Re:Startup Stock Option Changes
by Stasis5001 on Friday July 31, 2015 @02:35AM
(#9980256)
I agree. I came across this once, and ran the following model. Assume you assess the expected value of the equity grant to be, let's say, $100k over 4 years. Then this means your total comp will rise by $10k a year, which probably is comparable to your natural gain in market value. Thus this is equivalent to taking a similar offer except with $40k in equity with linear vesting, and either getting a raise or switching companies to get the $10k/year raise.
What this analysis omits is that the expected value calculation ignores the fact that the equity far exceeding the expected value is correlated with a desire to stay at the company, which makes the backloaded vesting irrelevant.
If you interpolate a bit to account for that correlation, I personally started concluding the $100k offer became more like $50-60k, which dropped the offer below market rate and I walked.
The reason I brought this up is that there are some founders who believe if you only stick around a year or two, you aren't loyal so you shouldn't get any stock. Some companies have repurchase rights. I was trying to suggest a way for employees who leave after a year or two to keep what they've vested and appease those founders who take a hard line about buy backs. I think this norm will be difficult to change although Sam Altman also discussed it in a post in recent years.
I would not even think of proposing a backloaded vesting schedule to an employee. There's nothing wrong with an even vesting schedule in terms of employee alignment. If you cannot retain an early employee after year 1 or 2 you have other problems.