If founders treated their investors the same way they treated their employees

I could be a cog in a giant corporate machine, or I can have a measurable impact where I work.

I can stay in my lane and do my specific job tasks, or I can run around putting out fires and helping wherever help is needed.

I mindlessly build the specific design product handed me, or I can guide my own work in accordance to the needs of our customers and the business.

I can follow policy and fill out forms when making any decision, or I can just do what's right because who has time to write policies and look over approval forms?

tbf, tech is relatively good at a lot of these. As I understand it, Facebook gives a fair bit of latitude to engineers, and Google used to be famous for their 20% time. But the longer a company exists, and the bigger it gets, the more bureaucracy and controlling it'll get. Every big disaster means a new policy on how to prevent future disasters.

I think pg wrote an essay stating that the most valuable skill in an early startup employee is "helpfulness" (maybe not though -- cursory search didn't find it). You do what needs to be done.

This is roughly your "wear many hats" point, but more than just different technologies, and not just being new. If you just want to have a well-defined, steady, sane-every-day job, a startup is terrible. If you every want to say "that's my job", a start-up is terrible. If you're the sort of person people will come to for help with whatever comes up (and enjoy being that), start-ups can be great.

I know plenty of startups that have a sane working culture as a key point of differentiation in the job market.

I switched to working remotely for a San Francisco-based startup because they offered me a 30% raise over what my current employer was willing to pay.

Two years later, when working for the startup became less palatable, I went back to my old company. My manager there struggled with the HR dept as hard as they could and got them to just match my startup salary in order for me to come back.

Which I guess is just to say the parent comment is not universally correct.

Startups pay more in salary than non-tech non-finance companies do in total comp. Startups that are far enough along (pre-IPO Uber, Lyft, etc.) pay more than FAANG (the RSUs aren't liquid but you need to only wait a year or two).

- they pay more than enough for my near-term financial goals

- the equity is ok

- they let me work on sidehustles

- I get to work on stuff that is truly make or break for the company, not some bullshit pet project a PM needs to get promoted

One day I'll reconsider this choice, probably when I'll have a bit more of financial stability (read: bought a house and paid it in full) and can afford some more risk.

Most people seems to overlook the fact that most startups die within a year, and some more startups drag a long death march before dieing.

You might have fun or do crazy interesting things, but if the company goes bust it might not be pretty.

For the moment, I'll stay conservative about this kind of things.

So I would add as a valid reason:

- Startup will pay you as much as anyone else, and won't be boring.

Caveat: may only apply to early hires!

I really wish I could, life would be easier, less work, less stress, pay better... None of them will take me so I keep help building and (sometimes) exiting startups.

It's really exhausting. 20 years of this... I wish more companies would value those who "challenge the book" instead of "follow the book" or that I could find a way to obediently follow it instead of challenge it.

I've honestly thought about figuring out how I could put things on ice for a few years and get a PhD, because then I'd have the proper paperwork to allow for my disposition and could finally stop this exhausting startup life.

But this is not enough for founders to have a peace of mind regarding your commitment.

- If you have already built a reputation, then that's enough for you to argue for a market rate salary.

- Else you would need to trade for some equity.

What are you getting out of this compared to a corp job:

- The work is likely more interesting.

- Away from corporate landscape (if that's not your thing)

- Gaining experience in new domain, doing thing in new ways.

The executives and investors and FAANG engineers have all made good money and seen decent RSU terms, you can't pull the wool over their eyes. Someone who is just getting into tech may be allured by a 50k salary and "1 MILLION OPTIONS!!!!" (There are ten trillion in the option pool).

I think engineers would do well to know that you are a COST CENTER to the business and the people who run it. They need you to make their product so they can make money but they hire you begrudgingly. You are in their power and they want to take advantage of you by paying you the least they can (shady options awards) and working you as much as possible (why did you slip on this feature you story pointed!!!).

Put yourselves in their shoes and you would do the same. Starting a successful business is all about customer growth and making money. If you aren't directly responsible for a part of that then you are a cost. Make sure you are getting paid what you are worth because nothing in this world gets built without great engineers, but the system is run by people who want to have power over you. Be careful.

> whenever you feel you’re treated unfairly, walk away. People will stop treating you unfairly.

Walking away from a bad deal certainly prevents you from being taken advantage of in that moment, but it will do nothing to prevent the next company who knows nothing about you from trying to hoodwink you again. While the ability to say no to a bum deal is important, it’s no substitute for actual leverage in these situations.

Executives and highly valued FAANG engineers have more leverage not because they say “no”, they have more leverage because both parties know they can say no, and they’re valued enough for that no to hurt. The startup needs not just an engineer, but that specific one. The threat of a “no” those with leverage gets far more results than from someone without it.

One of the best ways to accomplish this is to avoid shopping for a job when you’re unhappy with the one you have; when your best alternative is “I keep working at the place I like with the people I’m on good terms with” it’s far easier to start from that no and let yourself be convinced.

This isn’t semantics, token sales are counted for as revenue.

Yes, its too bad that there is a colloquial action called “invest” and a legal term called “investor”

Au contraire! I stumbled across one of these semi-monthly kludgeposts with a comment section full of angry people early in my career, and it helped me avoid getting mired in any bad startup situations.

I think that getting the word out about this stuff is one of the best things we can do, since it'd be really hard to try and legislate this problem away

Options solve this problem well, by delaying the tax burden until the equity is actually worth something. If it ends up worth nothing, you don't exercise your options and you don't pay any taxes.

If this article is being penalized at all, that's probably the reason. HN generally penalizes articles about recurring topics. I suspect YC realizes it's in their best interest for their portfolio companies to be fair and transparent in their equity offers.

- Find the other people at the company in your situation (size of grant, type of options). Share your learnings with each other. Consider getting professional advice, the Bay is full of attorneys and CPAs for whom this is a familiar situation.

- If you're at a unicorn, you probably have co-workers who are veterans of other unicorns and have been through this before. Ask them for advice (or an introduction to their source of professional advice)

- As a group, consider asking your board to arrange a limited second market sale to cover exercise costs and taxes. Many institutional investors are happy to buy a little extra stock, especially if it helps with keeping senior staff happy and focused on the right things.

- If you're going to be doing anything involving stock without board approval (like trying to build some kind off house-of-cards, pseudo-legal collateral package for a loan shark) you really need to hire an attorney.

- if you only have options, you might not be a shareholder. Your rights and access to information might be different once you've exercised a share.

- You can't extend the 90 day exercise window on ISOs, that's a federal law thing. The company can convert to NSOs to extend the window, but the setup for that conversion is complicated and expensive.

This still happens way too often to tech people. Another way in which that can be arranged is that everybody puts some money in relative to your inability to do so as well.

Putting $10K of your own money or not in at the beginning of a start-up should not have a 90% discrepancy in share allocation as a result.

The way some companies get around it is that, after 90 days, they replace the expired ISOs with nonstatutory stock options which, as their name implies, are not recognized by the tax code. Tax code is complicated but NSOs are ultimately worth maybe 10%-20% less than "equivalent" ISOs.

But, at least until recently, there wasn't standard paperwork for doing this, so the only companies that did it were those willing to innovate on their stock plan. I think a lot of founders weren't trying to screw their employees, but their lawyers weren't comfortable going off the beaten path.

But I think that excuse is fading now. Enough companies have done it to provide precedent.

My circa-2015 startup looked at this and fretted a bit but ultimately sidestepped the problem by giving everyone restricted stock instead of options. That's only really possible at the very early stages when the 409(a) valuation is nearly zero. But for anyone joining a seed-stage startup today, that's what I strongly recommend: Ask for restricted stock, and if the purchase cost is non-zero, ask them to comp you for it as a signing bonus (which is "free" for them since they're buying the stock from themselves). You'll have to pay income tax on the value but that should be pretty small (maybe you can even get the company to "gross it up", but that's real dollars for them). Then you'll never have to worry about exercising stock options or paying AMT. Don't forget to file your 83(b) election within 30 days.

With this, it actually makes sense to exercise options and stay employed at the startup: you now may not be qualified as a short-term seller when you sell the stock, since you held on to it for a while.

Only annoying thing is the constant prompt to login with your social accounts.

Because they're not working there anymore it's "demoralizing to others" if they retain the ownership that, again, they invested a part of their salary for in good faith. You've probably heard that one before.

It is absolutely outrageous to tell an employee that they're getting paid less in exchange for equity and then turn around and declare that the equity doesn't count the same as if they got paid market rates and just invested a portion of their salary.

The appropriate consideration when working for most startups is not that you're getting a cash dividend, quite the opposite - it's equivalent to the startup withholding a significant amount from each paycheck, and "buying" options/stock/whatever with that withheld money - you honestly earned that money, but you're not getting cash but something else instead. Is that something else a good value for that money?

People are usually foregoing part of the salary in lieu of options. e.g. $25k paycut (really conservative compared to FAANG) will come up to $100k over 4 years.

One can consider those $100k as cost of options you get.

AMT is essentially a completely different taxation system that runs in parallel to regular income tax in America. If the shares you exercise are worth a good amount, you will probably wind up paying AMT, especially if you live in a place with high state and local taxes.

After calculating your tax liability for both systems, you have to pay whichever is larger of regular income tax or AMT. Usually this payment, or part of it, comes due April 15th of the next year. Your company is not involved in your reporting and paying these taxes, but it's a federal crime to either misrepresent your income (which omitting the exercise from your filing would be) or not to pay the appropriate taxes.

If you haven't realized yet, a lot of this is complicated, so do your own due dilligence and/or work with a tax professional.

The AMT tax rate is 26% or 28%. The "income" considered by AMT for exercising and holding is equal to the difference between your strike price and the fair market value (FMV) of the stock on the day you exercised. FMV is based on a 409a valuation for companies that are still private. For public companies it's the market price for the stock on that day.

I'm not sure what you mean by your having "a low strike price (<$100 for all shares). For 100k shares, a strike price of $0.001 would cost $100 to exercise 100k shares.

To make the math easy, I'll give a hyptothetical...

You have 100k vested shares with a strike price of $0.10. The company has done well for the past 3 years and now has a FMV of $3.10 per share. To exercise 100k shares, you would need to pay $10k. However, if you're still holding these shares on 1/1/2021, you will have an AMT tax liability due 4/15/2021 of ~28% * ($3.10 - $0.10) * 100k = $84k.

Now it's weird how AMT works, so the above number isn't exactly what you wind up paying, but it's close. In general, the case stated above implies you would owe a sizeable amount in taxes if you exercised and held the stock.

People do this if they're leaving a company and their options will otherwise expire, or if they strongly believe the company will IPO or be acquired soon. Exercising starts a clock on the stock you're holding. If you hold the stock for a year after you exercise, your earnings will then only be taxed at the long term capital gains rate (probably 20%) rather than the ordinary income tax rate (usually higher than 20%). Earnings are the sale price minus the strike price (what you paid to acquire the stock or your "cost basis").

The downside of exercising now is 1) you have to pay cash to exercise, 2) you will generate a tax liability without necessarily having a way to sell your stock, and 3) if the price of the stock falls, the AMT you paid winds up being an even greater percent of the value. There is a way to receive credit on future tax bills for previously paid AMT tax that wound up like this, but it's complicated and best to be avoided.

The upside is mostly to obtain the a lower tax rate on the eventual sale. Most employees still with the company who didn't exercise their stock early don't exercise it until they plan to sell it.

What is the point you are making here, other than stating the obvious? It's the same for investment, what am I missing?

That is, if the distinction is between:

1) $150,000 + 0.1%, or

2) $250,000

Picking (1) would equal trading $100,000 for 0.1%.

Or if you are lucky to join later, 0.01% on top of $100,000.