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Comment by blagie | Hacker News Reader

It's a huge red flag, and it's a hugely common red flag.

A startup was peeved I valued their equity at zero when they wouldn't share. I got strong hints my equity was worth at least $100k in extra annual salary, but they wouldn't budge on disclosing anything I could hold them accountable to. I think they were being honest, but I didn't take the job.

I did take a previous job like that, and when the company sold, we were all surprised management was honest. Management gave a used-car-salesman vibe, which was just wrong. I think with transparency, people would have worked much harder.

I don't have insights as to the reason for the extreme opacity.

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The reason for the opacity is obvious, they want you to think the equity is worth more than it is.

People constantly assume good faith in these things when they shouldn’t.

Obviously number of outstanding shares is a bare minimum, but things like cash reserves and cash flow should also be shared but they don’t want to share that information, often times because it’s not good, they just wasn’t people who believe in the “mission” or that it’s a rocketship or whatever.

The secondary reason is that there are still too many naive engineers who assume good faith, drink the startup koolaid, and take these offers . Sometimes even declining public RSU grants to do so. One company out of ten thousand have ISOs that are worth anything but those are the only company in the headlines so the mystique continues.

The only solution is education. ISO (Incentive Stock Options) are one of the biggest scams of all time and you’re financially illiterate if you value them more than zero. They are carefully designed by venture capitalists to screw employees. NFTs of monkey pictures are infinitely stronger financial assets than startup ISO - I mean, as least the monkey jpegs have liquidity and volume, and no liquidation preference coded in to screw you over.

> ISO (Incentive Stock Options) are one of the biggest scams of all time and you’re financially illiterate if you value them more than zero. They are carefully designed by venture capitalists to screw employees

Given the number of millionaires and billionaires who can credit ISOs for their current wealth, I think that's too broad a statement. At the end of the day, a well-run company that can eventually go public because they have a strong business can be worth joining and the ISOs can be worth something someday. Admittedly, many will not, but if you pick the right one, you could do well.

Survivorship Bias at its finest. You don’t hear about the other 90%+ who got absolutely nothing.

> Admittedly, many will not

You mean, "there's a chance".

That's the thing, though. It's not always a scam. You never know whether you're being scammed. I /didn't/ get scammed, but everyone working at my first company out of school thought we /would/ get scammed. We've all seen a lot of people get scammed.

Not everyone in a pyramid scheme loses money, but that doesn't make it not a scam.

ISOs worked out well for me. It wasn't a huge windfall, but the preferential tax treatment is actually quite nice.

Really the best strategy is ISOs that convert to NSOs with 10y exercise windows when you leave. best of both worlds.

Have you looked to see if they're still around?

I just checked:

* They IPOed and are still in business.

* If I had taken the offer, the stock would have been worth between 50k and 150k per year, depending on when I sold it. Their estimate of 100k per year was spot-on.

So they were being honest. Good to know! They were late enough stage when I was applying that they could do a fairly reasonable valuation. I think I would have been much more likely to take the offer if I had information like this in writing.

I still think I was right to value the equity much lower, since I had no way to know if they were being honest at the time.

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