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Comment by dan-robertson | Hacker News Reader

The typical startup problem like the above is a more extreme example of people mailing it in until bonuses are out: people mailing it in until the startup is acquired or goes public because the company is doing well and they lose their shares/options if they quit

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Don’t EVER work for a company that will take your shares if you quit. It’s a psychological trap and you are the prey. Any startup owner that strips your stake if you leave deserves to become the personal target of an obsessive and vindictive IRS auditor.

Most of the time it’s not vindictive founders. It’s that the options cost money to buy. And if the company is successful one might have to pay taxes on the stock options too.

You can pay for options with some of your options, at least in the UK.

Not in US usually.

Generally I think the trade is that you can keep the stock if you quit but you don’t have stock. You have options that expire if you quit, so if you want the stock you must pay a lot of money to exercise the options, and you then pay tax based on gaining a high value of stock (potentially more tax than you could afford) even though its real is quite undetermined.

In other words, the company takes your shares if you quit.

The solution is to put the option strike deadline at 10 years in the future which is iirc what YC recommends. It's possible for these terms to be employee-friendly.

So you think it is better to work for a startup that doesn't promise any shares to begin with?

It's a weird incentive model when you get down to it. It's rare for individuals who have been with a company for a long time to be fired. While RSUs/guaranteed equity incentivises individuals to leave when they get bored. Options provide an incentive for bored/uncommitted employees to hang on.

I wonder if this is why mid-life startups that stop growing start to feel "stale". Too many people who just want their money and to get out of dodge.

Do yo mean expiring-at-separation options?

Yes, I noted guaranteed equity as a class as there are a multitude of instruments which can provide monetary benefit after separation.

I once worked with a guy who had been with an 8 year old startup for around 7 years. The company had stopped growing at around the 200 million dollar run rate and he’d stopped really trying to do much other than get by. Someone once directly asked why he stayed and it turned out he had a million+ options. He was never bad, never good, and never took risks or did anything that would make him stick out.

6 years later the startup is still private and hasn’t grown (it’s probably smaller today than it was then). When I think back on the experience there were a number of people who felt strangely trapped into working there and didn’t give a crap.

I worked at one other company doing the options game and saw the same thing - anecdotally I never saw this at companies giving RSUs. As a manager, it would be tough to part ways with someone if you know your stripping them of a million dollars in equity.

By "they lose their shares/options if they quit" do you mean vesting? Because if you do, then you are not losing shares that you have already earned. And founders also have vesting.

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