Leaving Well
avc.com
avc.com
At best, the advice is something obvious. More often, it's transparently self-serving and/or based on extremely skewed anecdata.
Of course management at these companies claims they will give you "more" in the new hire grant and yearly refresher, which may be technically true in terms of the dollar value they are granting, but what they fail to mention is that if the stock doubles one year, the next year your refresher is half the size (because it's based on valuation at the time of grant).
It's especially disgusting for a VC to pitch this as the majority of young workers don't even know to think about this. Just another example of how being close to the money lets the investor class pull the wool over the eyes of the rest of us rubes.
Same thing can happen with RSUs, those are usually granted based on price. 4 year vesting of $100k worth of RSUs could be worth significantly more than $25k worth of RSUs granted with a one year vest each year for 4 years.
Let's say one company offers you $400k of equity vesting over four years. On your start date, they'll use the current price of the stock to translate that into a number of stock units (RSUs, typically), and then you'll get those stock units according to your vesting schedule. Let's say, for ease of calculation, that this $400k translates into 480 RSUs. So you'll vest 30 RSUs every quarter (let's ignore a cliff). If the price of the stock is rising, the 30 that vest in those later quarters will be worth more than the 30 that vested in your first quarter. Your last 30 units will be worth _a lot_ more than your first 30 units.
Now let's say a company offers you $100k for your first year, and promises to refresh you another $100k each year thereafter. Your first year, they give you 120 units for the $100k. But your second year, the stock price has gone up, so $100k doesn't translate into 120 units anymore; it translates into maybe 100 units, or 80 units. Your second year, the stock price has gone up even further, and $100k translates into even fewer units. Likewise your fourth year. These per-year refreshes "reset" the value back at $100k each year, when a four year refresh would "accrue" more value, year over year, if the stock keeps going up in price, which tech stocks typically do.
For a concrete example, at a former employer (GOOG) I was granted $150k of stock in 2019, vesting quarterly over four years. When I left in 2021, the value of the remaining shares of that grant was...$155k! The stock had more than doubled in price from the time of the grant, but it was still vesting according to the _original_translation from value to units. So the unvested value of _half_ the grant units were worth _more_ than the original grant, even after I'd already vested half the units.
If you calculate the number of shares determined by the price when you join you're locking in more shares earlier. If you are forced to negotiate that each year then you lose the growth you would have gotten from locking in the cheaper shares earlier - and that's where the vast majority of growth exists.
Imagine you worked at Tesla and joined at $250/share and five years later it's $2500/share. If you locked in 5 year vesting at $150k/yr calculated at the $250/share mark then in year 5 that's now worth over 1.5M a year!
If you're forced to renegotiate every year there's no way they're going to grant you 1.5M worth of shares for another year (unless you're pretty high up the chain).
It screws employees from capturing that growth. It's framed in a twisted way as employee favorable because in theory if you were granted 5 years worth of equity in 1 year it would be better, but nobody is doing that.
We the former you total payout is rebased each year. With the later you get to reap the growth in rsu value.
Fred is a fantastic writer and really pulls you in. However, he also uses his platform to do things like shill a shady ICO from one of his portfolio companies:
Three things in particular stand out to me:
* Most of them have had one success as an entrepreneur, and somehow think that everything that applied to their one success also automatically applies to every other company on the planet. This makes their "advice" almost completely worthless.
* Most of them have absolutely monstruous egos. One of our partners would start every meeting with the founders of a potential investment with "Well, you've got two founding partners of a $200M investment fund sitting here with you, let's not waste any time". They literally treat everybody like it is a privilege to just be in their presence.
* The incredibly vast majority of them are sheep...they refuse to lead rounds, and only commit to "maybe" decisions just to not lose out in case some other VC decides to jump the gun. They talk a big talk about taking big risks, but almost all of their decisions are "we will if you will", because they don't want to be the only one that investors can point at when something bombs.
There are exceptions to each of those points, BTW...but I've never met one that was an exception to all of them. And consequently, I can't help but roll my eyes whenever one of them decides to spread their "wisdom".
Not disputing (I hadn't heard that before) just adding.
Though I will note that the chances a good founder won't make a good CEO are probably higher at earlier stages, and getting "pushed out" isn't always the wrong thing for a founder who isn't a good fit as bigco executive.
In one case, the founder was simply a rich kid who started the company with his family's money, fundraised from VCs, then everyone involved realized this person was luckier than skilled. It makes complete sense in this scenario for the VCs to remove the CEO but still like the business idea.
That's the whole point of the charade, of course, but it makes reputational information valuable, especially when a founder is deciding whether or not they want to get in bed with a particular VC.
Fred is a prolific VC with a lot of investments. At scale, eventually any investor is going to have companies that have outgrown their CEO.
I think two things are simultaneously true:
1) Founder-run companies are, on average, better performers than companies that have replaced their founders with career CEOs. This only works if the founder can grow into the CEO role as the company scales.
2) Not every founder is capable or even interested in transitioning to the CEO role of a growing company. If the founder is unable or unwilling to grow into the CEO role, it’s better for everyone to replace the founder with a more qualified CEO.
I’ve worked at two startups where it was obvious that the founder only retained the CEO title because they wanted to remain top dog at their own company, but they didn’t really want to do the work of being a CEO. In both cases (one <$100m startup, one >$1b unicorn) it was painfully clear to everyone that their was a leadership vacuum at the top. Other C-levels and VPs were constantly exiting the company because they were forced to do the jobs of the CEO while someone else took the credit. In one case, the CEO was ignoring important business meetings to come work alongside the engineers, “just like the old days”. But he had long since fallen behind the technology curve and was trying to force engineers to do things like he did 10 years ago. It’s not fun to be forced to choose between obeying your CEO or doing things the right way. We all wished he’d just let us do our job and go back to filling the leadership void at the top of the company.
Honest question: why didn't you tell him directly? I feel like for the right person, this could turn things around? Or maybe I'm just naïve
Disagreeing with him meant the end of your employment. One of several reasons why most of us left.
What if the executive doesn't want to move on? I'm not talking about people who have vested and are ready to bolt, but those who have founded the business and want to grow it further ... but are now no longer wanted by the venture capitalists.
The post strikes me as something that a VC or appointed board member might show an inexperienced CEO or CTO before they get shown the door and are replaced by "professional management." Don't make a fuss, and accept our less-than-ideal severance terms. It's for the good of the company.
Looks like a self serving argument coming from a VC.
Not that it would be good, if we had cultures, were processes and cultures were in place that handle such transitions well. Companies and employees would profit from good transition handling.
But I am yet to see a company that does this in a half decent way.
What happen is that, usually, the employee is not satisfied with the work, pay or just wants to change job descriptions and start applying to interesting positions. If the company advertising the position has any sort of relationship with the current company the employee is working at, it will notify the employee superiors causing serious repercussions internally. Note that none of this is described in any non-compete clauses. Those are unspoken pacts between companies.
I think companies believe that making their lives miserable in the process will reduce the resigning rate, but it only creates a culture of distrust. Because the alternative, making employees lives better, paying better salaries and implementing quality of life programs takes effort and costs money in the short run.
In the long run however, I believe everybody would benefit from a culture of cooperation, not only executives.
it makes no sense
The rest is the classic collusion between companies who see no reason to compete over people because this only drives salaries higher and raises payroll costs.
Executives and board members often talk the talk of openness, transparency, honesty, and directness. But it is usually one way. They will not stand for having honest feedback directed at them.
If you are an executive or board member, think about the last time someone directed critical feedback in your direction, asking you to take responsibility for a failure mode reverberating throughout an organization:
- Did you listen, or did you lash out?
- Did you think about your role, or did you blame someone else for being a bad leader?
- If you pushed someone out, were you open to discussing the debate that led to it? Or did you actually prefer for everyone to just stay heads down and move on?
There are two things I think companies should do:
1) Make sure people have sufficient opportunities for growth. Honestly look at each person and make sure they're getting what they want for their career and their life out of it. Hopefully, a company can find ways to make sure people are always advancing in knowledge, skill, and capability. When they can't, they should be open about that and either find another way to make it up to them or help them find something that's a better fit.
2) Always be planning for succession. An important job of managers is to make sure employees are growing according to their capabilities. They should know who the best fit is to replace them and be grooming that person to be able to step into their job.
For my part, I've done what I can for my direct reports.
I've never had a boss or worked at a place that has followed your advice. Tech sucks.
When I had a bonus that paid out yearly, I had to wait a few months to leave my job. You can bet that I was less focused on my work for those few months, and left as quickly as possible when I hit the bonus day. A friend was looking to leave their job, but discovered that the 401k plan had some bizzaro vesting cliffs. They had to wait to give their resignation on exactly their 3-year anniversary, just in case the company decided to terminate them early.
a) The new person needs to have a matching skillset, but for the transition period, duplicating the skill set is not very economically or would mean a large increase in IT investment.
b) When the new person turns out to be a bad match or quits early, the overall impact on a small company is greater than on a large company. A single position can determine much of the fate of a small company.
Any suggestions how best to cope with this problem?
> because the best vacations are between jobs.
I remember talking to someone at a party once. They were a long term contractor for Microsoft. They worked for 12 months and then were "laid off" for three months in order to preserve contractor status. After that three months, they were re-hired and good for another 12 months.
Apart from the dubious legality, I thought this would be just about the perfect working arrangement. 12 months is enough time to sink your teeth into anything and make a ton of progress. Three months is the perfect amount of time to do a side project, kick around, or explore a new place to live. And knowing you'd have a job to go back to makes it much easier to spend money on whatever you are doing in the interim.
Jeff had two CEOs under him- Wilke for Amazon, and Jassy for AWS. Six months before anyone else hears that Jeff is stepping down, Wilke announces that he's retiring. "So why leave? It's just time."[0]
I'll always wonder- was it just time? Or was he waiting to step into Bezos's shoes when it was his time, and had just found out they were going to be filled by someone else. I don't even think that's unreasonable, but it didn't make things smoother.
[0]https://www.cnbc.com/2020/08/21/amazons-consumer-boss-jeff-w...
Curious, what makes you say that?
Since Bezos is "the richest person in the world" and the founder of Amazon, tough for me to believe he was pushed out; being so rich, he has to have a lot of stock, enough that the BoD wouldn't or couldn't push him out.
The story was that he wanted to do something else: I can believe that. And I believe that he gets to select the next CEO, will continue watching Amazon, and will take full operational control if he sees a need.
So, does anyone know (1) what the Amazon capitalization table looks like, (2) what stock categories there are, (3) who the major stockholders are, and (4) the amounts of stock they own?
In the sense of AVC's post, I don't believe that Bezos actually "left", "well" or otherwise.
Uh, I grew up in Memphis and, thus, happen to know something about the founders of both Holiday Inns and FedEx -- in the sense of AVC, they never "left".
[Uh, for some supporting details, I worked at FedEx, and my office was next to the founder's. The founder of Holiday Inn lived on the south side of Galloway golf course; I grew up in a house on the north side of that golf course. Etc.]
When you announce you are leaving, you turn from employee to liability. Especially when your departure comes as a surprise. I always felt the need to document everything, interview prospective replacement, even extend my notice to three weeks. But many times I see all my efforts thrown out the window the second I leave. It's not that what I leave behind is not valuable, it becomes the work of a quitter.
Once my position was replaced by an intern, another time my position had been completely eliminated.
When I leave again, I'll give good smiles and nod politely until my two weeks notice expire and I'll move on.
Edit: Also a great reminder, when your employer wants you to leave, you usually have to clear your desk immediately.