would double their compensation they could easily be giving up multiple millions. To be employee #5-50 this individual should be getting an equity option that would reasonably be worth millions in an exit scenario for it to make sense.
Most startups simply aren't competitive for this mid-level engineer given current compensation practices. Which leads to a sub-selection of talent for those who for various reasons aren't willing or able to work at a firm willing to pay that level of compensation. Bear in mind, if the engineer had liquid equity from a public corporation they would be able to leave equity in hand after 4 years.
Whether this is a problem or not is an interesting question for startup CEOs. Generally I've found success in software is more closely correlated to the quality of employees than the quantity, and historically companies with generous compensation practices seem to be the successful ones.
If that engineer instead works for 100k and takes 100k in illiquid equity which may or may not be worth something in 10 years, they are losing well over a million dollars in opportunity. Given that 5 more years at a top-tier firm would double their compensation they could easily be giving up multiple millions. To be employee #5-50 this individual should be getting an equity option that would reasonably be worth millions in an exit scenario for it to make sense.
Most startups simply aren't competitive for this mid-level engineer given current compensation practices. Which leads to a sub-selection of talent for those who for various reasons aren't willing or able to work at a firm willing to pay that level of compensation. Bear in mind, if the engineer had liquid equity from a public corporation they would be able to leave equity in hand after 4 years.
Whether this is a problem or not is an interesting question for startup CEOs. Generally I've found success in software is more closely correlated to the quality of employees than the quantity, and historically companies with generous compensation practices seem to be the successful ones.
Thank you!
Without the investment funds, where is the startup getting the funds to pay you 100k/year? Some startups take a while to hit big and the only source of funding is investors. Fair or not, there’s a power imbalance and ignoring that seems foolish.
Also, the view you have is biased to the rare success scenario. In the failure scenario, the employee comes out ahead since they at least got some amount of their investment back.
Also not all investors are created equal. Some investors are strategic partners who can help grow your business. They forgo a salary because they provide advice and a social network the founder can tap into at critical junctures. That’s extremely valuable in some cases. Not all investors play that role (or play it well) but it’s hard to estimate the value of investors ahead of time just as it is to correctly evaluate an employees contribution.
Also, the view you have is biased to the rare success scenario. In the failure scenario, the employee comes out ahead since they at least got some amount of their investment back.
Also not all investors are created equal. Some investors are strategic partners who can help grow your business. They forgo a salary because they provide advice and a social network the founder can tap into at critical junctures. That’s extremely valuable in some cases. Not all investors play that role (or play it well) but it’s hard to estimate the value of investors ahead of time just as it is to correctly evaluate an employees contribution.
Loans still exist. They didn't magically disappear with the rise of venture capital.
Have you tried to obtain a loan for a startup? I recommend you go try to bootstrap it without collateral & the bank is just happy to eat the loss when it doesn't work out.
I think everything you said is true at face value, but do you have a viable alternative proposal? Do you prefer to believe that financial investment is riskier than time investment, and do you want to preserve the status quo where there’s a power imbalance in favor of money investors? I’m suggesting a way to value an employee’s time investment in a startup that doesn’t depend on speculation or subjective discussion of who’s taking more intangible “risk”. Employees and investors are both sacrificing the same thing to participate: money.
> the view you have is biased to the rare success scenario [...] the employee comes out ahead since they at least got some amount of their investment back.
Maybe you didn’t understand my suggestion, because the cash compensation is not a return on investment. If you forego $100k/yr for stock options, and the company goes belly up, you lose that amount. The cash compensation is keeping you from making a larger investment, it’s a hedge against risk. Cash paid counts against the time investment. Your suggestion is the same as saying the investors come out ahead because they had money in the bank that they didn’t invest.
FWIW, what I’m suggesting comes from experience both as a founder and as a dev participating in a startup. As a founder, realizing that I don’t need to have debates about what skills or status someone is bringing to the table was helpful in negotiations. As a founder and dev, using time as the metric gives me a framework for thinking about stock compensation that can be applied to everyone in the company equally, and gives both parties room to negotiate. As a dev, valuing my time this way allows me to choose my level of risk, as long as the company is open to paying more or less cash, which several in my life have been. And best of all, as a dev, valuing my time this way typically ends up with a higher number than a random offer of some amount of stock where it’s hard to decide whether to accept it because it’s not linked to my effort.
> it’s hard to estimate the value of investors ahead of time just as it is to correctly evaluate an employees contribution.
This is spot-on, and really goes to my point. It’s better to take that idea off the table completely, because there is no valuing contributions beforehand, and no fair way to measure it after the fact - if there’s a way to even measure it at all. Everyone in the company is investing something than can be measured and weighed fairly between people. The people who end up contributing more will enjoy faster promotions, longer tenures, greater chance of success, so they do end up compensated. But it’s a bad idea to try to let people argue about their contribution or value in non-measurable terms, and a bad idea to commit to paying for that before the contribution is made. I know this from experience, letting someone talk me into believing their contribution would be huge, and granting a large stock package, only to find out later when it couldn’t be changed that they were not the heavy hitter they made themselves out to be.
> the view you have is biased to the rare success scenario [...] the employee comes out ahead since they at least got some amount of their investment back.
Maybe you didn’t understand my suggestion, because the cash compensation is not a return on investment. If you forego $100k/yr for stock options, and the company goes belly up, you lose that amount. The cash compensation is keeping you from making a larger investment, it’s a hedge against risk. Cash paid counts against the time investment. Your suggestion is the same as saying the investors come out ahead because they had money in the bank that they didn’t invest.
FWIW, what I’m suggesting comes from experience both as a founder and as a dev participating in a startup. As a founder, realizing that I don’t need to have debates about what skills or status someone is bringing to the table was helpful in negotiations. As a founder and dev, using time as the metric gives me a framework for thinking about stock compensation that can be applied to everyone in the company equally, and gives both parties room to negotiate. As a dev, valuing my time this way allows me to choose my level of risk, as long as the company is open to paying more or less cash, which several in my life have been. And best of all, as a dev, valuing my time this way typically ends up with a higher number than a random offer of some amount of stock where it’s hard to decide whether to accept it because it’s not linked to my effort.
> it’s hard to estimate the value of investors ahead of time just as it is to correctly evaluate an employees contribution.
This is spot-on, and really goes to my point. It’s better to take that idea off the table completely, because there is no valuing contributions beforehand, and no fair way to measure it after the fact - if there’s a way to even measure it at all. Everyone in the company is investing something than can be measured and weighed fairly between people. The people who end up contributing more will enjoy faster promotions, longer tenures, greater chance of success, so they do end up compensated. But it’s a bad idea to try to let people argue about their contribution or value in non-measurable terms, and a bad idea to commit to paying for that before the contribution is made. I know this from experience, letting someone talk me into believing their contribution would be huge, and granting a large stock package, only to find out later when it couldn’t be changed that they were not the heavy hitter they made themselves out to be.
So I'm missing your point. If you forego $100k/yr of stock options to work at a startup, you're hedging your risk. You're still getting healthcare & a regular paycheck (even if it's less). This directly impacts the company's runway (i.e. your "100k investment" looks like a cost to the company. Don't forget that once you're past the seed round (where the company is literally making nothing), you're looking at multi-million dollar rounds where the minimum check size is maybe low-to-mid six-figures. That's also the point where employee compensation starts to rise btw so your sacrifice is largely meaningful just to you (not to mention that you are getting compensated well anyway in the success scenario, but less than those that took a bet with 0 hedge).
I'll note that nothing is actually stopping you from saying "sorry, no I don't want to work at your startup but would you take a 100k investment instead?" & becoming an investor yourself. You get to choose which role you want to play so why is "but I put time equity into it & didn't get rewarded the same" a fairness axis? You have access to all the information at your fingertips. To me if you're unhappy with a particular outcome that depends on which side of the equation you were on, that has to do with your own decision making ability/negotiating ability.
I'll note that nothing is actually stopping you from saying "sorry, no I don't want to work at your startup but would you take a 100k investment instead?" & becoming an investor yourself. You get to choose which role you want to play so why is "but I put time equity into it & didn't get rewarded the same" a fairness axis? You have access to all the information at your fingertips. To me if you're unhappy with a particular outcome that depends on which side of the equation you were on, that has to do with your own decision making ability/negotiating ability.
Again, all true statements, but I’m still not hearing any suggestion or viable alternative for how to value an employee’s equity, or how to grant stock. What are you suggesting? How would you grant stock as a founder? Have you started a company before?
My point is that there is a reasonable and fair metric and strategy by which to grant stock, and that this metric is not based on subjective and speculative and unmeasurable ideas about someone’s supposed risk and/or future contribution to the company. You’re making all great points, but none so far have been reasons not to grant stock according to a simple formula that considers the company’s valuation and the employee’s non-cash-compensated time investment. The top comment I replied to was referring to a subjective notion of “risk” on the part of investors, and that’s what I’m responding to by pointing out that investors and employees are risking exactly the same thing, especially if the employees do what you said here and evaluate what role they want to play the same way the investor did.
My point is that there is a reasonable and fair metric and strategy by which to grant stock, and that this metric is not based on subjective and speculative and unmeasurable ideas about someone’s supposed risk and/or future contribution to the company. You’re making all great points, but none so far have been reasons not to grant stock according to a simple formula that considers the company’s valuation and the employee’s non-cash-compensated time investment. The top comment I replied to was referring to a subjective notion of “risk” on the part of investors, and that’s what I’m responding to by pointing out that investors and employees are risking exactly the same thing, especially if the employees do what you said here and evaluate what role they want to play the same way the investor did.
I think you’re hand waving away that money is a store of value, and indirectly of time spent. The money investors have also came from them creating value by doing some activity. It doesn’t materialize independently. And it is still a risk to lose that money that they earned by trading their own time in the past.
Another term for VC is risk capital. A diligent investor will only put what they can safely risk into the market. While your correct that money indirectly represents time, you’re overlooking the incremental utility of money. An investor logically values each incremental dollar less, purely evidenced by the fact they were willing to risk it. An employee on the other hand will turn those funds directly into shelter/food/health.
Seems like a false equivalency to value investment assets at the same level as the money you need to survive.
Seems like a false equivalency to value investment assets at the same level as the money you need to survive.
You're saying that rich people should be paid less, a smaller multiple of what low paid workers get. You can make that debate, but it's not "equity vs wages".
Someone getting paid $100M but no "equity" isn't worse off than someone getting paid $100M of valuated equity (ignoring liquidity discount blah blah)
Someone getting paid $100M but no "equity" isn't worse off than someone getting paid $100M of valuated equity (ignoring liquidity discount blah blah)
It is 100% equity vs. wages. That’s how a financial statement works. Revenue – COGs – G&A – Taxes & Interest = Net income. That net income moves to the balance sheet as retained earnings. The higher the COGs & G&A cost the lower retained earnings and the lower the retained earnings the lower proportion of equity.
The premium equity achieves is largely as result of leverage – not value*. Employees might generate 100% of the revenue but get zero credit for the growth rate. In a book value sense both seem pretty even, but we don’t value growth companies at book… We value them with a DCF model (or a different model that takes into account future earnings). At T+0 you’re probably neck and neck, but as soon as you step into T+1, T+2, etc. the equity side will get credit for income it hasn’t earned yet while the wage earner is left the same (for the better or worse).
*related to my parent comment and the diminishing utility of money. Equity investors can afford to be choosey because they have wealth = aka options.
The premium equity achieves is largely as result of leverage – not value*. Employees might generate 100% of the revenue but get zero credit for the growth rate. In a book value sense both seem pretty even, but we don’t value growth companies at book… We value them with a DCF model (or a different model that takes into account future earnings). At T+0 you’re probably neck and neck, but as soon as you step into T+1, T+2, etc. the equity side will get credit for income it hasn’t earned yet while the wage earner is left the same (for the better or worse).
*related to my parent comment and the diminishing utility of money. Equity investors can afford to be choosey because they have wealth = aka options.
The more relevant factor IMO is not time vs. money but the proportional risk. A year of my time is a much larger fraction of my net worth than the typical VC's investment is a fraction of their net worth.
This is a Marxist labor theory of value argument, disregarding market forces. For a different supply-demand function, labor could get paid far more than investors (imagine a 0 interest rate environment while inflation is happening.)
Well, sort of. There's an argument to be made that people should realize how much better a deal VCs are getting and stop settling for worse ROI. Part of the problem is exactly that supply is high, possibly because of a lack of knowledge/negotiation leverage.
Labor supply is high because it is forced to be high, in a way that capital supply is not. Investors can stop investing and simply live on their hoards, or even a tiny fraction of their hoards. Laborers cannot stop laboring and do the same.
That explanation seems off? (Anyone who has enough to live off of can just do that, witholding both their capital and their labor.)
But anyway I meant supply of labor for startups specifically. Like, people are too willing to forgo FAANG comp for low equity numbers at startups.
But anyway I meant supply of labor for startups specifically. Like, people are too willing to forgo FAANG comp for low equity numbers at startups.
Yet investors have made a fortune over the last year while there’s interest rates below inflation.
>I think you’re hand waving away that money is a store of value, and indirectly of time spent.
Not if it's as a result of natural capital gain, dividend on shareholdings, interest, inheritance or rent.
In those cases it does materialize independently of time.
Taxes are typically lower if you didn't labor for your money too. Probably because large political donations are not typically made by people who worked for their money.
Not if it's as a result of natural capital gain, dividend on shareholdings, interest, inheritance or rent.
In those cases it does materialize independently of time.
Taxes are typically lower if you didn't labor for your money too. Probably because large political donations are not typically made by people who worked for their money.
Thanks for this comment. You've clearly outlined something I've been trying to convey for years, especially to people who read too much Taleb: "skin in the game" cannot be a purely financial concept, otherwise it fundamentally misunderstands the notion of "risk".
"Financial risk" is a proper subset of "calculable risk" which is a proper subset of "risk".
"Financial risk" is a proper subset of "calculable risk" which is a proper subset of "risk".
Your moralizing a non moral argument. Its simply harder to get access to someone else's capital than someone else's time. So people can charge a premium for the capital.
I do believe that premium is probably a bit higher than it should be because it used to be EVEN HARDER to get that capital so people are pointing out the slightly outdated examples of cost in order to gain negotiating leverage.
In the end our time and money have no intrinsic value, but try asking a friend to help you move and then try asking your friend to loan you money to hire movers and see which they are more likely to do.
I do believe that premium is probably a bit higher than it should be because it used to be EVEN HARDER to get that capital so people are pointing out the slightly outdated examples of cost in order to gain negotiating leverage.
In the end our time and money have no intrinsic value, but try asking a friend to help you move and then try asking your friend to loan you money to hire movers and see which they are more likely to do.
I think the big difference is that worker time can’t be saved in the same way that capital can be. While capital will lose value over time to inflation, it still holds most of its value if it is not spent (and there are very safe investments that can be used to hold even more of its value across time) An investor can choose to hold their capital for a better investment at a later time.
For a worker, however, every minute of labor is use it or lose it... it isn’t like a worker can look at the available jobs and say “nah, I think I’ll just save up my time for now and wait for a better opportunity to spend my labor hours”. You can’t wait a few months and then trade all those months of labor for more money later.
For a worker, however, every minute of labor is use it or lose it... it isn’t like a worker can look at the available jobs and say “nah, I think I’ll just save up my time for now and wait for a better opportunity to spend my labor hours”. You can’t wait a few months and then trade all those months of labor for more money later.
> Your moralizing a non moral argument.
I'm responding to a common moralizing argument:
> > A common reason I hear for the fact that investors get more equity is because of the "risk" they take on
> Its simply harder to get access to someone else's capital than someone else's time. So people can charge a premium for the capital.
That's just another consequence of our current system favoring those with capital. There's a glut of capital, it's just allocated in manners that favor asset owners over those who work for a living.
A more democratic approach to capital access wouldn't necessarily have to tip the scales in favor of those who already have it.
I'm responding to a common moralizing argument:
> > A common reason I hear for the fact that investors get more equity is because of the "risk" they take on
> Its simply harder to get access to someone else's capital than someone else's time. So people can charge a premium for the capital.
That's just another consequence of our current system favoring those with capital. There's a glut of capital, it's just allocated in manners that favor asset owners over those who work for a living.
A more democratic approach to capital access wouldn't necessarily have to tip the scales in favor of those who already have it.
You are justifying a system with the system itself. Why does it have to be hard to access capital? Worse that hard, why is there a very very tiny number of (undemocratic, unaccountable) people deciding who gets to access capital?
Why couldn't we think of a more democratic way of allocating credit/capital/finance to people and businesses?
Why couldn't we think of a more democratic way of allocating credit/capital/finance to people and businesses?
Playing devil's advocate:
But the employee's time is a replenishable resource (1 second per second).
The Total risk is not losing your job. It's losing your job + struggling strongly to find another one (considering loss income while searching, stress, ...). Or workplace injury / death.
An investor, while facing low to none risk of workplace injury / death, can permanently lose the investment and won't recover it ever (hopefully the investor hedges it with other investments)
But the employee's time is a replenishable resource (1 second per second).
The Total risk is not losing your job. It's losing your job + struggling strongly to find another one (considering loss income while searching, stress, ...). Or workplace injury / death.
An investor, while facing low to none risk of workplace injury / death, can permanently lose the investment and won't recover it ever (hopefully the investor hedges it with other investments)
> It's losing your job + struggling strongly to find another one (considering loss income while searching, stress, ...).
This is what severance clauses are for.
> Or workplace injury / death.
This is what insurance is for.
This is what severance clauses are for.
> Or workplace injury / death.
This is what insurance is for.
That was exactly my point. They are part of your compensation package. Surely there is a risk that the severance is not enough to cover for coping with a depressed job market.
Investors operate outside of these parameters. When it works out well , lucky you; but if it doesn't work you lose. The parameters to make this a worthwhile venture must be set so that the reward is higher than when you risk less.
Investors operate outside of these parameters. When it works out well , lucky you; but if it doesn't work you lose. The parameters to make this a worthwhile venture must be set so that the reward is higher than when you risk less.
The options offer with no percentage ("we're giving you a very generous 80,000 options"), always blows my mind!!! And often even without a strike price!
I got one of these and was dumb to accept because the finance department claimed the offer was legit. When I started, it turns out the deal to double the valuation to what they advertised... that deal hadn’t been done yet. I left and it took another 6 months to do the deal and the valuation was lower than expected.
If you’re a VC harping on comp, spend your energy calling out frauds. Now that would be an actual public service.
If you’re a VC harping on comp, spend your energy calling out frauds. Now that would be an actual public service.
Always ask for a non-diluatable percentage early on.
It’s reasonable to ask “what percentage does this represent on a fully-diluted basis?”
It is entirely unreasonable to ask for a percentage of the company which can never be diluted by a future fund-raising round. Doing so just telegraphs that you don’t know how venture funding/corporate finance works.
It is entirely unreasonable to ask for a percentage of the company which can never be diluted by a future fund-raising round. Doing so just telegraphs that you don’t know how venture funding/corporate finance works.
> It’s reasonable to ask “what percentage does this represent on a fully-diluted basis?”
Not only reasonable, but you really should. If they won't answer it's a bad sign.
Not only reasonable, but you really should. If they won't answer it's a bad sign.
I’ve scored deals that can’t be diluted for X years after liquidity event, so employees should be able to as well. Don’t put people down with “you must not know what you’re talking about”.
You’d have to be one hell of a hire to convince anyone to agree to something that will complicate all finance rounds going forward. I cannot imagine the average employee could get away with this.
It’s as easy to imagine as it is to imagine a VC getting this kind of deal. The first employees are the ones who literally build the company and usually take far greater personal risk
I cannot imagine a competent and well-informed founder accepting an investment on these terms. Prorata is fine for larger investors, but explicitly undilutable is idiotic.
VCs can somewhat commonly get pro-rata rights in future rounds. That's quite a bit different from a guarantee of never being diluted.
Pro-rata only usually applies once. The investor has an option to retain their ownership by investing more in the next round, but only that one round. If they use it, it’s gone. If they don’t use it, it’s gone. Then they have to negotiate it again for future rounds and usually you can’t get prorata unless you are the lead investor.
How would they know what fully-diluted would be? Wouldn't there be unknown number of rounds at unknown valuation before liquidity? Or do you just mean based on current expectations. Because, if the latter, how do you hold them to that?
Fully diluted means if all currently issued options, warrants, convertible bonds, etc are converted to shares. It obviously can't account for future financing rounds which aren't even yet contemplated.
Fully diluted is not the same as future diluted, it just means including all the available options currently allocated but not exercised.
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I imagine that that would be really hard to achieve (or manage for the company) in practice, although I'd love to see a world in which employees could essentially get pro rata rights to purchase more shares built into their employment. That'd allow them to participate more fully in the upside of companies taking off like rocket ships.
> employees could essentially get pro rata rights to purchase more shares built into their employment.
I've seen this done, for what it's worth. Both contractually and ad-hoc.
I've seen this done, for what it's worth. Both contractually and ad-hoc.
To add more fuel to the fire, in most if not all of the companies that switched to 1-year grants last year some director positions and all executive positions are still on four year grants.
Dumb question time: What's "IC". As you can imagine, the term is kind of overloaded in internet searches.
Also, does anyone know of a good primer on equity founders/early employees/later employees should expect/require so they don't get totally taken advantage of? It turns out experience is an expensive teacher.
Also, does anyone know of a good primer on equity founders/early employees/later employees should expect/require so they don't get totally taken advantage of? It turns out experience is an expensive teacher.
Individual Contributor, as opposed to Manager
The Holloway Guide has some goodies --
https://www.holloway.com/g/equity-compensation
It's complicated and there's a lot of gotchas I wish I had known. You can read up but if you are considering any of these I would find someone who has navigated the space (and has likely been burned).
https://www.holloway.com/g/equity-compensation
It's complicated and there's a lot of gotchas I wish I had known. You can read up but if you are considering any of these I would find someone who has navigated the space (and has likely been burned).
It's never dumb to call out the confusing usage of acronyms, especially not here where the problem is endemic.
> Do not support investor-focused comp models like backweighted vesting (Amazon)
This is from ~7 years ago, but my backweighted Amazon RSUs were balanced by a signing bonus, and another signing bonus a year later. Roughly, my total comp would be similar each year if AMZN stayed the same price, so it felt fair.
This is from ~7 years ago, but my backweighted Amazon RSUs were balanced by a signing bonus, and another signing bonus a year later. Roughly, my total comp would be similar each year if AMZN stayed the same price, so it felt fair.
And, at least in my case, the sign on bonus and number of RSU was calculated based on some long-term estimation of stock price done by Amazon. That wasn't only done for compensation purposes. Obviously, having started in 2014 that estimation worked out rather in favor of employees. You could even see the impact rising stock prices had on variable compensation in the Amazon reporting for, if memory serves well, 2016 and 2017. Being surprised by the huge valuation increase in the last years was rather expensive for Amazon.
Overall, I considered the Amazon approach fair. But then I never considered the sign on bonus nor RDIs as part of my everyday salary, for me it was rather a bonus to be put away to be used when absolutely necessary. Allowed me to boot strap since Oct. 2019. Unsuccessfully so but that has hardly anything to do with Amazon.
Overall, I considered the Amazon approach fair. But then I never considered the sign on bonus nor RDIs as part of my everyday salary, for me it was rather a bonus to be put away to be used when absolutely necessary. Allowed me to boot strap since Oct. 2019. Unsuccessfully so but that has hardly anything to do with Amazon.
Did Amazon return to back-weighted comp? The offer I received two years ago had comp that shifted from "cash focused" to RSUs over 4 years, and had equivalent cash value over the 4 years. Obviously, by year 3/4 when comp was mostly/all RSUs, the stock could have gone up or down significantly.
Given that the year 1 cash could be used to buy stock if I really wanted, it didn't seem an unreasonable approach to comp to me.
Given that the year 1 cash could be used to buy stock if I really wanted, it didn't seem an unreasonable approach to comp to me.
I definitely know some people on the 10/10/40/40 Amazon comp plan... also seems to be a common tactic to PIP people just before year 3 vests.
Fuck Amazon. I'll never work for them.
Fuck Amazon. I'll never work for them.
Oh they definitely became more aggressive with PIPs around 2013 and 2014. But then they were surprised that stock rised by 100%+ in that tome frame, so RSU based comp got really expensive. Not that this would have been a valid reason to PIP people in order to replace them with people on new contracts, but at least I get where they came from. Generally speaking, the 10/10/40/40 plan is fair. And also takes into account that most people leave somewhere between year 2 and 3 anyway, PIP or not.
Fun fact: timing internal transfers with review cycles, especially the mid-year one employees are hardly ever informed about, can avoid getting PIPs. In the first 6 months a new department doesn't review employees (at least didn't back the day) and in year one people don't get PIPs. So switching departments after the first full review, but before the mid year one, avoids being PIPed mid year. And the first end year review. The second end year review in the department hardly ever results in a PIP, so one can change again departments before the upcoming mid year review (the first with a real risk of being PIPed). Rinse and repeat. Took me too long to figure that one out so. In hindsight, I know quite a few people who managed to pull that off. Of course being part of a feed-back rings also works wonders.
Fun fact: timing internal transfers with review cycles, especially the mid-year one employees are hardly ever informed about, can avoid getting PIPs. In the first 6 months a new department doesn't review employees (at least didn't back the day) and in year one people don't get PIPs. So switching departments after the first full review, but before the mid year one, avoids being PIPed mid year. And the first end year review. The second end year review in the department hardly ever results in a PIP, so one can change again departments before the upcoming mid year review (the first with a real risk of being PIPed). Rinse and repeat. Took me too long to figure that one out so. In hindsight, I know quite a few people who managed to pull that off. Of course being part of a feed-back rings also works wonders.
They comp the difference in vesting schedule (against average) with a cash sign on bonus that pays out over the first 2 years. Your yearly comp is equal to getting 25% of the RSU value per year (plus the actual stock accrues value over this time).
Who gives a f about the comp plan? I'm on 5/15/40/40. The first two years are cash with bonus and then the stock vests in lieu of the bonus. I am making $275k and the stock has gone up 40% since I joined. And yet, if I stay through vest, it's like a $25k raise (9%). Why would they be incentivized to PIP me?
Plenty of people work here and get filthy rich. They stay because they create immense value at scale.
Sounds like sour grapes to me. I doubt you'd pass our interview.
Plenty of people work here and get filthy rich. They stay because they create immense value at scale.
Sounds like sour grapes to me. I doubt you'd pass our interview.
The Zoox acquisition offers are all back-weighted. There are several posts on Blind recently disclosing back-weighted new-hire grants. The mean tenure time at AMZ is 2 years and most engineers I know do NOT vest 50% at the 2 year mark.
The mean tenure time is a terrible measure for any company that is growing at the rate Amazon does. If you double your team every year, the average tenure is going to be really low even if not a single person quits.
You can look at attrition though, and I thought that was still pretty bad for amazon?
I saw the same in an offer from them a few years ago, but some less experienced acquaintances seemed to be getting offers without the cash component in years 1 and 2.
I wonder if it has to do with cases where their "salary ceiling" would otherwise make the offer wildly uncompetitive for experienced people.
I wonder if it has to do with cases where their "salary ceiling" would otherwise make the offer wildly uncompetitive for experienced people.
I have heard anecdotally that the situation was quite different in the past. For example, Google became what it is today in part because their early offers were outstanding for the time, compared to what the typical VC/IPO gives today. I would love to know if there is concrete data supporting this. I can't easily find it myself on the net.
I feel like we should have PSAs on LinkedIn that tell you this every time you mark yourself as 'looking':
If the Board and/or the VCs ever get uncomfortable with the % of the company that is owned by ICs, they will just print more shares of stock.
And don't get me started on preferred shares. Has any IC ever gotten those?
If the Board and/or the VCs ever get uncomfortable with the % of the company that is owned by ICs, they will just print more shares of stock.
And don't get me started on preferred shares. Has any IC ever gotten those?
Preferred shares were explained to me once this way:
Imagine I give you $1M for 10% of your business. You now own 90% of a business that has $1M in assets. You easily sell the whole business for $900k (giving away $100k to the buyer, basically), give me back my 10% * $900k = $90k, and keep the remaining $810k for yourself.
Preferred shares are a mechanism for preventing you from immediately liquidating my capital. An investment of time can't be liquidated as easily, so preferred shares are generally only for those making liquid investments.
---
It seems there are probably other mechanisms for dealing with this problem, but this explanation makes _some_ sense.
Imagine I give you $1M for 10% of your business. You now own 90% of a business that has $1M in assets. You easily sell the whole business for $900k (giving away $100k to the buyer, basically), give me back my 10% * $900k = $90k, and keep the remaining $810k for yourself.
Preferred shares are a mechanism for preventing you from immediately liquidating my capital. An investment of time can't be liquidated as easily, so preferred shares are generally only for those making liquid investments.
---
It seems there are probably other mechanisms for dealing with this problem, but this explanation makes _some_ sense.
It's easier than this — you wouldn't even have to sell the business. You can just dissolve the company and return the assets to the shareholders pro rata.
What specifically is wrong with a comp model of one-year vesting (instead of 4-year) and no cliff? Whether it's better or worse for employees depends on how they size the grant and in general is very situational. If the company goes up in value a lot over 4 years, then yeah, the employee may lose out, even if grants are comparable in dollar terms at time of grant. If the company has more volatility than growth, or only modest growth expected, then annual grants with one year vesting are likely better. It definitely does not seem as obviously evil as backlighted vesting or underspecified stock offers. Is there a more subtle problem?
> If the company goes up in value a lot over 4 years, then yeah, the employee may lose out
This is horrible at pre-IPO unicorns like Stripe. One year vesting could cost normal employees millions if the company blows up.
Sure, the stock might not move much, or it can go down. A temporary dip means good performers are more likely to get larger refreshers to get tc up to market rate. And if pay is your driving motivation you can switch to a new job.
This is horrible at pre-IPO unicorns like Stripe. One year vesting could cost normal employees millions if the company blows up.
Sure, the stock might not move much, or it can go down. A temporary dip means good performers are more likely to get larger refreshers to get tc up to market rate. And if pay is your driving motivation you can switch to a new job.
Stripe's last round was at like $100B. There's some growth being missed out on, sure, but I'm not sure for how many people that's gonna net out to be millions.
It could be a lot. 100B makes a lot of millionaires.
Even at 10B, lots of millionaires are created unless all hires were made at high valuation. I was getting 1m/yr at 5B and I wasn’t even that early of an employee or high up. Expand that same company to 100B? Everyone would be getting millions out of it - even the lowest ranking employees.
Even at 10B, lots of millionaires are created unless all hires were made at high valuation. I was getting 1m/yr at 5B and I wasn’t even that early of an employee or high up. Expand that same company to 100B? Everyone would be getting millions out of it - even the lowest ranking employees.
? My point is that $100B is very high and Stripe's unlikely to see insane future growth. For the people who joined at $10B, yes, 10x their equity could be millions for them. But I think it's a lot less likely that Stripe will make it to $1T soon, so people joining now are unlikely to 10x.
I think the idea is that the size of the grants remains roughly the same (or, you know, it's 1/4 of the size but lasts only 1 year). You're right that if they increased it, you could see that as just doing a bit of a risk trade-off. But my impression is that they aren't? And so it's just a comp decrease (albeit a more minor one the more stable the company's stock is).
Of all things in the equity world this certainly doesn't seem especially evil, but what I can't stand is the half-hearted framings of this as good for employees. If you're deciding you want to keep more equity for yourselves, fucking say so.
Of all things in the equity world this certainly doesn't seem especially evil, but what I can't stand is the half-hearted framings of this as good for employees. If you're deciding you want to keep more equity for yourselves, fucking say so.
Including percentages for startup stock grants is tricky. You have things like common/preferred stock, liquidation preferences, subsequent rounds causing dilution, etc. that the average employee doesn't usually understand. At best it's very confusing and at worst you have actual legal liability issues.
And I would never want my employees to value their stock based on our 409a price, we (like all startups) do all we can to keep that number as low as possible!
And I would never want my employees to value their stock based on our 409a price, we (like all startups) do all we can to keep that number as low as possible!
How do you want your employees to value their stock, then?
Agreed. Also C-levels get parachutes and a bunch of custom clauses to help ensure they are compensated even in some pretty lopsided scenarios.
Have you tried to look for a job after being terminated as a C-level or when startup you put in many years goes under?
Job market for IC is most of the time quite easy if you are technical, developers are usually spending 2 years at a company. I don't see C-level people switching companies on a whim and work one company for many years (not everyone is Elon Musk).
Once you have C-level on your CV good luck finding job again on lower level or the same level but different company. My boss is in it for life with current company, I can put my notice tomorrow and I walk away like I never worked there.
Job market for IC is most of the time quite easy if you are technical, developers are usually spending 2 years at a company. I don't see C-level people switching companies on a whim and work one company for many years (not everyone is Elon Musk).
Once you have C-level on your CV good luck finding job again on lower level or the same level but different company. My boss is in it for life with current company, I can put my notice tomorrow and I walk away like I never worked there.
I should hope at C level comp levels, these folks can manage their money well enough to weather a multi year dry spell after a few years of gainful employment.
> Employees deserve high-quality equity on par with investors
Why? As an employee I'm taking on nearly 0 risk. Maybe if they are paying me poorly I can see the argument where I'm "investing" more time/work into the company that I am being paid for and that difference should be made up with equity but otherwise this seems divorced from reality.
Why? As an employee I'm taking on nearly 0 risk. Maybe if they are paying me poorly I can see the argument where I'm "investing" more time/work into the company that I am being paid for and that difference should be made up with equity but otherwise this seems divorced from reality.
If you're a good employee you're better off working at a FAANG. the risk your taking is working for relatively crappy pay for the chance at a large pay off at the end when the company you believe it finally IPOs. At a FAANG I don't have to care, I'm making $300k-$500k or more if I'm actually worth anything.
It's an investment by the employee. Coinbase is being cheap and it will come back to bite them. Odds are they don't care for the lifetime of the company since they're so tied to bitcoin's success.
It's an investment by the employee. Coinbase is being cheap and it will come back to bite them. Odds are they don't care for the lifetime of the company since they're so tied to bitcoin's success.
> Why? As an employee I'm taking on nearly 0 risk.
I'm not sure how you are pricing things. FAANG stock comp is guaranteed money; You can sell it as soon as it vest for exactly the amount you signed for. Startup equity, not so much (there's no guarantee that a liquidity event will ever happen for starter).
Unless you are working in a lower tier market where stock comp isn't the norm.
I'm not sure how you are pricing things. FAANG stock comp is guaranteed money; You can sell it as soon as it vest for exactly the amount you signed for. Startup equity, not so much (there's no guarantee that a liquidity event will ever happen for starter).
Unless you are working in a lower tier market where stock comp isn't the norm.
The company could not exist without the employees, and for most startups it could not exist without the investors. Why should one critical component be rewarded not just with more of the company, but with better versions of the same rewards?
You can argue that employees are fungible, but so is investor money, and frankly I'd rather take random money than random programmers.
You can argue that employees are fungible, but so is investor money, and frankly I'd rather take random money than random programmers.
Employees can put in notice and be gone if something they don't like is going on. C-level mostly not. There is a lot less job openings for C-levels...
When you are simple employee it is still better to get your paycheck and invest on your own in other companies. As a IC level employee mostly you can invest your paycheck freely. C-level guy before buying some stocks/investing probably has to go via lawyers/legal so he also is has lot less options for diversification of his investments.
You are also making such statement looking at successful companies, there are loads of companies and C-level people who were invested for life in it and company went under.
If you are IC you should get market rate salary, don't settle for less, invest it in other places. I don't accept equity as a compensation, I want market rate salary and the rest I will handle myself.
Let investors keep their risk, I don't want any of that, because you know not every company is successful.
When you are simple employee it is still better to get your paycheck and invest on your own in other companies. As a IC level employee mostly you can invest your paycheck freely. C-level guy before buying some stocks/investing probably has to go via lawyers/legal so he also is has lot less options for diversification of his investments.
You are also making such statement looking at successful companies, there are loads of companies and C-level people who were invested for life in it and company went under.
If you are IC you should get market rate salary, don't settle for less, invest it in other places. I don't accept equity as a compensation, I want market rate salary and the rest I will handle myself.
Let investors keep their risk, I don't want any of that, because you know not every company is successful.
Agreed that it's right to be suspicious of the motives of any venture capitalist that makes a post like this (nothing against Fred Wilson personally). One thing I noticed at my last few startups is that the initial option agreements tend to have less diligence around them, say a very small strike price and more favorable terms on stuff like acceleration. Naturally, later-stage VCs would seek to skew the terms more in their favor, and redoing option grants yearly allows this to happen.
On a more general note though, golden handcuffs can benefit the employee just because they are a guarantee. There's no possibility of future faking when it's up front and signed into a four year vesting schedule (e.g. "we'll give you a few percent next year but we need to get through this raise first").
On a more general note though, golden handcuffs can benefit the employee just because they are a guarantee. There's no possibility of future faking when it's up front and signed into a four year vesting schedule (e.g. "we'll give you a few percent next year but we need to get through this raise first").
If Fred wanted to compensate employee shares he should be lobbying for banning some of the abuses dilution etc and for taxation only on a real gain
> ...or outright fraud like a start-up giving you a stock offer with no percentage or no 409A
If you only get the FMV from something like Carta, is that "enough"? I mean, it tells you nothing about the % at all. You can guess that the strike price will fit within a band (greater than 4, less than 35, likely around 17)
If you only get the FMV from something like Carta, is that "enough"? I mean, it tells you nothing about the % at all. You can guess that the strike price will fit within a band (greater than 4, less than 35, likely around 17)
> Employees deserve high-quality equity on par with investors.
My, if only there were an economic philosophy based on that. Some kind of "social"-ism...
My, if only there were an economic philosophy based on that. Some kind of "social"-ism...
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If CxO and founder compensation is unreasonably too high, why not go become one of them (presumably founder is easier to self-select into)?
This sounds employee-friendly, but it's total BS.
You'll just be getting less equity at a higher strike price every year, so it's just a sneaky way for these companies to give employees less. They can still say "we're giving you $100k in stock this year", but it's a lot less stock since you're not locked into a strike price.
If you want to leave after 1 year (post-cliff), you can leave under either scheme and get 1 year's worth of equity. This doesn't solve any "golden handcuff" problems, it just hurts employees.
You'll just be getting less equity at a higher strike price every year, so it's just a sneaky way for these companies to give employees less. They can still say "we're giving you $100k in stock this year", but it's a lot less stock since you're not locked into a strike price.
If you want to leave after 1 year (post-cliff), you can leave under either scheme and get 1 year's worth of equity. This doesn't solve any "golden handcuff" problems, it just hurts employees.
Not really BS: If it is really less compensation then employees.can view that as the price for job flexibility. And if they don't want or need that flexibility, they can go get a (maybe) higher TCP with a multi-year lock.
Do you realize that Coinbase is now a public company? There’s no such a thing as strike price because their stock compensation is likely done through RSUs. Not stock options.
Public companies issue an RSU grant at the beginning of employment and at no cost for the employee. Also if the share price goes below the grant date price, you’re likely recalibrated through rolling refreshers.
Public companies issue an RSU grant at the beginning of employment and at no cost for the employee. Also if the share price goes below the grant date price, you’re likely recalibrated through rolling refreshers.
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Terminology aside, the general principle is still the same issue and employees ARE better of with 4 year grants in high growth companies.
Let’s say you target RSU comp is $100k per year. Stock is $100 in year 1, $125 in year 2, $150 in year 3 and $200 in year 4. Ignoring inflation and taxes to make this easier to illustrate.
1) initial 4 year grant - $100k x 4 = $400k at $100/share is 4k shares. Assuming you keep all of your RSUs, you have $800k worth at year 4.
2) $100k of shares paid each year: year 1 - 1000 shares, year 2 - 800 shares, year 3 - 666.67 shares, year 4 - 500 shares. 4 year total comp in year 4 shares values is $593,334
So the employee receives $206.7k less under the new scheme versus the 4 year one. In reality, it’s even worse because we are talking high growth business here.
Layering in annual refreshers helps as well, but this is where things generally plateau a bit.
Let’s say you target RSU comp is $100k per year. Stock is $100 in year 1, $125 in year 2, $150 in year 3 and $200 in year 4. Ignoring inflation and taxes to make this easier to illustrate.
1) initial 4 year grant - $100k x 4 = $400k at $100/share is 4k shares. Assuming you keep all of your RSUs, you have $800k worth at year 4.
2) $100k of shares paid each year: year 1 - 1000 shares, year 2 - 800 shares, year 3 - 666.67 shares, year 4 - 500 shares. 4 year total comp in year 4 shares values is $593,334
So the employee receives $206.7k less under the new scheme versus the 4 year one. In reality, it’s even worse because we are talking high growth business here.
Layering in annual refreshers helps as well, but this is where things generally plateau a bit.
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This is horrific for employees. Ben Kuhn already nailed the math here[1]. The optionality embedded in long-dated grants is a huge fraction of total comp at high-growth companies and represent almost the entire right tail of outcomes. It also requires assumptions about the future, which is why companies generally abstain from quantifying what it's worth. It seems like the companies doing this are trying to arb that uncertainty by retaining all of the potential gain for themselves in exchange for a slightly larger nominal income.
Don't do it.
[1] https://www.benkuhn.net/optopt/
Don't do it.
[1] https://www.benkuhn.net/optopt/
This is no different from how Amazon does targeted compensation, where rising stock price means you get less/no refresher and raises, or all-cash comp at Netflix.
It's catering to more risk-averse candidate pool.
It's catering to more risk-averse candidate pool.
Having worked somewhere where I had a large deferred bonus, which I had to walk away from after the company turned hostile very quickly, I'd much, MUCH prefer to get my bonus paid out at the end of each year, vs. having it deferred, even if I have to take a hit on overall comp instead.
You just can't estimate how compatible you and your employer will be 4 years in the future.
You just can't estimate how compatible you and your employer will be 4 years in the future.
never even heard of that kind of bonus. it sounds like it's designed to work exactly this way.
Amazon does targeted comp 2 years in the future. While in theory the company may act to make people whole in a given year. This will practically occur via dive and saves or truly exceptional circumstances such as the stock suddenly dropping 2-4x and new hire grants effectively becoming non-competitive.
Did I read Ben Kuhn's article right? For engineers at almost every level (except maybe right out of school), they can easily make 100k/yr more by choosing a big co. So if money is all you're optimizing for, it's never worth it to choose a startup unless you're very risk adverse.
I don't think that's the right takeaway. There were a ton of assumptions going into that +$100k cutoff, including that the initial exercise price for your bag of options would be less than the fair market value for a new grad's initial stock grant at FAANG. The emphasis of the article wasn't a particular number, but that startup options can be a little more valuable than they look, so it might be worth actually doing the math on some of the better offers rather than blindly going to FAANG.
Okay, reality check: the most substantive part of this change is shifting 4-year vest to 1-year vest. This means 75% of the upside an employees stock compensation is taken away. That's the main effect here. The rest of the talk about percentile pay comp targets among peer companies is rounding error by comparison.
If FAANG had adopted this structure over the last 13 years, understand the number of rank and file engineers that became millionaires would have been reduced by an order of magnitude or more. This is just another way for VCs and finance in general to use their knowledge and positioning to skim all the upside on fast-growing companies.
It's one thing for a company to change their compensation policy and spin it in the best possible light—I don't like it, but it's just one company and I can at least hope the market teaches them a lesson. However for a VC like Fred Wilson to try to paint this as an unequivocal good is disgusting. Essentially this "golden handcuffs" argument is saying that rank and file employees who earn above market due to betting their labor long-term on a single company are a risk that should not be allowed.
If FAANG had adopted this structure over the last 13 years, understand the number of rank and file engineers that became millionaires would have been reduced by an order of magnitude or more. This is just another way for VCs and finance in general to use their knowledge and positioning to skim all the upside on fast-growing companies.
It's one thing for a company to change their compensation policy and spin it in the best possible light—I don't like it, but it's just one company and I can at least hope the market teaches them a lesson. However for a VC like Fred Wilson to try to paint this as an unequivocal good is disgusting. Essentially this "golden handcuffs" argument is saying that rank and file employees who earn above market due to betting their labor long-term on a single company are a risk that should not be allowed.
What it seems to me this is saying is the following:
- before we'd give you X options (say, 40,000) vesting over 4 years
- now you get 1/4 of that, 10,000 vesting annually
The strike price of both grants is the same (say, $1/option)
Now the question is, what happens year 2?
If the company is a lot more valuable, two things will change: - strike price will be higher (say, $3/option) which makes the options slightly less attractive. But that's not the big deal - # of options will go down, because the more companies grow the more options are valuable and the less they give out to employees. So year 2 options will be 5K.
If this continues, over 4 years the end the employee will have something like 10K + 5K + 3K + 2K = 20K options vs 40K. Not only that, but the 20K options will have a much higher blended rate.
On the positive side, there will be no reason for the employee to stay if they don't want the new grant. But the reason they don't have to stay is that they were not comp'ed as much in the beginning.
So me reading between the lines, this will mean a lot less compensation for early employees of successful startups vs the traditional model.
There is a reason why the handcuffs are called golden. At the end of the day employees decide to stay because it's worth it for them.
The strike price of both grants is the same (say, $1/option)
Now the question is, what happens year 2?
If the company is a lot more valuable, two things will change: - strike price will be higher (say, $3/option) which makes the options slightly less attractive. But that's not the big deal - # of options will go down, because the more companies grow the more options are valuable and the less they give out to employees. So year 2 options will be 5K.
If this continues, over 4 years the end the employee will have something like 10K + 5K + 3K + 2K = 20K options vs 40K. Not only that, but the 20K options will have a much higher blended rate.
On the positive side, there will be no reason for the employee to stay if they don't want the new grant. But the reason they don't have to stay is that they were not comp'ed as much in the beginning.
So me reading between the lines, this will mean a lot less compensation for early employees of successful startups vs the traditional model.
There is a reason why the handcuffs are called golden. At the end of the day employees decide to stay because it's worth it for them.
>There is a reason why the handcuffs are called golden. At the end of the day employees decide to stay because it's worth it for them.
Precisely this. Coinbase has made it and now they want to keep employees from resting and vesting. Stripe did this too. they're just being cheap.
Precisely this. Coinbase has made it and now they want to keep employees from resting and vesting. Stripe did this too. they're just being cheap.
I've talked to two FAANG-level recruiters recently about remote openings, which are all the rage now.
One was willing to give a base-salary range but absolutely refused to provide any comp information beyond that. Signing bonus? Equity? "We are still working out those numbers for remote employees, we'll negotiate when we give you an offer"
The other - everyone at the same level at the same location gets the same comp and the same equity, here it is.
Guess which one I'm willing to pursue. These days the whole process of doing a tech interview is grueling, between the 'leet' coding practice, the take-home assignments, the 4-8 separate interviews. If they think I'm putting myself through all that without some guarantee of a considerable pay raise, they're crazy.
I don't think "wait til we get you the offer" is going to work much longer for a lot of companies. Not unless they go back to the old-fashioned "tell us about yourself" interviews, which would be quite a relief but I don't see happening anytime soon.
One was willing to give a base-salary range but absolutely refused to provide any comp information beyond that. Signing bonus? Equity? "We are still working out those numbers for remote employees, we'll negotiate when we give you an offer"
The other - everyone at the same level at the same location gets the same comp and the same equity, here it is.
Guess which one I'm willing to pursue. These days the whole process of doing a tech interview is grueling, between the 'leet' coding practice, the take-home assignments, the 4-8 separate interviews. If they think I'm putting myself through all that without some guarantee of a considerable pay raise, they're crazy.
I don't think "wait til we get you the offer" is going to work much longer for a lot of companies. Not unless they go back to the old-fashioned "tell us about yourself" interviews, which would be quite a relief but I don't see happening anytime soon.
This is an incredibly nearsighted approach for reasons other responses partially point out.
First you have confused uncertainty with a bad scenario. For all you know the offer from the first company would end up much higher than from the second but you won't know.
Second, and this is probably a bigger deal - lack of exact range often indicates flexibility in seniority, skillset and scope. So in your case, your only good scenario is if you match exactly the picture of an employee company 2 has in mind for the role/comp. If you are just a little under, you won't make the cut. If you are any over, they will underpay you.
Comoany 2 gave themselves more flexibility with hiring and paying you. Eg if you aren't quite on the level they thought, they could level you down as a say in, which you would appreciate. Similarly if you are beyond what they expected they may offer you more than you'd think, and more than company 2.
Mainly, you have cut yourself off from valuable information and potentially leverageable competing offers because you couldn't hang with a bit of uncertainty.
First you have confused uncertainty with a bad scenario. For all you know the offer from the first company would end up much higher than from the second but you won't know.
Second, and this is probably a bigger deal - lack of exact range often indicates flexibility in seniority, skillset and scope. So in your case, your only good scenario is if you match exactly the picture of an employee company 2 has in mind for the role/comp. If you are just a little under, you won't make the cut. If you are any over, they will underpay you.
Comoany 2 gave themselves more flexibility with hiring and paying you. Eg if you aren't quite on the level they thought, they could level you down as a say in, which you would appreciate. Similarly if you are beyond what they expected they may offer you more than you'd think, and more than company 2.
Mainly, you have cut yourself off from valuable information and potentially leverageable competing offers because you couldn't hang with a bit of uncertainty.
> Second, and this is probably a bigger deal - lack of exact range often indicates flexibility in seniority, skillset and scope.
The flexibility should be reflected in the job title or level; salary bands are vital to ensure that people at the same level are being compensated equitably and know what they're interviewing for up front. It's totally fine to tell candidates they're going to aim for a L4 position with the possibility of L5 (or higher) depending on interviews.
The flexibility should be reflected in the job title or level; salary bands are vital to ensure that people at the same level are being compensated equitably and know what they're interviewing for up front. It's totally fine to tell candidates they're going to aim for a L4 position with the possibility of L5 (or higher) depending on interviews.
Jobs are less cookie cutter than your post implies though, especially at the higher levels.
Personal example - my last job (hedge fund) really wanted me. It took them forever to find someone of my profile - a mix of background, technical skills, domain knowledge, and personality so they wanted to have me. The way they set my salary was like this: they looked at what I was making and added enough on top that I couldn't refuse.
The first and last conversation we had about money was at the end of the interview process when they made me a really good offer. I didn't bother negotiating.
If I asked them during the 1st call what the salary was, they wouldn't be able to say because the salary was based on how much they wanted me and my circumstances. You can think that's inequitable and that's valid, but from a persona standpoint I'd be a fool if I had ended the conversation at that time.
Personal example - my last job (hedge fund) really wanted me. It took them forever to find someone of my profile - a mix of background, technical skills, domain knowledge, and personality so they wanted to have me. The way they set my salary was like this: they looked at what I was making and added enough on top that I couldn't refuse.
The first and last conversation we had about money was at the end of the interview process when they made me a really good offer. I didn't bother negotiating.
If I asked them during the 1st call what the salary was, they wouldn't be able to say because the salary was based on how much they wanted me and my circumstances. You can think that's inequitable and that's valid, but from a persona standpoint I'd be a fool if I had ended the conversation at that time.
> a mix of background, technical skills, domain knowledge, and personality
What kind of position did you get hired for? An IT related role, or something more exotic? If it is the latter, I would be delighted to have a chat if you would be interested. See my contact details for my profile.
What kind of position did you get hired for? An IT related role, or something more exotic? If it is the latter, I would be delighted to have a chat if you would be interested. See my contact details for my profile.
I am in product but my background is in engineering management.
The only way to know your value in the market is to get multiple offers and then negotiate against them. You'll do much worse if you just pursue one option, especially the option where they tell you that everyone gets the same (low) pay.
> we'll work it out when [we] give you an offer
Maybe I'm a cynic, or I've read too many books with a powerful cabal that lies while telling the truth.
But one interpretation of these words is that you are going to be a test subject in that 'work it out' activity.
Maybe I'm a cynic, or I've read too many books with a powerful cabal that lies while telling the truth.
But one interpretation of these words is that you are going to be a test subject in that 'work it out' activity.
I wouldn't be surprised after all the hemming and hawing about how they don't have remote compensation numbers in place. "How much less can we pay people who don't live in SV? Let's bring a bunch of chumps in and low-ball them to find out."
I think we underestimate the amount of self-deception that goes on with these deceptions. As evil as some people can be, I think more often we are just unwilling passengers on someone else's delusion.
Waking up every day thinking that things aren't going to work out is hell. At some point you have to do something about it, or you can't keep going on. Hope doesn't care if it's objective or not, and evolution preserves it if it actually works slightly more than never.
Waking up every day thinking that things aren't going to work out is hell. At some point you have to do something about it, or you can't keep going on. Hope doesn't care if it's objective or not, and evolution preserves it if it actually works slightly more than never.
I mean you can just go on levels.fyi and see the comp for yourself. Recently FB has been giving ~350k for a senior developer working remote. Thats great money for someone in the mid west. Studying a few months for a job that could set you up financially for a long time is a great deal.
Call me cynical, but they are supposed to be trying to recruit me. I say "That doesn't sound like more than I currently make, what about other forms of compensation?" If they say "well we're not sure...", I'm going to be pretty reluctant to jump in. For all I know they are "re-leveling" and those 400k paydays are going away.
Yeah but they arent though. 350-400k is actually somewhat low for senior. They have been paying this for a long time. Its great money remote. I really dont understand the issue
> Yeah but they arent though. 350-400k is actually somewhat low for senior.
I wouldn't say this. It's solidly middle of the road for a Google or FB senior, and high/unreachable for an Amazon or Microsoft Senior. Its probably(?) on the lower side for Netflix.
This is all before stock growth. Someone who has been a Senior for 5 years at Google or Facebook will be vesting shares that doubled in value, so the take home pay will be higher.
I wouldn't say this. It's solidly middle of the road for a Google or FB senior, and high/unreachable for an Amazon or Microsoft Senior. Its probably(?) on the lower side for Netflix.
This is all before stock growth. Someone who has been a Senior for 5 years at Google or Facebook will be vesting shares that doubled in value, so the take home pay will be higher.
> It's solidly middle of the road for a Google or FB senior, and high/unreachable for an Amazon
What is the logical conclusion you take from this about the people that can’t get into fb or Google but do work at Amazon or Microsoft?
What is the logical conclusion you take from this about the people that can’t get into fb or Google but do work at Amazon or Microsoft?
That's true, but stock growth influences new-hire offers as well. Google's valuation doubled in the last year, so someone who joined Google 1-2 years ago (and had the equity piece of their compensation double) will require a stronger offer to entice them away from Google.
Actually Amazon commonly beats Google comp, and matches FB. Senior employees at Amazon see the highest comp in the industry. Its less discussed, and really only at the lower levels that Amazon gets its reputation for being cheap and having lower talent. AWS Senior Engineers are top talent bar none.
L6 salaries (equivalent of FB/G L5) are 20-60K lower than those at FB/G (you cap out at 160K or 175K in the bay, which is below the minimum L5 salary at FB or Google). As I understand it, the stock grants can be similar but refreshes are harder to earn than FB/G (since if the stock goes up, you simply won't get a refresh unless your performance is stellar), and you don't get annual bonuses (which are another 30-50K in comp at FB or G).
This is also complicated because the Senior title at Amazon compares to L5 or lower band L6 at G/FB. So your peak Senior at Amazon should be compared to the compensation of a middling L6, which will usually start with a 4.
Perhaps at Principal and beyond the stock grants grow quickly enough to overcome the deficit, I honestly don't know. But I know they don't at Senior.
This is also complicated because the Senior title at Amazon compares to L5 or lower band L6 at G/FB. So your peak Senior at Amazon should be compared to the compensation of a middling L6, which will usually start with a 4.
Perhaps at Principal and beyond the stock grants grow quickly enough to overcome the deficit, I honestly don't know. But I know they don't at Senior.
This is a misnomer. Go look at levels.fyi, L6 at Amazon is either matched or beats L5/E5. People dont know how much money Amazon really pays, they just hear about the mediocre performers. Amazon absolutely pays huge sums for top engineers, they just dont talk about it. I know of SDE2s making 450k before equity appreciation
> Go look at levels.fyi, L6 at Amazon is either matched or beats L5/E5
Looking at SF offers (to avoid the price differential between bay/Seattle), the median seems to be 300-350K for, with a few offers at like 450K and then 2 at ~650 (also some data entry errors like a 300K signing bonus).
The 650 offers are matched by FB/G L6 offers, and the 450K are high L5/low L6 at G/FB. 330 is approximately the floor for a G L5, and new hire offers will be higher due to the relatively larger sign on grants. Like I said, perhaps for peak performers the Amazon grants are larger, but they're not consistently beating G/FB, they're maybe matching.
Its also difficult to tell because the data in levels.fyi doesn't match my understanding of how amazon's stock refreshes work (or like its difficult to tell). My understanding is that you don't normally get a stock refresh, unless your existing one ran out, or the stock didn't grow "enough" (or, as mentioned, your performance is stellar). So if we're seeing the once-every-few-year-grants at Amazon and comparing to the annual grants at G/FB, that's even more against Amazon, but I could be wrong there. I don't know enough senior people at Amazon (though I do know more junior people at amazon, and the levels.fyi methodology doesn't seem to make a distinction when it asks for data).
> I know of SDE2s making 450k before equity appreciation
Fwiw I'm aware of these kinds of hires at most companies.
I'll admit though that my initial statement, that 350-400K was unreachable for an Amazon Senior was flawed. It is, but mainly because the the level is wider than the comparable level at G/FB.
Looking at SF offers (to avoid the price differential between bay/Seattle), the median seems to be 300-350K for, with a few offers at like 450K and then 2 at ~650 (also some data entry errors like a 300K signing bonus).
The 650 offers are matched by FB/G L6 offers, and the 450K are high L5/low L6 at G/FB. 330 is approximately the floor for a G L5, and new hire offers will be higher due to the relatively larger sign on grants. Like I said, perhaps for peak performers the Amazon grants are larger, but they're not consistently beating G/FB, they're maybe matching.
Its also difficult to tell because the data in levels.fyi doesn't match my understanding of how amazon's stock refreshes work (or like its difficult to tell). My understanding is that you don't normally get a stock refresh, unless your existing one ran out, or the stock didn't grow "enough" (or, as mentioned, your performance is stellar). So if we're seeing the once-every-few-year-grants at Amazon and comparing to the annual grants at G/FB, that's even more against Amazon, but I could be wrong there. I don't know enough senior people at Amazon (though I do know more junior people at amazon, and the levels.fyi methodology doesn't seem to make a distinction when it asks for data).
> I know of SDE2s making 450k before equity appreciation
Fwiw I'm aware of these kinds of hires at most companies.
I'll admit though that my initial statement, that 350-400K was unreachable for an Amazon Senior was flawed. It is, but mainly because the the level is wider than the comparable level at G/FB.
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I recently went through a job search, and no recruiter was willing to pitch big numbers to me up front. I used levels.fyi and word of mouth to figure out who would be most likely to negotiate.
The market seems superheated compared to last time I did this (~3 years ago). Lots of capital flying around, and a lot of it ends up in tech. Hard not to feel like we're in some kind of bubble.
The market seems superheated compared to last time I did this (~3 years ago). Lots of capital flying around, and a lot of it ends up in tech. Hard not to feel like we're in some kind of bubble.
I’d say it’s not too hard to get offers right now but the offers are bad as far as I’ve seen. Especially at startups. Every startup I interviewed at completely lowballed the shit out of me on either salary or equity or both. Even public companies did the same - there is literally no interest in giving a good offer upfront. You need to pull teeth and have competing offers. Walking away isn’t enough! They want to hear companies and numbers and see proof.
I went with an offer in the 350-400k range like above. Hard to get above that without going into staff or getting lots of high competing offers. Even then, it’s risky.
Got a half dozen or so offers. It was a terrible time. So many startups withdrew at random stages because comp would come up and they realized they were too cheap to even bother sending an offer. Huge waste of time.
Great time to raise capital, terrible time to join a startup.
I went with an offer in the 350-400k range like above. Hard to get above that without going into staff or getting lots of high competing offers. Even then, it’s risky.
Got a half dozen or so offers. It was a terrible time. So many startups withdrew at random stages because comp would come up and they realized they were too cheap to even bother sending an offer. Huge waste of time.
Great time to raise capital, terrible time to join a startup.
Anything other than the rate at the main campus is not a serious offer.
Why? Say you live in or near Atlanta, the rate paid to (on site) employees in Atlanta is less than the rate paid to (on site) employees in SF (I think this is true for pretty much every FAANG).
Why should a remote employee in Atlanta make more than an onsite one?
Why should a remote employee in Atlanta make more than an onsite one?
> Why should a remote employee in Atlanta make more than an onsite one?
Not more, but why shouldn't they be paid the same if they're doing the same work?
Not more, but why shouldn't they be paid the same if they're doing the same work?
Markets don't care about justice. It's all about supply and demand. If a company needs people on-site in SF and also needs people on-site in Atlanta, it will have to pay the former more than the latter. If they don't, they will either be paying more (if they give the Atlanta folks extra money) than they have to or they won't be able to fill the positions (if they don't give the SF folks extra money).
Well, in the scenario you're responding to, you're actually asking why an onsite Atlanta employee should be making less than an onsite SF employee (based on the statement that remote should get main campus salary).
And the answer is market rates but a lot of people don't like that answer.
And the answer is market rates but a lot of people don't like that answer.
If the hiring pool is remote, then the local market rates don’t matter. Perhaps an open cost of living difference could be ok, but there is no market rate justification.
Isn't remote a disadvantage in that case as the pool is larger?
If I'm the employer I don't need to hire everyone.
I just need to hire a small subset of people, relative to the overall population in the pool who meets the qualifications of the job, who are also willing to work for X.
The bigger the pool the bigger the competition and the easier it is to find the matching subset, no?
If I'm the employer I don't need to hire everyone.
I just need to hire a small subset of people, relative to the overall population in the pool who meets the qualifications of the job, who are also willing to work for X.
The bigger the pool the bigger the competition and the easier it is to find the matching subset, no?
If there are more people who are equally qualified and willing to do the job remotely for less than the on-site team in Silicon Valley is, then the market for remote people to do the job is more employer-favorable than the on-site market.
Why should they pay person X more than needed to get the level of talent they want under the conditions they're willing to offer?
Why should they pay person X more than needed to get the level of talent they want under the conditions they're willing to offer?
Two reasons to open a satellite office. First is to cut costs, second is to grow the business and recruit from an untapped talent pool.
I'm not a cost cutting person, so I'm not interested by the former. Trying to play games with CoL signals that instead of putting money in growing the product, they would rather try to squeeze as much as they can.
I'm not a cost cutting person, so I'm not interested by the former. Trying to play games with CoL signals that instead of putting money in growing the product, they would rather try to squeeze as much as they can.
By that logic, why don't they just pay everyone five million dollars a year? Doing anything less is just squeezing employees. I learned from my first startup CEO, the number one cost for almost any company is payroll. If you can't manage it, you won't survive as a company. There's a difference between compensating people fairly, or even generously, for a job well done, and just leaving money on the table.
I have been asking this question for years, and also been downvoted on multiple sites (including HN) for asking it.
Will I at least make the same insane TC CoL adjusted? Or am I more likely to be paid what an average developer in Atlanta can take home or just a bit more?
At least where I work, I come out drastically ahead by not working in the Bay Area. Even though my compensation is maybe 10% lower, it's really more like a 5-6% pay cut when I take my marginal tax rate into consideration. I'd be spending waaaayyy more than an extra 5% of my income if I wanted a similar lifestyle up in Silicon Valley (owning my home relatively close to work)
> Will I at least make the same insane TC CoL adjusted?
There's enough disagreement about what this means that its difficult to say. If your goal is to buy a house, you'll be making more CoL adjusted. If you're happy to rent, its less clear cut but still probably close.
> Or am I more likely to be paid what an average developer in Atlanta can take home or just a bit more
More.
There's enough disagreement about what this means that its difficult to say. If your goal is to buy a house, you'll be making more CoL adjusted. If you're happy to rent, its less clear cut but still probably close.
> Or am I more likely to be paid what an average developer in Atlanta can take home or just a bit more
More.
> There's enough disagreement about what this means that its difficult to say.
I remember a talk HR was giving about remote work. Someone asked about COL and salary adjustments. HR didn't mention cost of living, but they did mention cost of labor. That was a new term to me.
I remember a talk HR was giving about remote work. Someone asked about COL and salary adjustments. HR didn't mention cost of living, but they did mention cost of labor. That was a new term to me.
You can say that for yourself, but it's just not realistic. Lots of people are about to learn this the hard way as SV companies start to roll out their remote-work plans. Companies are going to pay you less money if you choose to live somewhere other than Silicon Valley, or perhaps NYC. Odds are, you'll still come out way ahead.
I can see how you’d like that deal as a remote employee, but do you really think the company is going to hire you if they can hire someone locally for the same price? The only way this makes sense is if the local market is completely tapped out.
Many immigrants working at SV HQs would love to relocate to the offices in their home countries with the same pay.
Can we just link directly to the Coinbase post [1] instead of this 8-sentence blog spam?
[1] https://blog.coinbase.com/how-coinbase-is-rethinking-its-app...
[1] https://blog.coinbase.com/how-coinbase-is-rethinking-its-app...
Maybe I'm too cynical, but this "Eliminating negotiations from the hiring process" feels like they are saying "we are going to underpay you, severely"
Negotiations are normal part of the process, if they try to eliminate it, they will simply not receive applications from the top candidates.
Blaming it all on "women and minorities would end up underpaid" is a brilliant excuse.
Negotiations are normal part of the process, if they try to eliminate it, they will simply not receive applications from the top candidates.
Blaming it all on "women and minorities would end up underpaid" is a brilliant excuse.
Even companies that "don't negotiate" will often find ways to make exceptions for people they really want.
They want equitable policies, and they want to take candidates' leverage, but ultimately they hate to lose someone they've decided they want.
They want equitable policies, and they want to take candidates' leverage, but ultimately they hate to lose someone they've decided they want.
Presumably, "the top candidates" will be assessed as being higher-level employees, and will get better offers commensurate with their level? They aren't saying that everyone will get the same offer, just that the offer you receive will be best and final.
The fact that different socioeconomic groups approach negotiation differently has been shown to be a strong contributor to pervasive, long-standing differences in pay. This is a good step to start to address that inequity.
The fact that different socioeconomic groups approach negotiation differently has been shown to be a strong contributor to pervasive, long-standing differences in pay. This is a good step to start to address that inequity.
Hmm - turns out it had a thread here - https://news.ycombinator.com/item?id=27119787. We could re-up that one instead, but it's not very good.
Normally I'd agree with you and merge the threads or similar—but I'm not sure I'd call this post blog spam. It's true that it doesn't go deep, but he's raising a general question that isn't quite the same thing as the OP.
Normally I'd agree with you and merge the threads or similar—but I'm not sure I'd call this post blog spam. It's true that it doesn't go deep, but he's raising a general question that isn't quite the same thing as the OP.
Thanks. This was much more informative.
For those wondering, they’re doing:
-increasing comp targets to be at or above industry 75th percentile across the company
-no negotiation for comp (standardized starting offer by location/role)
-yearly stock grants with no 1 year cliff upon hire
For those wondering, they’re doing:
-increasing comp targets to be at or above industry 75th percentile across the company
-no negotiation for comp (standardized starting offer by location/role)
-yearly stock grants with no 1 year cliff upon hire
"75th percentile of industry" is almost meaningless.
Does industry include programmers at Comcast, Liberty Mutual Insurance, Staples, Smalltown Bank, Wipro, and everyone else who employs programmers in any capacity?
Or does it mean Amazon, Facebook, Netflix, and Google?
If you're beating three out of those four, your comp is excellent. If you're beating 3 out of 4 all companies who hire programmers, you're hopelessly uncompetitive with the "actual" top tech market.
Does industry include programmers at Comcast, Liberty Mutual Insurance, Staples, Smalltown Bank, Wipro, and everyone else who employs programmers in any capacity?
Or does it mean Amazon, Facebook, Netflix, and Google?
If you're beating three out of those four, your comp is excellent. If you're beating 3 out of 4 all companies who hire programmers, you're hopelessly uncompetitive with the "actual" top tech market.
It is a named set of a peer SV companies. So probably FAANG, but they don't give specifics.
This is a plan that is much worse for employees, being presented as if it were better. At least be honest about feeling like you are paying employees too much equity up front and want to pay them less.
Basically this lets the employer retain more of the upside in stock appreciation - your equity bonus is now recomputed every year at the current stock price, and presumably expressed in dollars (not shares). So they'll say "oh you're getting 50k this year in stock", when you got 40k last year, but meanwhile the share price has doubled and your 40k in equity _would_ be worth 80k if they had given you all 4 years up front.
They say it protects against downside, but odds are if the company isn't doing well they'll cut the dollar value of annual bonuses as well.
They say it protects against downside, but odds are if the company isn't doing well they'll cut the dollar value of annual bonuses as well.
Not also pay them less. It turns out that for the average person sometimes this four year grants when fully vested are enough to retire or to switch to a job that pays less but has better WLB.
They are paying people less because they want to keep them in the "golden handcuffs" for longer. The way it's painted by this particular VC is particularly gross.
Also executives usually keep the upside potential. So as an engineer if because of your work the company skyrockets and becomes 8x more valuable over the year you share 0% of that upside, while executives cash in. On the downside, as an engineer you can just leave because the market is very fluid, truth is you don't need job security from your employer if you are a good software engineer. If/when that changes probably compensation will go down enough so that this mega-grants are not going to be a problem anymore. They are just counting pennies.
They are paying people less because they want to keep them in the "golden handcuffs" for longer. The way it's painted by this particular VC is particularly gross.
Also executives usually keep the upside potential. So as an engineer if because of your work the company skyrockets and becomes 8x more valuable over the year you share 0% of that upside, while executives cash in. On the downside, as an engineer you can just leave because the market is very fluid, truth is you don't need job security from your employer if you are a good software engineer. If/when that changes probably compensation will go down enough so that this mega-grants are not going to be a problem anymore. They are just counting pennies.
To me this all depends on how it's implemented but you're right to be suspicious.
If all they do is give you 1/4 of the equity they were going to give you previously, then yes it drastically reduces employee upside to the benefit of others (execs, investors).
But they probably can't do that because it would be harder for them to attract talent against a 4 year vest company. Instead they'll probably have to bump up that initial grant so that when employees do the math there is still the big upside if the company improves.
If all they do is give you 1/4 of the equity they were going to give you previously, then yes it drastically reduces employee upside to the benefit of others (execs, investors).
But they probably can't do that because it would be harder for them to attract talent against a 4 year vest company. Instead they'll probably have to bump up that initial grant so that when employees do the math there is still the big upside if the company improves.
I'm suspicious of this as well, but would this be better for a lot of employees? Go to Coinbase, get your 25% stock in 25% of the time, then "just" go somewhere else and get more. It's not unheard to return to a company later (Coinbase in this case) and get a better title, additional grant, etc.
One of the things that I love about working for Netflix is that they just pay you every 2 weeks and that's basically it. There are no RSUs that are stacking up, no yearly bonus, etc. No smoke and mirrors. No internal websites to calculate the value of your compensation like at Google.
I remember how much trouble the yearly bonuses caused when I worked at Google. In the fall, some people would become much less active and turn from top performers into dead wood while they hung around, waiting for the yearly bonus payout in Jan.
I remember how much trouble the yearly bonuses caused when I worked at Google. In the fall, some people would become much less active and turn from top performers into dead wood while they hung around, waiting for the yearly bonus payout in Jan.
From what I have seen, if you can be well paid, and put a significant portion of your salary into index funds, over the years, you will generate a modest nest egg, and have choices in your late middle age or retirement. This is a different path than betting on a startup you joined, and hoping that your options end up paying out, but, it is not a bad path.
That's true, if by "late middle age" you mean 38 years old. Netflix pays very well.
The opposite side is two of my ex employers (one from 20 years ago) shares are still paying tax fee dividends in my ISA and increasing in value.
If you work for a company that pays you cash money only, you can buy their shares in a brokerage account (taxable or tax-advantaged). If you work for a company that does RSUs, you have to wait for vesting, and it's not consistent money; it's nice when the stock price is going up, and it's not nothing when it's going down like options are, but if it's a publically traded company, why not just pay me the $x/year in dollars and I'll do what I think is right. (Which, for me, isn't going to be holding the stock of my employer directly; I've got enough exposure to them through my paycheck and index funds, thanks.)
Tax efficiency, leverage and more $$ - they wont pay you real $ in replacement for options.
Though the UK's a bit better I never paid any income tax, dividend tax or cgt.
Even my top of the line EMI I am only paying 10% CGT if it pays out
Though the UK's a bit better I never paid any income tax, dividend tax or cgt.
Even my top of the line EMI I am only paying 10% CGT if it pays out
Why would they become less active in the fall? Wouldn't it make sense for them to be less active after January?
There was a mental perception that if you left just a "few" months from the yearly bonus payout, you were leaving money on the table. So people would normally leave in the spring and summer, but try to stick it out until the bonus if they were thinking about leaving in Oct. or later, since it was only 3 more months..
Its the same in finance
I feel like you only need to read into this a _tiny_ bit to see how weird it sounds:
> It sucks that people might want to leave a company but won't because of how well they pay, so we decided to stop paying so well! Problem solved!
It'd be one thing if the comp was adjusted somehow to make up for the loss of extra upside. (Some companies switching to 1-year grants seem to be saying they're going down this route). But just cutting the grant length is literally just a comp decrease. (Which, of course, makes it easier to leave).
> It sucks that people might want to leave a company but won't because of how well they pay, so we decided to stop paying so well! Problem solved!
It'd be one thing if the comp was adjusted somehow to make up for the loss of extra upside. (Some companies switching to 1-year grants seem to be saying they're going down this route). But just cutting the grant length is literally just a comp decrease. (Which, of course, makes it easier to leave).
The problem is unless you hold onto the stock, you are not tied to the long-term growth of the company.
I think this is really trying to optimize to keep only the high performers without having to have a traditional stack ranking system.
Interestingly, I recall the Google article about the highest performing teams not being made up of the highest performing individuals, but the best communicators. No one seems to be trying to hire to create the best teams, but still just the highest performing individuals. Perhaps there is a Moneyball in tech work.
I think this is really trying to optimize to keep only the high performers without having to have a traditional stack ranking system.
Interestingly, I recall the Google article about the highest performing teams not being made up of the highest performing individuals, but the best communicators. No one seems to be trying to hire to create the best teams, but still just the highest performing individuals. Perhaps there is a Moneyball in tech work.
> the highest performing teams not being made up of the highest performing individuals, but the best communicators
Not saying this may not be like, true in the ontological sense... but as an experiment it's shitty because they measure performance by how good you are at communicating what you did and what impact it had.
Not saying this may not be like, true in the ontological sense... but as an experiment it's shitty because they measure performance by how good you are at communicating what you did and what impact it had.
one thing i think about, is hiring entire teams or groups at least of two to three instead of poaching just one person from a competitor/etc.
From the linked article on Coinbase's compensation ( https://blog.coinbase.com/how-coinbase-is-rethinking-its-app... ):
> Because our standard offers are world-class, we are officially eliminating negotiations on salary and equity from our recruiting process.
> We are OK if we lose some candidates due to this decision — the best candidates for Coinbase are those who are looking for a highly competitive package and are ready to let their contributions speak for themselves.
I'm sorry but that's a self-contradiction (even oxymoron). "highly competitive package" these days is after negotiation, period. If you're 100% firm on the offer when asked, then people seeking "highly competitive package" (after balancing all other factors of course) can and will simply walk.
As for the "let their contributions speak for themselves": For (especially early stage) startups, any promise to raise the compensation later *cannot be trusted*, period. It's not written on your offer (except for maybe "guaranteed/target bonus"), and the management could always come up with "budgets" --- basically handing out far less than what would make up for the initial compensation deficit, maybe except for a few people in the "inner circle". Having been both in and out of the "inner circle" myself, this difference can be significant over time. Also as the startup goes through funding rounds, company policy will change and the people who "promised" you will inevitably leave, etc. etc.
> Because our standard offers are world-class, we are officially eliminating negotiations on salary and equity from our recruiting process.
> We are OK if we lose some candidates due to this decision — the best candidates for Coinbase are those who are looking for a highly competitive package and are ready to let their contributions speak for themselves.
I'm sorry but that's a self-contradiction (even oxymoron). "highly competitive package" these days is after negotiation, period. If you're 100% firm on the offer when asked, then people seeking "highly competitive package" (after balancing all other factors of course) can and will simply walk.
As for the "let their contributions speak for themselves": For (especially early stage) startups, any promise to raise the compensation later *cannot be trusted*, period. It's not written on your offer (except for maybe "guaranteed/target bonus"), and the management could always come up with "budgets" --- basically handing out far less than what would make up for the initial compensation deficit, maybe except for a few people in the "inner circle". Having been both in and out of the "inner circle" myself, this difference can be significant over time. Also as the startup goes through funding rounds, company policy will change and the people who "promised" you will inevitably leave, etc. etc.
On the one hand I want to agree, having to trust that a company will Definitely For Sure pay you more once you've earned it is a really hard pill to swallow.
But on the other hand, it does seem off for so much of your compensation to be based on how well you perform in a five hour interview or how well negotiate it as opposed to your actual work.
But on the other hand, it does seem off for so much of your compensation to be based on how well you perform in a five hour interview or how well negotiate it as opposed to your actual work.
They also have the option of firing you quickly if it turns out that you're not as good as the interview led them to believe. You'd still get paid for the time you work, but they get the signing bonus back and get to keep all their equity.
I sense greed on part of coinbase. If coinbase doesn't want to have 4 year vest schedule which makes up a significant portion of salary, Why don't they follow what netflix is doing and just give out salary as full base salary instead of any RSUs.
After thinking about this, I think they’ve created a false dichotomy here. As an employee who is heavily compensated with stock, I’ve experienced “golden handcuffs,” where my annual compensation, including vesting shares, is much higher than what the company, or any other rational employer, would have paid me that year. The only way to fix this would be … to pay me less by not granting me restricted shares for so far into the future. Net-net, the enterprise will shell out less money in compensation under this plan.
I can see why companies don’t like this situation, because it’s very hard to reward performance with compensation when everyone is making far more than scale. Your best and worst performers all take home big checks. But to pitch this as an employee-friendly move is gaslighting at its worst.
I can see why companies don’t like this situation, because it’s very hard to reward performance with compensation when everyone is making far more than scale. Your best and worst performers all take home big checks. But to pitch this as an employee-friendly move is gaslighting at its worst.
Don't piss on my shoes and tell me it's raining. Just say it: As an investor you want to keep more of the wealth employees create for you.
As a laborer, if I have a choice between a world where golden handcuffs exist and world where they don't, I choose the world where golden handcuffs exist. Presumably the idea is they will be forced to make work better to retain employees instead and it will a net win for workers, but there's zero details or explanation as to how exactly that will happen.
There are many different sorts of handcuffs. Mine was a lucrative defined benefit retirement plan. My (former) company eliminated the plan about 30 years ago, but grandfathered everyone who was still in the plan. About two years before I was eligible to retire (early), they changed things again and made it impossible to continue contributing to the plan. They offered a temporarily higher match to 401k contributions as compensation. (For the $200k I lost, I got about $20k back.) Eliminating further contributions meant I could no longer increase my retirement payout. Converting the annuity to lump sum (the obvious choice) meant that my lump sum payout would be reduced every day that I continued working there. The net effect was about a 12% reduction in pay. I took the early retirement as soon as allowed, and then took a job elsewhere for a 15% raise.
(The reason for the 12% reduction may not be obvious. When converting an annuity, they look at actuaries to estimate when I will die. The lump sum payout converts the annuity payments from the retirement date to the date of my death into one payment, distributed over five years. If I work longer, the time between my retirement and my death decreases. Thus the longer I work without retiring, the lower the payout.)
My golden handcuffs were changed into a golden kick in the arse.
(The reason for the 12% reduction may not be obvious. When converting an annuity, they look at actuaries to estimate when I will die. The lump sum payout converts the annuity payments from the retirement date to the date of my death into one payment, distributed over five years. If I work longer, the time between my retirement and my death decreases. Thus the longer I work without retiring, the lower the payout.)
My golden handcuffs were changed into a golden kick in the arse.
This reminds me of restaurants adopting (and then mostly abandoning) no tipping policies. You're trying to change an entire culture, good luck!
"Letting that market operate efficiently and not trying to game it makes a lot of sense to me."
This is not obvious to me. In many ways, the job market is not like other markets. Onboarding employees is a money-losing proposition. Turnover is disruptive. Recruiters cost money. Benefits operate on a calendar-year basis or have waiting periods.... I could go on, but there are all sorts of reasons for companies to pursue retention over an "efficient market."
"Letting that market operate efficiently and not trying to game it makes a lot of sense to me."
This is not obvious to me. In many ways, the job market is not like other markets. Onboarding employees is a money-losing proposition. Turnover is disruptive. Recruiters cost money. Benefits operate on a calendar-year basis or have waiting periods.... I could go on, but there are all sorts of reasons for companies to pursue retention over an "efficient market."
My general rule of thumb is that if the new comp arrangement isn't better in an obvious, predictable way, then it probably isn't better for the employee.
I think it would be good for Fred or Coinbase comp team to provide the expected payoff calculations for various kinds of employees under this new scheme - the hard numbers and probabilities (even optimistic ones) would be what convince me.
I think it would be good for Fred or Coinbase comp team to provide the expected payoff calculations for various kinds of employees under this new scheme - the hard numbers and probabilities (even optimistic ones) would be what convince me.
Reminds me of a16z's "dead equity" blogpost, largely revolving around employees with lingering options who no longer contributed their "fair share".
https://a16z.com/2016/06/23/options-timing/
> Well, not exactly. There is a more fundamental issue at the > heart of this seemingly good solution: A 10-year exercise > window is really a direct wealth transfer from the employees > who choose to remain at the company and build future > shareholder value, to former employees who are no longer > contributing to building the business/ its ultimate value.
But not mentioned in either is that these long running exercise windows "hurt" _all_ shareholders, especially investors. Nice of both to make this about the little man/woman.
I only wish their worth and value to the company was met with the same scrutiny they seem to give employees.
https://a16z.com/2016/06/23/options-timing/
> Well, not exactly. There is a more fundamental issue at the > heart of this seemingly good solution: A 10-year exercise > window is really a direct wealth transfer from the employees > who choose to remain at the company and build future > shareholder value, to former employees who are no longer > contributing to building the business/ its ultimate value.
But not mentioned in either is that these long running exercise windows "hurt" _all_ shareholders, especially investors. Nice of both to make this about the little man/woman.
I only wish their worth and value to the company was met with the same scrutiny they seem to give employees.
Is he misusing the definition for "golden handcuffs"? From my understanding, the issue is that an employee has 90 days to exercise one's options. Most can't afford to do so if the company isn't public due to the cost to exercise and the tax burden. I'm not sure how this new options structure addresses that.
> Is he misusing the definition for "golden handcuffs"?
No; in general "golden handcuffs" refer to any situation where future financial compensation counterbalances any desire to leave. You give one example, but there are lots of scenarios (it could as easily be pension qualification, or earn-out rights, or whatever).
No; in general "golden handcuffs" refer to any situation where future financial compensation counterbalances any desire to leave. You give one example, but there are lots of scenarios (it could as easily be pension qualification, or earn-out rights, or whatever).
There are many forms of golden handcuffs.
Public companies gives you X dollars worth of shares at the current price of your start date over 4 years. Meaning if today the shares are worth $1 and they want to give you $100k of shares, then you get 100k shares over 4 years.
If after 2 years, the unvested shares (50k) 3x in value, ($150k) you have to stay to continue to earn the same number of shares, but are worth 3x what they originally were.
Public companies gives you X dollars worth of shares at the current price of your start date over 4 years. Meaning if today the shares are worth $1 and they want to give you $100k of shares, then you get 100k shares over 4 years.
If after 2 years, the unvested shares (50k) 3x in value, ($150k) you have to stay to continue to earn the same number of shares, but are worth 3x what they originally were.
The term isn't very precise, but is generally taken to mean "promised future compensation". The 90-day rule for exercising illiquid options absolutely is one form of promised future compensation, but so are future options clearly in the money, or even highly-appreciated real shares about to vest.
So he isn't misusing the definition, just using the broadest possible sense of the term.
So he isn't misusing the definition, just using the broadest possible sense of the term.
I don't see how 4-year stock grants that steadily vests are golden handcuffs at all, since if you switch to a similar company they'll just give you a new stock grant that also steadily vests.
The only part that's like golden handcuffs is the 1-year cliff that's standard, but 1 year ain't bad.
The only part that's like golden handcuffs is the 1-year cliff that's standard, but 1 year ain't bad.
More likely than not, your current stock has appreciated significantly (at least at FAANG), so you would be leaving all the paper gains on the table. And it's not guaranteed that you're getting vesting stock at the next company.
Depends on how big it is.
For me, my base salary is quite enormous, but with some work I could find something within 20%. (I am exceptionally lucky, its not skill)
However, what I can't replace is the stocks. Depending on performance its ~3-5 times my already vastly over inflated annual wage. So I'm stuck here at the boring FAANG company not achieving very much, because to walk away from a small fortune would be madness.
There is no real incentive to work harder, because the difference between working a normal 35hour work week, and the 75 hour week required for promotion is another 10% on base.
For me, my base salary is quite enormous, but with some work I could find something within 20%. (I am exceptionally lucky, its not skill)
However, what I can't replace is the stocks. Depending on performance its ~3-5 times my already vastly over inflated annual wage. So I'm stuck here at the boring FAANG company not achieving very much, because to walk away from a small fortune would be madness.
There is no real incentive to work harder, because the difference between working a normal 35hour work week, and the 75 hour week required for promotion is another 10% on base.
Add to that the grass isn't always greener. If you've "lucked" into a really lucrative opportunity and you can do fine with sane working hours and a decent if not exciting environment, a lot of people would be advised to think hard and long before heading off.
"A bird in hand is worth two in a bush."
This seems to make long-term ccompensation even more volatile. Who says the company will grant me a similar options package all 4-years. Business needs change, and it might do any of a million other things.
Sure, the stock-price may go up, or may fall, but that is somewhat out of the day-to-day control of the company. Or it is much more out of the company's control than next year's personnel budget, where you just have to convince the CFO of what the right grant value will be.
This seems to make long-term ccompensation even more volatile. Who says the company will grant me a similar options package all 4-years. Business needs change, and it might do any of a million other things.
Sure, the stock-price may go up, or may fall, but that is somewhat out of the day-to-day control of the company. Or it is much more out of the company's control than next year's personnel budget, where you just have to convince the CFO of what the right grant value will be.
Coinbase is an interesting company. They're grossly underrated and laughed off as an online casino, but they invest all that money they make very wisely and strategically to grow the business.
I find another paragraph from that press release interesting:
>Traditionally people expect they need to negotiate for the best package after being hired in a new job. Those that do this well tend to be rewarded, and those that don’t lose out. These negotiations can disproportionately leave women and underrepresented minorities behind, and a disparity created early in someone’s career can follow them for decades. We want to do everything we can to ensure that’s not the experience at Coinbase. All employees in the same position, in the same location, receive the same salary and equity offer. No exceptions.
If this was mandated to be standard practice, instead of the insane approach some countries take with minority quotas and such, we'd be a lot further in terms of equality in the work place. Also salary negotiation favors aggressive and outgoing types, while there might be qualified candidates who get left behind just because of their personality.
I find another paragraph from that press release interesting:
>Traditionally people expect they need to negotiate for the best package after being hired in a new job. Those that do this well tend to be rewarded, and those that don’t lose out. These negotiations can disproportionately leave women and underrepresented minorities behind, and a disparity created early in someone’s career can follow them for decades. We want to do everything we can to ensure that’s not the experience at Coinbase. All employees in the same position, in the same location, receive the same salary and equity offer. No exceptions.
If this was mandated to be standard practice, instead of the insane approach some countries take with minority quotas and such, we'd be a lot further in terms of equality in the work place. Also salary negotiation favors aggressive and outgoing types, while there might be qualified candidates who get left behind just because of their personality.
The companies that I've been a part of that employed this non-negotiation strategy ended up only shifting the negotiations from compensation to title. The same negotiators still come out on top, since they'll request higher titles in order to meet their comp expectations (since they can't negotiate for comp directly). As a result, the eng org can end up topheavy in leveling.
This is a tough problem, but these non-negotiation policies aren't the solution. They make the inequity even worse since it becomes harder to negotiate (for title) than for incremental comp increases.
This is a tough problem, but these non-negotiation policies aren't the solution. They make the inequity even worse since it becomes harder to negotiate (for title) than for incremental comp increases.
I don’t think these make it worse overall. It definitely makes it works for some but better for many.
I suspect this policy and the 1-year grants makes it quite a bit harder for Coinbase to poach employees from FAANGs.
I suspect this policy and the 1-year grants makes it quite a bit harder for Coinbase to poach employees from FAANGs.
This reads to me like when you talk to a used car salesman and the first thing he says is, "We don't negotiate on price."
When someone you have a semi-adversarial relationship with removes your ability to negotiate, they aren't doing so in your favor.
When someone you have a semi-adversarial relationship with removes your ability to negotiate, they aren't doing so in your favor.
This seems like it will just result in those who can be underpaid being hired at lower levels. If a hiring manager really wants someone and they can't pay them more, they can hire them at a higher level.
If decisions are made by the higher-leveled ICs, then it seems like even more decisions will be made by white men under this culture.
If decisions are made by the higher-leveled ICs, then it seems like even more decisions will be made by white men under this culture.
> If a hiring manager really wants someone and they can't pay them more, they can hire them at a higher level.
Yes, this is how it should work! Their role will then involve a higher level of responsibility and expected output that they better be prepared for, and they'll be compensated more for that.
It makes much more sense than people getting higher/lower compensation for the same level of responsibility and expected output based on their competing offers at the time of signing, doesn't it?
Yes, this is how it should work! Their role will then involve a higher level of responsibility and expected output that they better be prepared for, and they'll be compensated more for that.
It makes much more sense than people getting higher/lower compensation for the same level of responsibility and expected output based on their competing offers at the time of signing, doesn't it?
Exactly. I find it incredible that there are so many comments defending shady behind-closed-doors negotiations. Maybe a lot of the HN demographic are the type of people who benefit from this but for everyone getting a sweet deal there's someone else getting paid less. This is a step in the right direction, if you're actually worth so much more you can prove it and work your way up. No one should get a high salary off the bat just because they were able to impress the bro from HR during the interview. Companies should be competing for talent on an open market. They don't tell you salaries upfront because they want to pay you as little as they can get away with.
At all jobs I worked in my life I got paid more than most coworkers who were often even more dedicated to their jobs than me. At one company, the less I cared about being productive and the more I complained, the more leeway and compensation they gave me. It was like in Office Space.
Not that I refuse free money when they hand it to me, but that's obviously an unfair system. It's not a smart policy from the shareholder's perspective either, this is simply bad management and leads to lots of employees feeling treated unfairly.
At all jobs I worked in my life I got paid more than most coworkers who were often even more dedicated to their jobs than me. At one company, the less I cared about being productive and the more I complained, the more leeway and compensation they gave me. It was like in Office Space.
Not that I refuse free money when they hand it to me, but that's obviously an unfair system. It's not a smart policy from the shareholder's perspective either, this is simply bad management and leads to lots of employees feeling treated unfairly.
>more dedicated to their jobs than me
Is that actually a relevant metric? Were they also more effective at their jobs than you?
I'm often not sure what productivity means in this context. If you can produce better results in 4 hours a day, go for it.
Is that actually a relevant metric? Were they also more effective at their jobs than you?
I'm often not sure what productivity means in this context. If you can produce better results in 4 hours a day, go for it.
I’ve been told before by recruiters that they don’t negotiate and that policy suddenly disappeared the moment I said “no, my other offers are higher.”
The "no negotiation" policy ran off with the "COL adjustment" policy :D
This is just reinventing unions but without the employee's ability to input via collective bargaining.
If you're ambitious, this doesn't hurt your ability to join Coinbase and grow quickly, which is an important factor in the tech industry and its appeal of opportunity. A union would.
This offers a more level playing field for employees to begin their time at the company without stringent rules around who can get promoted and when and other red tape. Seems like a great decision.
This offers a more level playing field for employees to begin their time at the company without stringent rules around who can get promoted and when and other red tape. Seems like a great decision.
> A union would.
This claim is disputed by, like, many unions. Tenure based promotions/compensation is one, but certainly not the only approach that unions use.
This claim is disputed by, like, many unions. Tenure based promotions/compensation is one, but certainly not the only approach that unions use.
Nearly every major union I've seen supports seniority-based promotions.
I imagine that this is not popular with many employees, and so it cannot be a part of their initial pitch — as you said, not the only approach unions use.
If established unions support seniority-based promotions but nascent ones don't publicly support them, it would follow that they must develop into supporting seniority-based promotions. This is possibly one of those issues where a union gets power and then takes overarching, unpopular measures that rid the company of anyone who wants to work harder and be promoted faster.
If you have evidence that unions don't support seniority-based promotions, I would love to see it! I haven't had a chance to gather data, so I'm only speaking anecdotally.
I imagine that this is not popular with many employees, and so it cannot be a part of their initial pitch — as you said, not the only approach unions use.
If established unions support seniority-based promotions but nascent ones don't publicly support them, it would follow that they must develop into supporting seniority-based promotions. This is possibly one of those issues where a union gets power and then takes overarching, unpopular measures that rid the company of anyone who wants to work harder and be promoted faster.
If you have evidence that unions don't support seniority-based promotions, I would love to see it! I haven't had a chance to gather data, so I'm only speaking anecdotally.
> Nearly every major union I've seen supports seniority-based promotions.
There are a number of well known counterexamples, sports and acting unions/guilds for example.
> If you have evidence that unions don't support seniority-based promotions
I've yet to see any tech union advocate for this position, and they generally advocate against it. Tech Workers Coalition and the Alphabet Workers Union are the two I know of in this case.
> If established unions support seniority-based promotions but nascent ones don't publicly support them
This isn't really correct. Unions in certain fields support seniority based promotions. But on the other hand, certain professional fields support seniority based promotions without unions. Like medical and legal fields have non-union professional associations that afaik don't advocate for any sort of tenure based compensation. Despite that the most sought-after biglaw companies use a mostly-tenure based compensation process. The medical field uses an unholy combination of merit (exams and matching) and tenure (residency).
> This is possibly one of those issues where a union gets power and then takes overarching, unpopular measures
It's unclear how this could happen. Unions are democratic. The members vote on things. They generally cannot take unpopular measures[*]. It may be that there is a majority in some industries that prefer tenure based seniority.
[*]: Ok the exception here is if in a "Right-to-Work" state people refuse to join the union, but it still has a majority membership and is therefore NLRB recognized, so you have say, 51% employees in the union, and those 51% have a directional bias. For example, everyone who supports tenure based compensation is a union member, and they make up 26% of the company, and 52% or so of the union. Then they vote and win and the union contract includes this clause. The fix here, of course, is for other people who don't support this to join the union. But then they don't want to because of the idea that unions are bad and support unpopular policies.
There are a number of well known counterexamples, sports and acting unions/guilds for example.
> If you have evidence that unions don't support seniority-based promotions
I've yet to see any tech union advocate for this position, and they generally advocate against it. Tech Workers Coalition and the Alphabet Workers Union are the two I know of in this case.
> If established unions support seniority-based promotions but nascent ones don't publicly support them
This isn't really correct. Unions in certain fields support seniority based promotions. But on the other hand, certain professional fields support seniority based promotions without unions. Like medical and legal fields have non-union professional associations that afaik don't advocate for any sort of tenure based compensation. Despite that the most sought-after biglaw companies use a mostly-tenure based compensation process. The medical field uses an unholy combination of merit (exams and matching) and tenure (residency).
> This is possibly one of those issues where a union gets power and then takes overarching, unpopular measures
It's unclear how this could happen. Unions are democratic. The members vote on things. They generally cannot take unpopular measures[*]. It may be that there is a majority in some industries that prefer tenure based seniority.
[*]: Ok the exception here is if in a "Right-to-Work" state people refuse to join the union, but it still has a majority membership and is therefore NLRB recognized, so you have say, 51% employees in the union, and those 51% have a directional bias. For example, everyone who supports tenure based compensation is a union member, and they make up 26% of the company, and 52% or so of the union. Then they vote and win and the union contract includes this clause. The fix here, of course, is for other people who don't support this to join the union. But then they don't want to because of the idea that unions are bad and support unpopular policies.
I'm certainly not an expert on unions, so thank you for the detailed reply!
> There are a number of well known counterexamples, sports and acting unions/guilds for example.
I can't imagine how promotions would apply to areas like sports and acting the same as it applies to typical careers that have ladders, so I wouldn't cite it as a well-known counter-example.
> I've yet to see any tech union advocate for this position, and they generally advocate against it. Tech Workers Coalition and the Alphabet Workers Union are the two I know of in this case.
With regards to the Tech Workers Coalition, they want "explicit criteria to achieve (promotions)" [1] which would necessarily involve more red tape and likely a seniority-basis, as not every employee can be promoted.
> Despite that the most sought-after biglaw companies use a mostly-tenure based compensation process.
This is a reason why I elected not to go to law school, and a contributing factor for several people I know who moved from law to tech. The lack of this is what makes tech unique and adopting the homogeny of another un-meritocratic industry should certainly be avoided.
[1] https://techworkerscoalition.org/bill-of-rights/
> There are a number of well known counterexamples, sports and acting unions/guilds for example.
I can't imagine how promotions would apply to areas like sports and acting the same as it applies to typical careers that have ladders, so I wouldn't cite it as a well-known counter-example.
> I've yet to see any tech union advocate for this position, and they generally advocate against it. Tech Workers Coalition and the Alphabet Workers Union are the two I know of in this case.
With regards to the Tech Workers Coalition, they want "explicit criteria to achieve (promotions)" [1] which would necessarily involve more red tape and likely a seniority-basis, as not every employee can be promoted.
> Despite that the most sought-after biglaw companies use a mostly-tenure based compensation process.
This is a reason why I elected not to go to law school, and a contributing factor for several people I know who moved from law to tech. The lack of this is what makes tech unique and adopting the homogeny of another un-meritocratic industry should certainly be avoided.
[1] https://techworkerscoalition.org/bill-of-rights/
> With regards to the Tech Workers Coalition, they want "explicit criteria to achieve (promotions)" [1] which would necessarily involve more red tape and likely a seniority-basis, as not every employee can be promoted.
I don't see how this follows. Much the same way that you can have transparent pay even though people are paid differently, you can have transparent promotion criteria that aren't simply "John has worked here longer".
I am absolutely able to recognize that the more senior ICs I work with have larger scopes of work and often more challenging projects. My reading of this is that there should be clear job ladders that are used and checked against during promotions (and for example you're given feedback stating that XYZ is why you aren't performing at th e next level yet).
Google, for example, is aspirationally already doing this. There's a job ladder and you're rated agains the ladder. In my case, this has meant that I've gotten promoted almost 2x as fast as some of my coworkers on my team.
The aspirational part is that sometimes the feedback isn't in line with the rubric, and criteria can be different across the company (this is sort of a necessary evil of having a big company, a 1-size-fits-all rubric is difficult.)
I'm honestly, really not sure how it follows that since not everyone can be promoted you must use tenure as the metric. As long as you can define some set of criteria that defines "Senior" vs "Junior", you should promote all of the people who meet the criteria. If that's all of your employees, perhaps you need to rethink the criteria, or perhaps you have a bunch of "Senior" employees. At that point, deciding which ones to not promote is going to be crappy no matter what: tenure is an option, but the alternatives are usually "who the boss likes the most" which isn't really any better. But again, this comes down to at this point the company has failed to provide explicit criteria to achieve promo, because people who achieve them aren't being promoted anyway.
I don't see how this follows. Much the same way that you can have transparent pay even though people are paid differently, you can have transparent promotion criteria that aren't simply "John has worked here longer".
I am absolutely able to recognize that the more senior ICs I work with have larger scopes of work and often more challenging projects. My reading of this is that there should be clear job ladders that are used and checked against during promotions (and for example you're given feedback stating that XYZ is why you aren't performing at th e next level yet).
Google, for example, is aspirationally already doing this. There's a job ladder and you're rated agains the ladder. In my case, this has meant that I've gotten promoted almost 2x as fast as some of my coworkers on my team.
The aspirational part is that sometimes the feedback isn't in line with the rubric, and criteria can be different across the company (this is sort of a necessary evil of having a big company, a 1-size-fits-all rubric is difficult.)
I'm honestly, really not sure how it follows that since not everyone can be promoted you must use tenure as the metric. As long as you can define some set of criteria that defines "Senior" vs "Junior", you should promote all of the people who meet the criteria. If that's all of your employees, perhaps you need to rethink the criteria, or perhaps you have a bunch of "Senior" employees. At that point, deciding which ones to not promote is going to be crappy no matter what: tenure is an option, but the alternatives are usually "who the boss likes the most" which isn't really any better. But again, this comes down to at this point the company has failed to provide explicit criteria to achieve promo, because people who achieve them aren't being promoted anyway.
In my experience, when salary is narrowly banded such that there is little negotiation within the band for a position, people negotiate position as a proxy for salary. It produces the same net result in a more convoluted and opaque way. I've seen this pattern in several places. You see patterns in companies where new hires are consistently more senior than existing employees, largely because compensation has not kept up with the market rate.
This creates some perverse incentives. I've worked at large companies where when compensation didn't fit an existing standardized value, they would literally create a "new position type" in the HR system for that hire that not coincidentally matched that hire's salary requirement. This caused a weird proliferation of titles that had little semantic relationship to the overall organization. At one company, they had 1,000 roles in the HR system for this reason, that at any sensible company could have been reduced to fewer than 100.
This creates some perverse incentives. I've worked at large companies where when compensation didn't fit an existing standardized value, they would literally create a "new position type" in the HR system for that hire that not coincidentally matched that hire's salary requirement. This caused a weird proliferation of titles that had little semantic relationship to the overall organization. At one company, they had 1,000 roles in the HR system for this reason, that at any sensible company could have been reduced to fewer than 100.
Aggressive negotiating types will fight for position rather than salary at that point. I wonder how flat Coinbases structure is.
I feel like if you had a skill they REALLY wanted, they would create a new position for you to get around this rule.
I feel like if you had a skill they REALLY wanted, they would create a new position for you to get around this rule.
All this is telling me (someone who cares about negotiation) to avoid Coinbase.
> All employees in the same position, in the same location, receive the same salary and equity offer. No exceptions.
How do they define location? In one city, there are neighborhoods where the median income is six figures while it's a fifth of that in another. Same can be said of two different locations in a state or county, or two different states.
How do they define location? In one city, there are neighborhoods where the median income is six figures while it's a fifth of that in another. Same can be said of two different locations in a state or county, or two different states.
If my base salary is competitive, and I get vesting grants on top of that, then I don't see it as a bad thing.
If the vesting grants are an excuse to underpay me, then that is a bad thing.
An employer's perspective is different to mine, and some companies cannot compete by offering grants. This is probably what this article is really about.
If the vesting grants are an excuse to underpay me, then that is a bad thing.
An employer's perspective is different to mine, and some companies cannot compete by offering grants. This is probably what this article is really about.
I don't mind Golden Handcuffs.
Its just one part of a companies toolbox to increase retention.
If you would tell me that i get my current additional bonus as it is without splitting it up to 3 years, i would of course take it but i assume that internally they were able to form/create this type of program and the 3 years was an internal bargain chip.
Its just one part of a companies toolbox to increase retention.
If you would tell me that i get my current additional bonus as it is without splitting it up to 3 years, i would of course take it but i assume that internally they were able to form/create this type of program and the 3 years was an internal bargain chip.
> [Golden Handcuffs are] one part of a companies toolbox to increase retention.
Not in any way that's good for the company, though. That'd be a classic application of optimizing for the metric, not in what you really want optimized.
Usually if an employee is staying solely or mostly because of the handcuffs, they're not producing their best work, and aren't fully engaged or focused. Do you really want to keep an employee like that around? Wouldn't you rather they left, voluntarily?
On the flip side, as an employee, I like the idea of golden handcuffs. In a hypothetical situation where I didn't like where I worked, I could drop down to doing the minimal amount of work that wouldn't get me fired, and coast along while collecting the money. Sure, it's not a particularly fulfilling life, and probably wouldn't be sustainable for the long term, but maybe it's not that bad for a while.
Not in any way that's good for the company, though. That'd be a classic application of optimizing for the metric, not in what you really want optimized.
Usually if an employee is staying solely or mostly because of the handcuffs, they're not producing their best work, and aren't fully engaged or focused. Do you really want to keep an employee like that around? Wouldn't you rather they left, voluntarily?
On the flip side, as an employee, I like the idea of golden handcuffs. In a hypothetical situation where I didn't like where I worked, I could drop down to doing the minimal amount of work that wouldn't get me fired, and coast along while collecting the money. Sure, it's not a particularly fulfilling life, and probably wouldn't be sustainable for the long term, but maybe it's not that bad for a while.
> Usually if an employee is staying solely or mostly because of the handcuffs, they're not producing their best work
I know plenty of people with handcuffs, including me, and this doesn't apply to any of them. I think that claim is common but is in fact not justified in the real world. Your top performers are basically top performers for personality reasons.
Sure, if your company spends 10+ years getting to liquidity, which became popular in the mid-201x because not a single one of them was even remotely financially sound and the markets weren't ready to bite that off yet, you had people staying years longer than they should have, but it is not nearly as big a problem as people claim and was, mostly, because the real value was being captured by early/founder insiders in late stage super-sized PE rounds instead of going public.
I know plenty of people with handcuffs, including me, and this doesn't apply to any of them. I think that claim is common but is in fact not justified in the real world. Your top performers are basically top performers for personality reasons.
Sure, if your company spends 10+ years getting to liquidity, which became popular in the mid-201x because not a single one of them was even remotely financially sound and the markets weren't ready to bite that off yet, you had people staying years longer than they should have, but it is not nearly as big a problem as people claim and was, mostly, because the real value was being captured by early/founder insiders in late stage super-sized PE rounds instead of going public.
Huh? So now handcuffs with no gold?
This is much worse for start up employees - as grants each year allow for even more dilution, management hand wringing, and changed expectations. Do founders stock get magically taken away when they suck at being a CEO? When deadlines are missed? Generally they just get moved to the board.
The commitment you receive from your employees is HUGE. They show up 40+ hours a week, and bet their entire family and time on your company. Stop acting like somehow paying them even 0.1% as well as your founder is somehow a "bad marriage".
If they're pulling down the team, fire them. If you're afraid they're making too much money and may quit / retire - why are you in capitalism at all? Ownership is supposed to provide benefits.
The brazen attitude towards those that actually build your ivory tower is incredible.
This is much worse for start up employees - as grants each year allow for even more dilution, management hand wringing, and changed expectations. Do founders stock get magically taken away when they suck at being a CEO? When deadlines are missed? Generally they just get moved to the board.
The commitment you receive from your employees is HUGE. They show up 40+ hours a week, and bet their entire family and time on your company. Stop acting like somehow paying them even 0.1% as well as your founder is somehow a "bad marriage".
If they're pulling down the team, fire them. If you're afraid they're making too much money and may quit / retire - why are you in capitalism at all? Ownership is supposed to provide benefits.
The brazen attitude towards those that actually build your ivory tower is incredible.
I wonder if this is a good thing for "early-ish stage startups" in the long run? If all big-cos start doing this (and since the first few players have already folded I dont see a reason for the rest not to) this may end up standardizing pays with no upside for the employees. So finally the risk-taking employees have more of an incentive to found or join startups. May be even better, since this kind of greed is (possibly) a by-product of the size more of the startups will be motivated towards more realistic exits instead of growth for the sake of growth!
I feel like four year stock grants, more than anything else, are responsible for the upwards wage pressure that has led to the high pay in the Silicon Valley tech scene. You come in earning $X and a few years later you’re earning $2X without needing a promotion. Now if another company wants to steal you away they have to offer starting comp to match your golden handcuffs.
Reduced golden handcuffs can only hurt the rank and file labor market. No surprise a VC is enthusiastic about it.
Reduced golden handcuffs can only hurt the rank and file labor market. No surprise a VC is enthusiastic about it.
I don’t get this spin. In the old way, you had golden handcuffs because your stock had appreciated so much, it made financial sense to stick around until your options fully vested.
In the new way, all that potential upside comp is eliminated, so employees will earn less and feel better about leaving.
Seems like first option is far better for employees. Please give me those golden handcuffs.
This was also the best way for normal employees to “strike it rich”, which isn’t a bad thing.
In the new way, all that potential upside comp is eliminated, so employees will earn less and feel better about leaving.
Seems like first option is far better for employees. Please give me those golden handcuffs.
This was also the best way for normal employees to “strike it rich”, which isn’t a bad thing.
A lot of companies stop issuing stock options when they get to a certain size. Part of the thinking is that the company is now a "safe bet" so there's no need to give employees a potentially large upside in exchange for staying around.
Another reason for doing this is that stock options don't work well when the stock price (and company valuation) is already high. You end up with a big tax bill betting on growth that often doesn't come for already-highly-valued companies.
You could spin this as being employee-friendly, but it's more about being pragmatic about the fact that the company probably won't be able to 10x its valuation like in the old days, and now views itself as "safer."
Another reason for doing this is that stock options don't work well when the stock price (and company valuation) is already high. You end up with a big tax bill betting on growth that often doesn't come for already-highly-valued companies.
You could spin this as being employee-friendly, but it's more about being pragmatic about the fact that the company probably won't be able to 10x its valuation like in the old days, and now views itself as "safer."
As an employee this opens a few uncomfortable discussions. If your comp is heavy on equity, you may find yourself facing a paycut next year. For many engineers this could easily be a sudden 50% paycut during performance reviews. If a company chooses not to refresh your grant at the same level in 2-3 years time, then you'll have had plenty of warning to leave or for you and the company to figure things out.
The problem with a 1 year grant is that it provides an unstable compensation target, for a public company most employees will prefer cash to shares that may be up or down 15% at year end.
The problem with a 1 year grant is that it provides an unstable compensation target, for a public company most employees will prefer cash to shares that may be up or down 15% at year end.
> the idea that an employee can’t leave because they would be giving up too much money if they do.
This is part of the reason a cash-biased compensation package at a startup can be attractive. Effectively it places less coupling between your career path and financial success, which IMHO reduces unnecessary stress and gives you freedom to make the trade-off between these two at the time of _your convenience_, rather than some fixed number of months.
This is part of the reason a cash-biased compensation package at a startup can be attractive. Effectively it places less coupling between your career path and financial success, which IMHO reduces unnecessary stress and gives you freedom to make the trade-off between these two at the time of _your convenience_, rather than some fixed number of months.
No one year cliff good.
New grant (assuming with new price) every year is a joke. Potential for rapid wealth growth is the reason many work for a startup in first place.
New grant (assuming with new price) every year is a joke. Potential for rapid wealth growth is the reason many work for a startup in first place.
> We operate in an open market for talent.
Don't you just love it when you're treated as a commodity in a market?
> we ... expect them to earn their seat at Coinbase.
So, I'm working someplace, I'm always under threat of termination and have to prove, repeatedly, that my seat shouldn't be taken from under me.
Of course, the owners of coinbase don't have to earn their seats every year, or any year, right?
At this point I would make a derisive comment about Capitalism, but to be honest - the company's business is financial speculation with made-up currency, so I guess that's to be expected.
Don't you just love it when you're treated as a commodity in a market?
> we ... expect them to earn their seat at Coinbase.
So, I'm working someplace, I'm always under threat of termination and have to prove, repeatedly, that my seat shouldn't be taken from under me.
Of course, the owners of coinbase don't have to earn their seats every year, or any year, right?
At this point I would make a derisive comment about Capitalism, but to be honest - the company's business is financial speculation with made-up currency, so I guess that's to be expected.
Some more on single year equity grants here: https://www.levels.fyi/blog/one-year-equity-grants-vesting-s...
This seems like something more later stage, high growth companies are adopting. It’s simply much cheaper for the company to give out single year grants. Basically a challenge to the whole "rest and vest" culture.
This seems like something more later stage, high growth companies are adopting. It’s simply much cheaper for the company to give out single year grants. Basically a challenge to the whole "rest and vest" culture.
If this is so good, why not switch your old employees on the 4 year grants to it?
[deleted]
No desire to invest in Coinbase or work there.
Do not support investor-focused comp models like backweighted vesting (Amazon) or outright fraud like a start-up giving you a stock offer with no percentage or no 409A.
Employees deserve high-quality equity on par with investors. The OP’s suggestion is a major step back in one of the greediest economies in history. Complete non-starter. Don’t let this guy live in your thoughts rent-free.