Just two months ago I declined an offer from a known and well funded startup because of a one year cliff on equity.
The recruiter didn't seem to be able to discuss this matter and I asked them to make sure to bubble this sort of thing up their food chain. I never heard back afterwards.
As an "old timer" in the industry a one year cliff makes absolutely no sense to me. Its like working for credit, which seems very backwards.
I don't think you are wrong in doing so as the market in tech moves fast while employers move like slugs, it is just such a shift from what I grew up to expect.
In my experience, people tend to be either lifers and stay for 10+ years, or bounce between jobs every year or two. Lifers tend to accumulate in companies that cater towards them (good work/life balance and job security) due to low employee turnover, so if you're in the other group, it appears that everyone in the industry only works for a year.
You might as well not bother interviewing at any startups if this is a deal-breaker for you. Whether you think it's fair or not this is an extremely standard term and no company is going to alter their employee stock grants on a one-off basis.
Why would you otherwise take the risk?
I'm curious about Microsoft- anyone know if Microsoft has a cliff on RSUs?
After busting my butt, often working 12 hour days for 9 months, they fired me without cause.
Because I hadn't quite worked there for a whole year yet, I didn't get any of my stock options.
I will NEVER make that mistake again.
Next, I'd like to see pre-IPO startups offer longer periods to exercise shares when you leave. 90 days being standard is way too low.
Only worth it if you aren’t early. ISOs provide preferential tax treatment, and early on are usually very very cheap, so many companies (mine included) also offer early exercise with ISOs, which is an unbeatable tax win (afaik).
The issue occurs when options get expensive (aka the company is doing well) and then you have to do the math between ISOs or NSOs. The longer expiration may be better, but certainly not for every employee.
That said, as companies get bigger they stop being able to offer as many ISOs (there is a max cap), so at that point they should extend the timeline for expiration.
One thing companies do have to worry about though: a 10-year expiration means your cap table is in flux for 10 years, potentially, which makes calculations, acquisitions, etc, tougher.
But it's only 1 year?
* Bonuses are usually given annually
* Signing bonuses and sabbaticals usually obligate one year employment
A year seems like a very low bar.
What's the real advantage of waiting to exercise, to make sure that the stock will be worth something versus wasting your call option costs? How high are these strike prices that people are holding out?
Again, I've some, but limited (but very different) experience here with equity grants and options.
You stay for three years. The exit hasn't come yet because the VCs want to see a higher valuation, but the company has grown and the 409(a) valuation is now $5 / share. You've now vested 60,000 options that would cost you $60,000 to exercise, plus you will have an AMT adjustment of $240,000 because of the difference between the strike price and the current 409(a) valuation. So, exercising those options will cost you $120,000 (ballpark, IANA accountant) in exercise cost and taxes.
Keep in mind you've accepted a lower salary for the past three years because of this stock, so you might not have that kind of cash lying around. And even if you do - are you willing to throw $120,000 into a bet that the company will one day have an exit? Keep in mind that the company may have debt, preferred stock, liquidation preferences, etc. and most companies won't share all their past financing terms with ordinary employees, so it may be hard to estimate what a realistic exit even looks like for your stock. And if you're leaving, maybe you're a little disillusioned with how things are going in the first place? You have 90 days to make this decision after leaving the company and then you lose the stock forever.
For many people, the answer at this point is that they don't want to take the bet - and they get screwed out of a large part of what was supposed to be their compensation.
It's a shitty and exploitative system. I worked at a startup where this exact thing happened to many people who contributed immense value to the company. We had a bumpy year, some management turmoil, etc. and many people left before the IPO and got nothing out of their years of hard work other than a shitty, uncompetitive salary. I will never work for another startup under these terms.
What gets you with waiting, if you have ISOs, is how much AMT hits you. If you're at a >50% IPO company, it's somewhat common to exercise as many options as you can before the AMT hits you.
It's also worth remembering that your 50% startup could be Wework. It's worth $9B, but was valued at almost $47B.
as an example, I joined an early stage startup as an exec (potential good deal!), but I would've had to shore 300k to exercise my stocks, pay taxes on it (minimal, that's the huge advantage here), and more than probably see it fail.
now let's play the opposite scenario: you join as an engineer late stage, each ISO might be valued at 10 dollars each. how do you exercise.
this game is skewed towards founders.
in my example, I had to quit for personal reasons and the company was later acquired. however I wan't able to afford, so I got got of $100ks at the time of acquisition.
removing these 90 days time would have let me gain what I was owed.
no hard feelings, because I knew the game, but it was the moment I decided no more startups that have this 90 days BS.
It should be at least 365 days so that you can split it between tax years.
I've still got options of a public company I need to "dispose" of, and I don't want to do it all at once.
Perhaps until the options expire (typically 10 years) would be too much to wish for, but that would be ideal.
This reads to me like someone looked at the data and discovered that almost everybody who stays employed for a quarter goes on to stay for a year. So they decided to try to juice some marketing value out of a policy change that makes no functional difference to anyone.
Why else would they choose to have equity vest quarterly instead of with each pay period? Or monthly, which is already typical after the cliff? If you believe equity is part of total compensation why does it need a different schedule at all?
This makes sense for reduced paperwork if the company is buying back 28% of the shares to pay taxes instead of selling it to the market to pay the taxes - the company can reduce the open market sale on vesting days, but keep it as a single event within the quarter (advance tax payment per quarter).
https://www.teamblind.com/post/Lets-Boycott-Interviewing-at-...
This Blind post is saying that Instacart/Stripe says you only get $50k no matter the price of stock? How would you even structure that kind of grant? Why not just make it a bonus?
To me a decent junior should be able to build a basic Hacker News.
There are a lot out there who have never done so much as make a web page with more than copy/pasted Jquery and expect to get jobs.
I finished undergrad last May and had multiple offers to choose from well before I even graduated. Maybe covid has slowed hiring since, though.
Not to say that everyone can simply walk in to these jobs (and they shouldn't!), but if a graduating CS major cannot find any decent software job today I'd be more inclined to suspect their skills than the industry itself.
Because no one is going to hire a junior developer to work remote. The job market isn't especially hot, it's just temporarily distorted in a way that favors more experienced developers.
Senior has all but lost its meaning too... It describes how long you've been in the industry, not if you have the skills to be a technical leader, etc.
At larger corps when a senior leaves, you're often given budget to re-hire a senior, so there is no incentive to hire a junior/entry level. A lot of companies don't even have pathways from internships to entry-level positions. They just let them finish their internship and say "good luck"
This is a problem for diversity as well. Look at the makeup of the seniors in the industry. Now look at the junior/entry level folks coming out of master programs, colleges and boot camps.
Clearly this is anecdotal, but what types of things lead you to this conclusion?
- tons of remote offers, even with technologies like Java where in the past very few offers were remote
- salaries significantly up compared to 1-2y ago (getting 90-100k eur for a remote position in EU was rare, now it's not surprising to see such numbers)
- companies shorten interview processes, both in terms of numbers of rounds but also the time the whole process takes. In the past companies could reply to your application after a week, now I saw a few cases where a week after applying they send an offer
It effectively gave the company a discount on employees who stayed only 364 days - or to look at it another way, a 'trial period' of 1 year where the pay was substantially less.
A buddy of mine who worked at a giant company (not strictly tech but you'd recognize it) said he heard from his boss that the company effectively considers the first year of a software engineer's employment a wash as far as cost/benefit. I can't imagine they're the only ones. In that case, why would you reward people who jump ship before your break-even point?
I've always found the one year cliff funny, since investors don't have a cliff.
I've been hoping startups would start doing this for a while, and think DD is really a pioneer here and think this will become a trend. I know personally I turned down a few opportunities at promising startups simply because I was young, in my twenties, and a year felt like a long time. I found the probability of a life changing event that would require me to move and leave a company too high, and didn't want to bust my butt for 10 months with a salary cut, then have to leave and get no equity. So I said "no" to a few opportunities that otherwise would have been great.
Currently incentives first your first year are to focus on not getting fired. Now it can be on making an impact.
Smaller firms may have smaller codebase and less complex infrastructure and processes to get familiar with. Learning all of that wouldn’t take more than a week or a month, tops.
Larger, public companies like FAANGS will often have completely custom stacks, specialized developer tools and a ton of checks before anything you write hits production. Learning to navigate this will take a lot longer. IIRC Facebook has a bootcamp of several weeks (months?) just to get new engineers familiar with their shit.
In either case, I personally don’t think it’s a “wash” since even at the bigger company it’s not like you’re not doing anything and once you get familiar with the stack you can be productive af.
Sometimes, companies include in their annual reports the conditions of employee shareholding plans. In Europe, for management, plans with 1 year vesting and 1-3 years blocking period is a practice. This means that you cannot exercise the options until 2-4 years in. Further, all unexercised options are forfeited if the employee moves to the competition within a defined timeframe.
(In actual fact I was then a pretty underperforming employee who misunderstood the situation, but the apparent trigger for me getting fired was my own request for help addressing the situation since I realized something was wrong. The startup founders were as early-career as me and didn't really know how to give me the feedback I needed. My next employer did give me the necessary constructive criticism, after which I made the necessary changes, got subsequent positive feedback from that same employer, and have been a decent to good employee everywhere I've been since then.)
Usually signing bonuses have a 1 year paypack period. So sure, you may get stock even if you leave before a year, but you still have to pay back the signon bonus you received (and you don't get the taxes you paid on the sign-on bonus back either)
Allows bad-fits to leave asap rather than hanging around till 366 days
and if you don't like the statutory result, you can incorporate in at least one of 55+ other sovereign jurisdictions within the United States
People that really think they need a state-level business court system for their multinational unicorn, in a place they never physically will be, can just keep using Delaware for no reason, and their employees will subsequently have better earned securities laws.
Only equity-eligible roles classified as employees get equity. For everyone else employed by DoorDash, and on whose backs DoorDash is built, let them eat cake.
If you ban DoorDash someone else will pop up to exploit the system. Or someone like Kiwibot or Serve Robotics will come along and automate the whole thing and remove the jobs from the market entirely.
Legislators should stop fixating on minimum wage and fix the root causes behind low pay rather than trying to legislate band aids.
I switched a few months ago from a company that did. It was a farce how my old company, at the end of the year, would say your compensation for next year is $X but part of X was paid out over the next 4 years with a 1 year cliff each year. Just one of many reasons why I left.
My current company pays out equity every 3 months and it's incredible.
The only good thing my old company did was pay every week instead of every 2 weeks. I know most companies do every 2 weeks; I was surprised at how large a difference getting paid every week vs every 2 weeks makes. Not sure why the extra week between is so impactful but it really is.
In what way?
Or, tl;dr, it makes it easier to automate money without leaving a large buffer of cash in a checking account.
Overall, this is not bad for a company that has already IPOed. I hope the startups that are on the verge of the IPO dont use this as a way to cap out giving RSUs to employees.
That's quite surprising. Generally RSU comp is based on a particular monetary amount, but converted to no. of units upon issuance based on market prices (usually at/close to start date). Is this not the case with DoorDash?
If that's the case that seems... awful? That's a cash bonus with a downside.
I think here they are mentioning value based, which means that instead of being given X amount of shares/rsu over 4 years, you're given "the equivalent of $X" at the begining of each years. So after 1 year, of the stock doubled in price, you will effectively receive half the amount of stocks (still the same $ value tho).
Is that necessarily true?
Is there generally also a separate cliff for those additional option grants?
I ask because I interviewed with a startup recently and the recruiter told me that the company had just awarded everyone in the company additional options. I asked them if there was a cliff attached to those but they couldn't answer that.
My cynical read of this is that they are changing the vesting schedule to quarterly (instead of monthly, which is more typical), and burying the lede on that by painting this as a benefit to employees (when it really only impacts new employees).
Does anyone know if this is true or not?
So you get nothing the first three quarters, but after quarter 4 (your first year at the company), 25% of your 4-year grant is immediately vested. Every quarter after that is another 6.25% of your initial grant.
I believe the point they were trying to make in the article is that, instead of quarterly grants following the pattern of:
[0%, 0%, 0%, 25%, 6.25%, 6.25%, ...]
[6.25%, 6.25%, 6.25%, 6.25%, 6.25%, ...]
Is it? Almost all my and my friends' RSUs have been quarterly, with a typically 1 year cliff as described in the article.
Maybe I'm on the wrong coast?
What's the endgame?
Standard vesting schedule with 1-year cliff... but you would be prevented from selling any stock grant for the first year after it vests. Love it, thank you but no!
Who joins Oracle/IBM...etc' these days ?
What is the mission here? Is Doordash at all sustainable without continually funneling VC money into subsidizing services that no one would pay for at their breakeven cost?
Wouldn't this move incentivize employees seeking short term employment thus diluting stocks given out to existing long term employees?
It takes a lot to fire someone legally - oftentimes you have to document ~6 months of poor performance, put them on a PIP, give them a chance to remediate, etc. Combine that with normal long ramp-up times in a tech company, and by the time you know it's not working out and can fire them, they're pretty close or past the 1 year vesting point anyway. It's much more efficient if the employee decides to leave on the their own, if they know it's a mutual bad fit.
This removes the incentive to stick around for the windfall - if you're not enjoying your workplace, go leave and find a better one, and you get paid fully for time served. It's a lot like the buyout offers at places like Zappos or Coinbase, designed to make sure that everyone is on-board with the existing company culture.
But they also don't give you units of RSUs as stock comp, just cash equivalents, so that is another major downside working there.