4 ms·

I appreciate the feedback, it's useful to hear this. I'd be willing to boost the options pool, but I'm not sure I'd be willing to do so right now for a few rea

I appreciate the feedback, it's useful to hear this. I'd be willing to boost the options pool, but I'm not sure I'd be willing to do so right now for a few reasons. 1.) I don't trust that someone isn't going to come in, get offered a large chunk of equity (lets say it's 10%), and leave after 2 years with 5% of the company. In many ways that would be unfair to a future employee who works with us for a longer period of time and gets dramatically less equity. This could be solved with highly backloaded option grants (I've been thinking about doing this), but I suspect you wouldn't be interested if 8 of the 10% vests over years 5 and 6 or years 5-8 either. 2.) At previous startups I've worked, there are often follow-on grants that mitigate dilution for employees upon fundraising events. As a founder, I definitely won't get such a grant until I'm close to fully vesting. If we take some of the sting out of dilution, then that effectively is growing the option pool over time. 3.) I currently have 50.1% of the company. Had I cofounders, we would together own 50.1% of the company. This is helpful because it allows me to make some decisions without relying on our investor (who's been lovely so far, but still). Later, that will change, but at that point we'll have more infrastructure. On accounting/books, I don't know if I can do that. I've never seen it done across the org, though I'm happy to show senior management rough projections and our current burn. Unlimited vacation is an accounting construct. The pain of having to deal with accrued days vacation is not worth the hassle for a small company. When we have better financial infrastructure, maybe we'll revisit. A lot of this sounds like I need to foster some trust in my potential hires that I'm going to take care of them more than anything else. Regarding the equity, how would a long or highly backloaded vesting schedule work for people in your shoes?

thrwn_frthr_awy 6y ago
I'm glad to give feedback. I'd prefer to have start up jobs as an option, so I'm incentivized to help with this problem as well. Sorry you are being downvoted as you are at least thinking about the problem and possible solutions. You say you don't trust someone to get a chunk of equity and then leave after two years, but you asking employees to trust that they won't get let go before vesting. I'm not saying you think of it that way, but that is how it comes across. You want to have your cake and it it too. Re owning 50.1%: Do you not trust the 15% of employee votes to side with you over the investors? I really don't know much about corporate structures, but I'd love to see the collective employees represent a board vote as well. I have no idea if this is possible. I would not join a start up without knowing the burn rate with existing revenue/investment (not sales about to close or an investor about to sign papers). Re-unlimited vacation: What you say is a hassle sounds like offloading your burden as a founder to the employees in the form of a pay decrease. At least in California, PTO is debt owed to the employees, so 2 weeks at 200k is 8k being withheld because of a hassle. Again, does not feel good. Also, I believe in an "unlimited" pto situation employees will only take as much time off as their manager/leadership so in my interview I would be asking what time off my manager/founders have taken in the past year or what you are doing to ensure people take the time off they need to live a healthy and balanced life. I also ask this question at interviews for non-unlimited PTO jobs, but because at least that time will get paid out if unused it isn't as big of deal, although I still wouldn't accept a position if my direct manager hasn't taken at least one week off in the past year. There are too many creative ways for options to go poorly for an employee. Even with founders with the greatest intentions, things change. Board control can change, divorces can affect shares and control, a co-founder could leave, market conditions could cause well intended founders to have to let people go when things get rocky. If there is medium-success acquisition will the investors/founders be paid before my shares? Also with options... what am I expecting to be a good payout? $500k after 4-5 years maybe? Thats ~100k a year. With RSUs for actual public stock, sign on grants, ESPP, PTO, etc., the TCO at a FAANG company can be quite high, so it feels like I'm taking on a lot risk to maybe break even? Yes, there is the chance of a billion dollar startup, but those are outliers and aren't representative of most successful startups. One thing that startups haven't yet started to utilize is the resource of time. Many FAANG engineers make more than enough. If a startup offered me half my FAANG salary for 3 days full time employment with benefits, this is an offer I would strongly consider. It also eases the pressure of PTO issue. Like the old saying goes... Time is money. I may not be representative of everyone, but these are things have become important to me as I've grown as both an engineer and a person.
- trytozoom 6y ago
  Thanks for engaging, this is really quite helpful and as you imply it's a kind of cancer on the ecosystem right now. On the chunk of equity, I had a cofounder walk away early so I'm a little burned on the subject. You're right that the letting go before vesting is an issue, I think maybe rethinking the cliff to something like a 6 month rather than a year could do better there. Full disclosure, we do have a mildly backloaded vesting schedule (20-23-27-30) to encourage staying longer, but I think a crazy backload (like 10-15-25-50) creates toxic incentives on firing people before the equity hits. I think essentially my (and the investor's) worries about that employee stem from a belief that a founder typically has a different level of emotional commitment than even very dedicated early employees. Obviously not always but often. Which means that even if it's a theoretical risk that the founder walks early with a hefty chunk, it's less likely. On owning less than half, I actually tried to write a clause like that (I vote by proxy for employees who own less than a given percentage individually) into the term sheet. It was rejected by the investors. I'd love to have a board representative for the employees as we expand. I've actually considered a seat that has to be a non-exec employee that would rotate in every 6-12 months. Something to consider when we have more seats for sure. With all hires I've been clear on how much we've raised, how many shares exist, who are the investors in rough proportion, rough estimate of runway, and milestones we have to hit to get the next round. I'll think about careful ways to share the information as we go down the road. One difficulty is that it's hard to judge how people react to these numbers. If I've got 6 months runway left, how many people look for the exits? And what does it say about me that I'm not sure about being honest about that? I'm honestly really torn. On unlimited PTO and time I sense that there's a larger, "will you abuse my home life and time?" undercurrent. On the accounting, I don't know the details but I'm told it's more than just the price of the PTO, it's the way it complicates backend accounting. Maybe I should dig more. One way I think I could mitigate the concerns and that I've considered are as follows: - guaranteed 1 company holiday per month, if there's no official holiday in that month we'll designate one monday or friday as off. - 1 week off in the winter 1 week off in the summer as scheduled company shutdowns. The nature of our business is not live, "keep the website running" so we have flexibility there. I've also set a tone with all my employees that we don't burn out here, lets find schedules that work. We shouldn't be burning the midnight oil and weekends all the time. If we are, we need to rethink our objectives or staffing. Maybe setting the above two benchmarks would also set that tone. Maybe this is idealism, but I think we can do it. I guess we'll find out! Your 3 day work week sounds interesting, will think on it a bit. We would need to have a good mutual understanding of what milestones we want to hit on what timeline, but could be doable with the right people. I hear you on the many ways things go wrong. I can't predict that, and sadly layoffs can happen. I think you can do those humanely but it's awful and I hope we'll avoid it, though likely if we're around long enough we won't. On the investor/founder vs employee split though, I have common stock, just like every other employee. We rise and fall together, though yes investors can have a liquidation preference. In those cases, my strike price was better but that's the only way I'd be treated differently than an employee. I see no reason to change that, and I think if secondaries happen (and my investors typically don't do those) they should be open to all in proportion to their ownership of the company. The stock comp at FAANG is basically unbeatable and I'm convinced is designed to distort the startup ecosystem. The only thing I'd say as risk is this: "We're going to pay you a decent base, you're not gonna struggle. If we go big, you'll have a nice upside, and you'll have done it building something cool from the core. If we go medium, you'll probably not make as much overall as a FAANG, but you'll get to build something cool that mattered and was more directly tied to you personally. If we fail after a few years, then worst case you've worked on something cool, and FAANG will take you right back." It's strongly tied to us building something cool to work on AND that while building it we don't abuse you. It sounds like I have to find ways to convincingly make that promise.

thrwn_frthr_awy 6y ago

I'm glad to give feedback. I'd prefer to have start up jobs as an option, so I'm incentivized to help with this problem as well. Sorry you are being downvoted as you are at least thinking about the problem and possible solutions. You say you don't trust someone to get a chunk of equity and then leave after two years, but you asking employees to trust that they won't get let go before vesting. I'm not saying you think of it that way, but that is how it comes across. You want to have your cake and it it too. Re owning 50.1%: Do you not trust the 15% of employee votes to side with you over the investors? I really don't know much about corporate structures, but I'd love to see the collective employees represent a board vote as well. I have no idea if this is possible. I would not join a start up without knowing the burn rate with existing revenue/investment (not sales about to close or an investor about to sign papers). Re-unlimited vacation: What you say is a hassle sounds like offloading your burden as a founder to the employees in the form of a pay decrease. At least in California, PTO is debt owed to the employees, so 2 weeks at 200k is 8k being withheld because of a hassle. Again, does not feel good. Also, I believe in an "unlimited" pto situation employees will only take as much time off as their manager/leadership so in my interview I would be asking what time off my manager/founders have taken in the past year or what you are doing to ensure people take the time off they need to live a healthy and balanced life. I also ask this question at interviews for non-unlimited PTO jobs, but because at least that time will get paid out if unused it isn't as big of deal, although I still wouldn't accept a position if my direct manager hasn't taken at least one week off in the past year. There are too many creative ways for options to go poorly for an employee. Even with founders with the greatest intentions, things change. Board control can change, divorces can affect shares and control, a co-founder could leave, market conditions could cause well intended founders to have to let people go when things get rocky. If there is medium-success acquisition will the investors/founders be paid before my shares? Also with options... what am I expecting to be a good payout? $500k after 4-5 years maybe? Thats ~100k a year. With RSUs for actual public stock, sign on grants, ESPP, PTO, etc., the TCO at a FAANG company can be quite high, so it feels like I'm taking on a lot risk to maybe break even? Yes, there is the chance of a billion dollar startup, but those are outliers and aren't representative of most successful startups. One thing that startups haven't yet started to utilize is the resource of time. Many FAANG engineers make more than enough. If a startup offered me half my FAANG salary for 3 days full time employment with benefits, this is an offer I would strongly consider. It also eases the pressure of PTO issue. Like the old saying goes... Time is money. I may not be representative of everyone, but these are things have become important to me as I've grown as both an engineer and a person.

trytozoom 6y ago
Thanks for engaging, this is really quite helpful and as you imply it's a kind of cancer on the ecosystem right now. On the chunk of equity, I had a cofounder walk away early so I'm a little burned on the subject. You're right that the letting go before vesting is an issue, I think maybe rethinking the cliff to something like a 6 month rather than a year could do better there. Full disclosure, we do have a mildly backloaded vesting schedule (20-23-27-30) to encourage staying longer, but I think a crazy backload (like 10-15-25-50) creates toxic incentives on firing people before the equity hits. I think essentially my (and the investor's) worries about that employee stem from a belief that a founder typically has a different level of emotional commitment than even very dedicated early employees. Obviously not always but often. Which means that even if it's a theoretical risk that the founder walks early with a hefty chunk, it's less likely. On owning less than half, I actually tried to write a clause like that (I vote by proxy for employees who own less than a given percentage individually) into the term sheet. It was rejected by the investors. I'd love to have a board representative for the employees as we expand. I've actually considered a seat that has to be a non-exec employee that would rotate in every 6-12 months. Something to consider when we have more seats for sure. With all hires I've been clear on how much we've raised, how many shares exist, who are the investors in rough proportion, rough estimate of runway, and milestones we have to hit to get the next round. I'll think about careful ways to share the information as we go down the road. One difficulty is that it's hard to judge how people react to these numbers. If I've got 6 months runway left, how many people look for the exits? And what does it say about me that I'm not sure about being honest about that? I'm honestly really torn. On unlimited PTO and time I sense that there's a larger, "will you abuse my home life and time?" undercurrent. On the accounting, I don't know the details but I'm told it's more than just the price of the PTO, it's the way it complicates backend accounting. Maybe I should dig more. One way I think I could mitigate the concerns and that I've considered are as follows: - guaranteed 1 company holiday per month, if there's no official holiday in that month we'll designate one monday or friday as off. - 1 week off in the winter 1 week off in the summer as scheduled company shutdowns. The nature of our business is not live, "keep the website running" so we have flexibility there. I've also set a tone with all my employees that we don't burn out here, lets find schedules that work. We shouldn't be burning the midnight oil and weekends all the time. If we are, we need to rethink our objectives or staffing. Maybe setting the above two benchmarks would also set that tone. Maybe this is idealism, but I think we can do it. I guess we'll find out! Your 3 day work week sounds interesting, will think on it a bit. We would need to have a good mutual understanding of what milestones we want to hit on what timeline, but could be doable with the right people. I hear you on the many ways things go wrong. I can't predict that, and sadly layoffs can happen. I think you can do those humanely but it's awful and I hope we'll avoid it, though likely if we're around long enough we won't. On the investor/founder vs employee split though, I have common stock, just like every other employee. We rise and fall together, though yes investors can have a liquidation preference. In those cases, my strike price was better but that's the only way I'd be treated differently than an employee. I see no reason to change that, and I think if secondaries happen (and my investors typically don't do those) they should be open to all in proportion to their ownership of the company. The stock comp at FAANG is basically unbeatable and I'm convinced is designed to distort the startup ecosystem. The only thing I'd say as risk is this: "We're going to pay you a decent base, you're not gonna struggle. If we go big, you'll have a nice upside, and you'll have done it building something cool from the core. If we go medium, you'll probably not make as much overall as a FAANG, but you'll get to build something cool that mattered and was more directly tied to you personally. If we fail after a few years, then worst case you've worked on something cool, and FAANG will take you right back." It's strongly tied to us building something cool to work on AND that while building it we don't abuse you. It sounds like I have to find ways to convincingly make that promise.