It's a bummer - startups do a lot of really cool stuff, but I'm at a point in my career where I can no longer really gamble that the options will pay out. I need the stability and mortgage paying power of actual comp.
At the time, the company I was at seemed to be going downhill quickly, and they began mass layoffs for the first time shortly after I left.
What happened since then? Well, the startup options have very likely gone to zero. And my previous company’s stock price, which had been dropping quickly over the course of my last year there, made a hard U-turn right after I left and has been skyrocketing ever since (my family likes to joke that I caused the change of course at both companies).
Was it really a bad decision though? It’s sort of hard to tell. At my previous company, my manager had put together a promotion packet, but this likely would have been cancelled with the layoffs, and there’s a chance I could have been laid off as well (as far as I can tell it was random). And then there’s the fact that for whatever weird reason, compensation for internal promos at this company heavily lagged that of external hires at the same level for many years.
So at least up until now, I think I am even with or maybe slightly ahead of the counterfactual situation where I didn’t join a startup. Plus I have had new experiences, greater scope, and different types of challenges than I had previously, and I think it’s valuable to have a variety of novel experiences over a lifetime.
Obviously, from this point forward my future (financial) outlook would be better off if I had stayed, but it’s hard to write off my decision to try something new. Other former coworkers also left to join startups, a few of which are likely to go public soon, so it’s not as if going from FANG to a startup always works out unfavorably, and if you join a startup that seems to be doing well at a later stage, the downside risk doesn’t seem that high actually.
this is true but this is largely due to an unworkable tax treatment of giving out illiquid shares to employees that rely on employment for money, and the longstanding tax regime would seek to tax employees that have higher value shares even if they can't get cash to pay for it.
so this has left private companies in an uncompetitive situation with options as the poor workaround, analogous to chemotherapy where it hurts everyone in the absence of a better treatment, but you might come out ahead
but crypto organizations have added another wrench for more than half a decade, leaving the other startups aside, they are startups paying one amount, and skipping the options and paying their employees RSUs of their liquid crypto tokens, competing directly with FAANGs on compensation as employees can sell those tokens just as - or even more easily - than they can sell shares in a brokerage account
I'm saying it as if its news because the crowd here relies on people they respect saying the same thing to believe it in the absence of public and common knowledge, and that likely hasn't happened in the topic of anything crypto/web3 industry here
“For a pocketful of mumbles such are promises” Paul Simon.
Seen too many promises forgotten/diluted to really trust anything other than cash.
* Ask questions to founders if they raise on participating preferred (the worst). Don't take a job if they do or if they won't answer
* Find a place with early exercise of options
* Find a place with a healthy company culture. (I believe this correlates)
Note the past tense. The way startups operated a decade ago is quite different to the way they operate now. The tricks to get the most from employees without giving away much equity are more widely known now. I have no doubt that there are still some moral and ethical startups about, but I also think there are many, many more who give out stock with absolutely no intention of it becoming valuable in the future these days.
I run a (still small, 1.5M ARR) tech startup and we treat our employees fairly. Low / clean investment table, early exercise for employees that make early employee risk effectively 0, upfront about how to deal with options, alongside market salaries.
But maybe I am not the norm and it's more common for people to get screwed over. However, I have several friends at startups that have similar recent stories with their options.
Participating preferred = investor invests 50M on 1x participating preferred and company sells for 100M. The investor makes 50M + their % share of the company. Common stock makes % share of 50M.
They participate in the % sales ON TOP OF their preferred stocks liquidation preference (money in = money out before common stock value is considered)
Now here's where it gets nasty. 2x participating preferred = investor invests 50M and company sells for 100M. Investor makes 100M and common stock makes $0. Or if the company sold for 150M, investor makes 100M and participates in the % stock value from 50M.
It's a bit confusing, but the short is participating preferred is the absolute worst terms for common stock holders (founders included.)
Bad terms are raised due to bad founders (not knowing better) but more likely bad company health. (That can include trying to raise 50M series A as we saw in past 2 years.)
A healthy company with good founders (or lawyers) should be able to avoid issues.
I was the employee around #300 at Atlassian, the founders didn’t dilute the employees, and my options netted $3m (minus the taxes) after working there for 3 years and waiting 6 years.
Scott Farquhar and Mike Cannon-Brookes were hell-bent on being honest, fair and giving back. There are good people out there.
Also $currrent_company which I wont reveal. Run as well as Wisetech in terms of growth focus. Got some options. Learnt lesson. HODLing these fuckers to zero or "very interesting" levels lol!
I feel like a lot of people (founders included) buy into the idea that the VCs should be able to walk in and screw everyone out of their equity because they hold all the cards. If you work for founders that believe this, you will definitely get screwed, partially because the founders will believe screwing you is just part of the game.
You take 10 people who worked for a public BigTech company that gave cash + RSUs and 10 people who got the same in “equity” in 10 different private companies, who do you think will be ahead in 10 years? 10 years is the average amount of time it takes for the few companies that make it to have an exit event.
Those are very likely to have multiple liquidity events before they even go public, and are known to pay more than FAANG. You're trading some liquidity and some security for a higher upside.
Those are the companies that have the best luck luring away FAANG engineers with higher comp (if things go well).
When you work for a public company, you know exactly when your RSUs are going to vest, they appear in your brokerage account and you can (and should) sell the same day and diversify.
Also, historical returns don’t take into account that we now live in a time of high interest rates and the public markets have caught on to the Ponzi schemes of non profitable tech companies IPOing
We'd also need a new technology as big as the PC and the Internet to open up lanes for new entrants. As it is the incumbents have locked up most of the market so that's where the money is.