Ask HN: Percent of employees that benefit financially from equity offers?
17 comments
The answer is findable, but what you really asking? Percentage that benefit at some company, or percentage across a basket of companies?
RSUs at a public company are straight-up benefit if you survive to vesting. Whether that was better than getting more salary is only known in hindsight, but some companies are reliable in that being pretty good. Not FU money anymore, but when it's over 100% of your base it is objectively good. Options at a public company are risky, the markets were favorable for a while but you can see that high-flyers may be at the top of their market. Anything at a private company is a crapshoot, mostly filled with crap. Top execs and maybe a few early employees can benefit from some equity sales. Since you are asking the question, I'll guess this doesn't describe you. In general the company needs to thrive pretty well or have an in on a buzzy acquihire for either options or RSUs to be worth anything, and you took a salary cut for those chances. The old rule of 9 out 10 fail may need updating, but if you join at series C or after you have still a 90% chance of 0 and a 10% chance of a little something (because the quantity and pricing at that point is not all that interesting). Plenty of companies will not top you up after your first grant, so your slice is small. A few companies take care of their employees, but you need to treat the employer's statements in this as completely suspect. An employee, outside of work and in a social setting, is much more reliable.
RSUs at a public company are straight-up benefit if you survive to vesting. Whether that was better than getting more salary is only known in hindsight, but some companies are reliable in that being pretty good. Not FU money anymore, but when it's over 100% of your base it is objectively good. Options at a public company are risky, the markets were favorable for a while but you can see that high-flyers may be at the top of their market. Anything at a private company is a crapshoot, mostly filled with crap. Top execs and maybe a few early employees can benefit from some equity sales. Since you are asking the question, I'll guess this doesn't describe you. In general the company needs to thrive pretty well or have an in on a buzzy acquihire for either options or RSUs to be worth anything, and you took a salary cut for those chances. The old rule of 9 out 10 fail may need updating, but if you join at series C or after you have still a 90% chance of 0 and a 10% chance of a little something (because the quantity and pricing at that point is not all that interesting). Plenty of companies will not top you up after your first grant, so your slice is small. A few companies take care of their employees, but you need to treat the employer's statements in this as completely suspect. An employee, outside of work and in a social setting, is much more reliable.
From https://news.ycombinator.com/item?id=29141796 :
> There are a number of options/equity calculators:
> https://tldroptions.io/ ("~65% of companies will never exit", "~15% of companies will have low exits", "~20% of companies will make you money")
> There are a number of options/equity calculators:
> https://tldroptions.io/ ("~65% of companies will never exit", "~15% of companies will have low exits", "~20% of companies will make you money")
I consider virtual shares (in Germany) an unregulated scam. It’s a “nice to have” but should absolutely not be considered compensation, nor should renumeration be compromised for them. I don’t know a single person who has come out profiting. Dangling carrots.
Same. Worked for years for a company that offered VSOPs. They never went public. Hopefully I negotiated a decent base salary. So, as long as they offer a decent base salary and on top of that they add vsops, I’m fine. The moment they offer your less base salary in exchange for more vsops, avoid them.
What are virtual shares exactly? Do you mean you are promised shares before the company goes public?
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He means VSOPs.
They aren't shares, but options. So if the company's valuation skyrocket you hit the jackpot, but if the company growth stales you get nothing.
Of course, RSUs are better, but VSOP has a non-zero chance of making you money, it isn't 100% though.
They aren't shares, but options. So if the company's valuation skyrocket you hit the jackpot, but if the company growth stales you get nothing.
Of course, RSUs are better, but VSOP has a non-zero chance of making you money, it isn't 100% though.
It's not options either (that would be ESOPs), but actually a kind of bonus structure. If there is an exit event, as specified in the VSOP agreement, you get a bonus that should be the same as what real options would have been worth. They are taxed as normal income, but you do not have to pay tax when you receive them. In the past you would have to pay tax on real options when receiving them even though they'd most likely never pay out.
Only one in ten startups “succeed” and by “succeed” meaning make money for investors that get a preferential treatment on exit.
I’ll take equity in a private company on top of them paying my fair market value in cash. Now RSUs in a publicly traded company is as good as cash. Even though even then you have a risk of the stock falling.
While I personally would never work in BigTech (again) and prefer smaller companies and will accept the lower pay that comes with it. I would never suggest given a choice anyone join a startup that pays less than they could get somewhere else hoping that their equity will be worth something
I’ll take equity in a private company on top of them paying my fair market value in cash. Now RSUs in a publicly traded company is as good as cash. Even though even then you have a risk of the stock falling.
While I personally would never work in BigTech (again) and prefer smaller companies and will accept the lower pay that comes with it. I would never suggest given a choice anyone join a startup that pays less than they could get somewhere else hoping that their equity will be worth something
You can sell the RSU tranche the day you get it though right? So it like cash. Unfortunately that also means for tax purposes.
Yes. You get taxed when they vest. At least when I was getting them, you could make a selection to sell enough to cover taxes, sell them in all, or cover the taxes yourself.
Anecdote: RSUs have been about 40% of my annual income for about 8 years now (I work for a mega corp, not FAANG tho).
My manager refreshes them every year, the grants vest in three tranches, we can sell every quarter, and every quarter I have three different tranches becoming available for sale.
I sell them whenever they vest, though I would have probably been better off to keep them given the past year’s stock market.
Selling did help me pay off my house in 8 years.
I sell them whenever they vest, though I would have probably been better off to keep them given the past year’s stock market.
Selling did help me pay off my house in 8 years.
There are unfortunately a lot of variables. I would expect options, double trigger RSU, single trigger RSU, stage of the company, to have different risk/reward functions.
I joined a private "startup" one year before its IPO and got a 40% return on my equity grant's first vest a week after the listing, but ~60% loss on the following grant. The company granted me more shares to make up the difference, so my compensation (almost) never declined, despite huge drop in value. Since the all time low, the stock is up 40%.
This year, I will/have receive about $300k USD in stock (which I can immediately sell on the market). My base pay is $245k/yr USD, so equity is a significant part of my compensation.
Every employee at the company benefited from the equity, although some should have sold when they could have.
0/ Options
Options are typically bad, because they expire when you leave. For example, the company gives you the option to give them $20k per year to exercise options.
- But if you're only making $100k/yr, $20k/yr in post-tax paper money isn't great - But if you don't exercise the options when you get them, you may need to pay additional money for taxes - But if you leave the company, you may only have 1-6 months to pay for those options.
IMHO, the only way to make money with option equity is if you are very lucky and can stay the entire time at the company.
1/ RSUs
RSUs are shared by later stage company and can be sold before a liquidity event. You owe taxes when they vest, unless they are double-triggering, unlike options. but at this point in the company's lifecycle, hopefully those rsus will be worth something.
I joined a private "startup" one year before its IPO and got a 40% return on my equity grant's first vest a week after the listing, but ~60% loss on the following grant. The company granted me more shares to make up the difference, so my compensation (almost) never declined, despite huge drop in value. Since the all time low, the stock is up 40%.
This year, I will/have receive about $300k USD in stock (which I can immediately sell on the market). My base pay is $245k/yr USD, so equity is a significant part of my compensation.
Every employee at the company benefited from the equity, although some should have sold when they could have.
0/ Options
Options are typically bad, because they expire when you leave. For example, the company gives you the option to give them $20k per year to exercise options.
- But if you're only making $100k/yr, $20k/yr in post-tax paper money isn't great - But if you don't exercise the options when you get them, you may need to pay additional money for taxes - But if you leave the company, you may only have 1-6 months to pay for those options.
IMHO, the only way to make money with option equity is if you are very lucky and can stay the entire time at the company.
1/ RSUs
RSUs are shared by later stage company and can be sold before a liquidity event. You owe taxes when they vest, unless they are double-triggering, unlike options. but at this point in the company's lifecycle, hopefully those rsus will be worth something.
I believe I read (sorry can't find the study now) that the most lucrative time to join a company is just pre-IPO. You negotiate on salary as if RSUs aren't worth anything, because you can reasonably argue its all on paper. But they will still throw RSUs at you. The downside risk is there, but the reliability of high upside is more reasonable than early startup.
I can't say this is the highest expected value, its a reasonably reliable value. It seems that if you have a sense a company has a good chance of successfully IPO'ing, you can maximize negotiation of both RSU and salary at this stage.
N=1 but this worked personally for me. I remember reading this a few years back, and negotiating strongly with an offer from Reddit when the tech market was at the bottom. And it did turn out they IPO'd. I did pretty well through that.
I can't say this is the highest expected value, its a reasonably reliable value. It seems that if you have a sense a company has a good chance of successfully IPO'ing, you can maximize negotiation of both RSU and salary at this stage.
N=1 but this worked personally for me. I remember reading this a few years back, and negotiating strongly with an offer from Reddit when the tech market was at the bottom. And it did turn out they IPO'd. I did pretty well through that.
You also have to take into account how often equity that becomes valuable gets stolen through some sort of financial engineering. When real money is on the line, investors do not hesitate to change the rules of the game. Its a two part process:
1. Vest valuable equity
2. Hope the powers that be let you cash out said equity
1. Vest valuable equity
2. Hope the powers that be let you cash out said equity
Some of the best early stage startups offers i checked are not even close to most Faang like opportunities on the market.
Rsu at public company is obviously almost as good as money if the company is doing okay.
Rsu at public company is obviously almost as good as money if the company is doing okay.
Does anyone have real data on how many employees actually see financial upside from equity grants? Are there studies or even anecdotal numbers on how common it is for non-executives/non-founders to walk away with any money? Specifically talking about privately held US startups.