For all the ire on this site about the likes of Google, Apple, etc. screwing over the small company with their 30% app store fee, why isn't there even more outrage over the founders and startups who screw over their even more deserving-of-help employees?
You know, the employees who get subjected to unregulated dilution, tyrannical bosses, unreasonable hours and unclear compensation for trading off the prime years of their life? The ones who sign papers that look like an official company that has rules and structures, only to find that it's really "whatever the CEO wants to do"?
You would think people would be up in arms about that.
I had an exit interview where the founder told me their endgame was to destroy the value of the company to buyback the equity they sold to investors. I've never been more insulted in my life.
And you're still protecting them even after they admitted to fraud!
This is in response to someone saying we need to look out for each other. Our fellow devs and employees.
Y'all need to stop being so nice. Your founder isn't. You need to stop trying to play fair, your founder isn't. You need to put the people you work with on a higher level than your founder and get over this appeal to authority.
Reddit was quite popular before Digg failed. It didn't spring up over night. But yeah, something might replace Reddit one day. Getting there will be extraordinarily hard.
Cutting off your nose to spite your face. Destroy the company and then it's worth nothing for anyone. How does that make sense? Founder was better off just quitting and starting a new company from scratch.
90% of the time you hear of start-up employees getting "screwed", it's because the investors and founders are trying to recover their investments through an acquihire or IP sell off.
Cliffs on investments reduce the risk premium and lower the cost of money which is used to pay for the employees salaries. Founders (excluding previous successes) most likely draw a "survival" salary for many years. It's also a very demanding job, so good luck optimizing expenses at home. Employees are paid livable salaries plus options on common stock, which in a true runaway scenario will be worth something.
It's unfortunate that employees lose out on their lottery tickets, but that's really what option grants are. If you want more negotiating power, position yourself as a technical cofounder and accept the survival salary.
I've seen a ton of this on HN for the past couple of years, "Go work for FAANG, startups are worthless." As someone who has started a company, gotten it funded, and would like to hire high quality engineers, this is deeply disheartening. I've tried to hire a few people, offering them market rate or close to it for base salary (_very_ rough ballpark 150-200K for 2-5y experience) and a decent chunk of equity (highly variable, for VP level I've offered up to 2%, there's a salary equity tradeoff though).
These seem like fair offers, but often I'll get, "actually I'm really a cofounder so I should be getting double digit equity." That's fine, except
1.) I have 15% of the company in my option pool, so no I can't do that unless I effectively want to give nothing to everyone after that person.
2.) At the risk of sounding aggrieved: I spent all of my savings to get this off the ground and funded, am taking a far below market salary, and you want to get that sort of equity with none of that risk? When I'm pretty sure you wouldn't be talking to me if I didn't have a nice war chest?
What should someone in my position be doing to entice top notch people to join us? Yes it takes a leap of faith that what we're doing is interesting (please trust me that it is), and that someday stock worth 10s or 100s of K will be worth 100s or 1Ms.
But if nobody is willing to take that leap, then companies like mine and many others will die. If it's all about cash and comfort, then FAANG will have won and innovation will slow.
I'm really willing to listen, what can I do to solve this dilemma of a necessarily limited option pool AND inability to say, "yeah my stock is provably worth $100s a share and I can pay 75-90th percentile of market base."
To rephrase the dilemma you pose: "FAANG has more money than my startup and the employees I want are mainly motivated by money". There is probably not much you can do to beat FAANG on the money front. Some options include:
- Go for less top-notch people. Do you really need the very best or have you just convinced yourself that you do? How do you even measure quality? I've seen ex-FAANG people bomb more than once at a younger company because they couldn't handle the lack of structure and immediately went about imposing Google-scale solutions and processes for a 10-person company.
- Seek out people motivated by something else than money (ie autonomy, purpose, mastery, community) and offer them opportunities to chase those things.
- Finally, your post is very focused on YOUR perspective as entrepreneur. Things like "there will be no options left in the pool for other people" and "then companies like mine and many others will die" are not problems for the prospective employee. They are under no obligation to join your company just because you really want them to.
I can't handle the structure of a large company. There is more than pay influencing decisions. I like the nimble "family" atmosphere of a startup and the ability to make an impact. That sometimes propels people to greatness. I had zero credentials and was hired as app support to free up developer time at a startup. My freedom to impact the business infused me with passion and I ended up being a key person in the operations of the company and a major influencer of the technical direction. My salary went through the roof. Hire people who haven't been burnt down by big company culture and turn them loose. You can create top-notch people on the fly. The people they hired along side me who had credentials and tons of Corp experience were left standing.
As a FAANG engineer that used to work for start ups I’ll give my honest feedback on why I don’t consider working for a start up anymore.
A 15% options pool is insulting as you’ve decided to split off 85% for yourself and non-employees while leaving a measly 15% for the people who will actually build the company.
2% is just way to low to be of interest to me. And the sad part is, that is much higher that most offers. I have no idea what that two percent will be after being diluted x number of times, so the one thing that is supposed to incentivize me is just a black box with a theoretical ceiling of 2% and a very real possibility of 0 or close to it.
Other things I would like to see: actual vacation time (not unlimited vacation) and accounting/books shared with employees (these are not PowerPoints).
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?
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.
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.
Do you and/or your investors have preferred stock/liquidation preferences? If so, that dramatically reduces the value of employees' stock and creates a misalignment of incentives, and my impression is that that misalignment has been the biggest source of horror stories of employees getting screwed.
If a $250M exit will make you rich, your investors happy, and your employees nothing, and you and your investors are the ones who get to decide whether to take that exit, your employees are right to value their equity grants at approximately $0. (That's not a knock on you specifically, of course - it's a claim about the importance of incentives.) Or maybe less than $0 - if you work at an established company with all cash comp you don't have to deal with watching your boss become a multimillionaire based on your hard work.
I do not, the investors do. I sit in the same shoes as the employees and intend to keep it that way.
It's entirely possible for our investors to recover their money, and for me and the employees to make $0. However it's not possible for me to make something and the employees to make $0.
One small wrinkle is that my strike price was microscopic because of when the company was incorporated, whereas the strike price for an employee is merely very low, so there could be some outcome differences there.
> and that someday stock worth 10s or 100s of K will be worth 100s or 1Ms
This sounds a bit dodgy. I don't endorse paying someone with less than 5 years 250k/year but if you're looking at someone then the amount of options you give them should be worth at least the salary cut over the vesting period. So say you're looking at some VP potential that could get 400k per year working at Netflix or something and you're going to pay them $150k. Then you should offer them (imo) $750k in options vesting over 3 years. That's in now money, as in that should be whatever the investors in your last round paid for that same stock.
Not an exact art of course but if you do it that way, and you explain your logic in the offer, and they still don't agree, then they just don't want to work for you. If this calculation comes out to something that's untenable for you, then you're looking at too expensive engineers and imo you should move your company out of the valley.
Unless that employee would like to pay taxes on an illiquid, fungible asset, then you actually want the value of those options to be zero at the time of grant/employment.
In my experience, employees place much more emphasis on salary than options during negotiation. And that is find, it is the CEO's job to sell the vision of the business and acquire the resources necessary to execute. Just don't be disappointed if that means the company raises additional investment to pay your salary instead of granting more options.
Yeah of course the options should be set at 0 value, but they should represent the same future potential.
I agree that if you can't entice on options then you should raise for salary, whatever makes the most sense. From my personal experience, if the startup feels very promising to me I'll lean more towards options, and if it feels more risky I'll lean towards salary.
> Then you should offer them (imo) $750k in options vesting over 3 years. That's in now money, as in that should be whatever the investors in your last round paid for that same stock.
Except those investors got preferred stock whereas you are getting common stock which has less value. Thus, they are offering you the option to pay 750k for stock that is actually worth more like 600k losing you money. Now those options do have some value because of the expiration time and the fact that the price can rise but option pricing is complicated.
I highly recommend everyone considering startups to read up on the options greeks and go look at prices for deep out of the money (OTM) calls on public companies because that is effectively what startups are offering you and you can see what the public markets value options like that as.
Yeah, but their investment is a lump sum, while you can get out at any time. I do get what you mean, I'm just setting a sort of baseline standard, that you're off by 15% on way or the other doesn't really matter, it's about that you're getting an offer that's in the ballpark of being fair.
I don't think that the option greeks are very relevant, especially not in public companies as they have very different dynamics.
I understand the perspective, but from my view that sounds like the person wants to take zero risk. Essentially, they don't believe in the idea enough to believe that the stock is undervalued by virtue of the company being early on. We have to pay well, but as you imply if someone doesn't want to take a pretty small risk then they're not the right fit.
I say small risk, because the worst case scenario is that we fail in a year or two and then that person will likely have no trouble going back to the crazy high comp at FAANG. So the biggest downside is some opportunity cost and a few years of yes lower financial cost but without a devastating lifestyle change if we're paying decent base salary.
That is not zero risk, that is just aligning the risk with the rest of the company. Zero risk would be them working for FAANG. They would get their money and spend it however they like.
The idea that the stock is undervalued is ridiculous, if it really was it would mean you as the founder made a mistake raising money. Are you really suggesting your employees should pay more for the stock than your investors? Why?
Also realize that your employees are taking a bigger risk than the investors, as employees can only spend their salary once. There's only a 1/20 chance their stock will be worth anything, maybe even smaller. Investors invest in more than 20 companies so they have a smaller risk on their total portfolio.
In the Zoox case, the founders allegedly subverted the rightful 1Ms payout of the early employees. You sound like a trusthworthy person, but there are so many other cases of this happening besides Zoox, and it's very difficult to predict peoples' moral reactions to life-changing amounts of money ahead-of-time. At the end of the day, it's up to the CEO to make sure everyone gets treated fairly.
Good point. I hope I get the opportunity to test this hypothesis, but right now I can't imagine that mattering to me. I've made decisions recently where my thought process literally was, "Ok so if we win big, I'll have a slightly smaller yacht." It's not that hard to treat your people well.
I fully recognize it's easy to say now, and I hope I stick to it when given the chance.
More interesting than currently easy promises is: how do you interview the founders to maximize the chance that they're not greedy assholes?
Answered elsewhere but 1.) unsure about implications on corporate governance at this stage of the company. 2.) I didn't think very much about this initially and thought 15% would be fine, now it would take a fair amount of legal wrangling to get right 3.) honestly part of the reason I worry about double digit grants when people are earning near market base salary is that I don't feel they're committed in proportion to the equity that's vesting. Maybe could be solved with long vesting schedules.
* Options should not have a 3 month expiration after a person leaves the company. Anything vested should be exercisable 10
years after they were granted no matter what.
* Give people a starting bonus for early exercise
* Allow sales of exercised shares on secondary markets, or guarantee in writing X shares will be purchasable by your investor pool so some of the equity could be gained
While your story might be great and fair, there are far too many stories of useless stock options in the world for many people to take a huge risk like this. Between that and the average age of companies going public trending up, it feels like a bad trade off. Stock Options don't pay mortgages.
I've actually talked to our lawyers and investors about some of these.
1.) More than 3 months expiration gets tricky legally and I'm not sure it's actually fair. At that point I'm told we can't grant them as ISOs, they have to be NSOs or RSUs which could have poor tax profiles. Investors are also not keen, because you're basically giving free optionality that pretty much nobody else has. Essentially a 10 year exercise window means you get to just wait and see and only put in money when it's a sure thing. You don't even need to put in time if the option is vested. This while others who come later likely can't benefit from the same treatment (because the awards will be taxable as NSOs, and at that point more than trivial in paper value), and while investors and founders have put in cash to purchase the shares.
2.) Early exercise we have offered and will continue to offer. It's tricky because those have to be NSOs as well, but it's totally something we do. We have given signing bonuses (I hate doing this as a general rule, but it's what we have to do to get the talent), could look at making that more tied to the early exercise in some way. Again I'm not sure how the tax side plays out for the employee though. Generally this is something I support, glad to see it'd be helpful.
3.) I'm not sure what restrictions we have but I think we do restrict secondaries. For very early stage companies it's hard to write these promises of future purchases down, there's too much uncertainty on how they plays out over the long term. It can spook investors to have non-standard clauses like this, and the lawyers get very upset which means they charge us more money. That said, it's worth thinking about how to accomplish the same outcome.
Keep in mind we are paying a decent base salary. It's actually strange to me how the compensation market in the bay area essentially discounts base pay because FAANG have had insane stock trajectories. When we recruit in other markets base pay is the main negotiating point, not equity.
Make the company attractive by providing other advantages, such as an interesting problem to work on, interesting technology, being part of a great team, the excellent experience the engineer will receive (not just closing bug tickets), a closable door office for each engineer etc.
If you are going to compete on salary / options alone, you are also going to get candidates for whom that is also the only criteria evaluating a job.
What does this have to do with the question I asked? If this person is having a hard time attracting top notch people, maybe it's time to find out whether they even need top notch people.
You may need to hire people with less experience but the potential to grow into the role. I'd say the biggest advantage to working at a startup is the ability to advance up the career ladder faster than you can at a traditional company.
There are automated threads on or about the 1st of each month for folks looking for work. Lots of people looking for neat projects and that startup experience.
My contact info is in my profile as well, I might be interested!
Those aren't the only 2 options in our industry. There's tons of companies who are profitable from day 1 (they sell a product or service) and who pay developers market rate or better.
Go plug the numbers in for yourself on tldroptions.io and see what the return looks like.
That said, on the most rocketcorny of rocketcorns the growth curve continues and being an employee in series A or B can be a nice payday. But for the vast, vast majority of companies (VAST!), your share will be worth little, and more often than not, less than what you will make just going to work at a FAANG.
Startups have other innumerable benefits, but in terms of compensation, those benefits are (unfortunately) just that.
There’s nothing wrong with working in a startup, if the salary is decent. The only risk you’re taking is that it might go under, but then again, a well established company might lay you off too.
You’re only really taking a risk if you’re working for equity, with compensation that you wouldn’t have accepted if not for that equity.
Because Startups don't have a virtual monopoly on jobs the issue is much less pressing than with app stores. Of course that doesn't mean that programmers shouldn't form a union.
> Of course that doesn't mean that programmers shouldn't form a union.
That's potentially quite an expensive trade-off. You give up your ability to negotiate so that somebody else will collectively negotiate on your behalf.
That can work out well, at least for a while, but it's worth considering the longer-term consequences. E.g., in the longer term it can favour cheaper labour or cheaper competitors elsewhere. (Yes, you can argue that's the case even in the absence of unions, but there are stark examples of unionisation bringing about the premature demise or severe shrinkage of large industries: steel in the UK, the auto industry particularly in the UK (and also, to some extent, the US), coal in the UK, and the list goes on.)
For me outsourcing your negotiating power falls into a similar category to outsourcing your thinking: it simply doesn't feel like a good idea to me.
Yes and no. You could likely work outside the union though with their minimum pay/max hours (and a employer side of the same). A union could work for local jobs with other unions (think districts) to keep things local and provide equitable pay guidelines or openness. You likely would not be required to join anyway.
Plumbers have it mostly sorted out though. Critical tech might demand higher pay but I love this story I read of a band doing a wedding and negotiating pay for a 4 hour reception. The planner and band can't come to an agreement so the band says to call the local plumbers union, ask what the cost is for 4 guys on a 4 hours job, and use that number with some drinks tossed in.
Why do you say you lose your negotiating power? The union will ensure that you have the same basic rights (and salary) that everyone else in the field. That doesn't mean you can't ask for a raise or a higher starting salary.
I would love (seriously) to hear an example of a union that negotiates pay for its members but individuals successfully get additional raises or bonuses on top of that (not just for doing additional work). Teachers, pilots, public sector employees, all have pay contractually set. If you're a high school teacher and you ask your Principal or Vice Principal for a raise out of band you'll get laughed out of the room.
Most teachers work in public schools so even if the principal could give them a raise they wouldn't be able to but in private schools they absolutely could.
Pilots are an interesting example because AFIK they negotiated terribly, i.e. they have all sorts of benefits and high salaries for the high-tenured pilots but new pilots are almost working for free. Student pilots have been told for years that there's an upcoming shortage of pilots but right now you're lucky to get a job anywhere in the world.
If you're looking for examples then look at europe. In my country everyone has the right to negotiate their salary once a year even though most people are part of a union. Where I worked I would always be able to get a couple of % added to my salary.
This regularly happens at Siemens. IG Metall negotiates contracts and good engineers negotiate bonuses on top of the contract, or increases in pay grade.
But the NFLPA still hurts top performers. The joint negotiating in the NFL absolutely leads to the highest paid players being paid less than they would without a union. The revenue split, the franchise tag, the minimum salary, the rookie pay scale (arguable), and the veteran benefits all lead to less of the pie being available to the top tier players and less negotiating power. The salary escrow provision is a great example of an out-of-date rule that exists due to CBA negotiations and 100% hurts the top earners (while also providing zero actual benefits - it just existed because it has been there for decades and it's an effort to change anything when doing collective bargaining).
Not that I think any of this is bad since the NFL is brutal to its lowest earners, but it absolutely hurts the highest earners.
Yes, and democracy hurts the top aristocrats. But we don't tend to view antidemocratic aristocrats very kindly, even if maintaining antidemocratic systems are good for them.
Some people experience less optimal outcomes in a union. Those people are free to resist unionization. What I don't like is the claim that, because some specific high performers can no longer negotiate as well, everybody else should shut up about unionization.
Someone else brought these two up elsewhere in this thread. Are there no examples of regular people who aren't making tens of millions of dollars a year?
What typically happens with unions is the agreement will likely contain a salary guideline adhered to most of the time, which diminishes individual leverage.
That's never been my experience with unions and wages. My salary has been based in what I negotiated but the union ensures that each year I get a raise that is at least in line with inflation so that I am not, in really terms, making less money each year. They also collectively bargain on my behalf for annual leave and provide the same function for me that HR provide for my employer.
The unions you are referring to are almost universally for blue collar workers. Most professional athletes are members of unions. Most highly paid actors are members of a union. Neither of those groups have decreased individual leverage. It's unlikely that a union for highly paid white collar workers would closely resemble a union for blue collar workers.
> Neither of those groups have decreased individual leverage.
Huh? Sure they do. The MLB negotiated agreement is terrible for top performers, who are paid close to the league minimum salary for the first three years of their career, and an arbitration-determined salary for the next two.
As soon as the union-negotiated common salary time runs out, top players’ pay jumps several times.
What were equivalent players paid before the unions existed?
Sports unions are responsible for the massive increase in pay over the years. Those top performers would have been making much less in the absence of a union, both at the start and in the peak of their careers. I personally don't view that as decreased individual leverage.
> As soon as the union-negotiated common salary time runs out, top players’ pay jumps several times.
That 'several times' level only exists because of the unions.
Programmers are much closer to electricians than they are professional football players, though. Athletes and actors have star power, and considerable individual leverage. Tom Cruise is definitely in the Screen Actor's Guild but when's the last time SAG did anything for him? They're there to make sure the lowest end gets their $2k/week.
I get your point and it's a good one, I just think when we're talking about literally 100-200 people negotiating 8 and 9-figure yearly contracts it's an outlier (to say the least).
Or it can do nothing of the sort, instead negotiating things like non-competes, options exercise window, etc. See screen writers or actors unions for examples.
I'm in europe, unions are mandatory everywhere, some are good, some are not, average just do what the company wants them to, usually the 2-3% raise every year.
Unions don't really work for software, high demand, low supply of people, here you can negotiate better then without one, and if you are not happy, next job.
They aren't mandatory everywhere, atleast in germany.
You can join the union or not. If you don't join you can still take advantage of the union negotiated rates or not if you wish. If you think you can negotiate better than the union you're still free to do so.
Unions only seem to benefit the union leaders. Union membership have long dropped precipitously for decades for over 50 years at least. Programmer are in no danger of being stuck like McDonald's workers. They're free to work elsewhere and the NDA are as good as toilet paper.
> Isn't that democracy everywhere though? And it's still better than any of the alternatives by a significant margin.
Yes it is. Which is fine for something like a country where I don't have any hope of negotiating with the government individually, and where I don't have any choice in which country I'm part of.
But I'm not sure it's what I want for my job, where I can already negotiate directly with my employer, and where I can leave for other options if I don't like the offer. I'm trading one master that I need to persuade and negotiate with (employer) for two (employer and union leaders and their majority block). That sounds worse not better to me.
A union is great if you're part of the majority. If you're part of a minority in some regard... then yikes good luck.
I dont think thats the case at all. I am not sure what qualifies as a minority, but the union where I work has been instrumental in ensuring that disabled employees have access to tools they need to do their job and the support they need. They help when restructuring brings redundancies, they negotiate retraining packages for people etc.
You have fallen into the Us v Them trap that benefits employers. Your employer does not see you as significantly different to any other employee, even if you think you are. You have more in common with the other employees than you do with mid and senior level management.
Consider it this way, if you died on the way into work tomorrow, your colleagues would mourn and miss you, your employer would be typing up the job post whilst wondering if they could get someone cheaper this time.
I genuinely think you have some serious misunderstandings about what a union can and does do for its members. I don't know of one union that would prevent you from negotiating your own contract or terms and conditions. What you will find is that the bare minimum of acceptable terms has already been agreed with the union so you are starting negotiations 1-step up from where you would be without them. What this means for you is that you aren't using some of your powers of persuasion to ensure you have e.g. 14 days leave per year, you can now use that leeway to negotiate dental or medical, or whatever else you value.
I would just point out that employee unions are pretty strong in Europe, not over powered, but we have maternity pay, sick leave and generous annual leave allowances. In the US you dont like unions, have woefully inadequate annual leave, sick pay, maternity pay etc.
"Socialism never took root in America because the poor see themselves not as an exploited proletariat but as temporarily embarrassed millionaires.”
In the same way it seems like US employees don't see themselves as employees but as business owners/managers who haven't quite achieved their position as yet and a union would be detrimental to them when they are in that role even if it would benefit them right now.
> instrumental in ensuring that disabled employees have access to tools they need to do their job and the support they need
Accommodating disabled employees is a majority view. The majority of people agree with it. As we said, unions are democratic so how did this action get implemented if it wasn’t a majority view? The problem is when you’re in a minority view.
> Your employer does not see you as significantly different to any other employee
And the union doesn’t see me as significantly different to any other member. Just another infinitely small vote they can disregard if they want. What’s the difference? At least there's some impact on my employer if I quit. There's none to a union!
> You have more in common with the other employees
Until you don’t. Like a more senior workforce voting for pay based on seniority when you’re younger.
> Consider it this way, if you died on the way into work tomorrow, your colleagues would mourn and miss you, your employer would be typing up the job post whilst wondering if they could get someone cheaper this time.
I don’t need people to mourn and miss me - I need good pay and conditions.
> I genuinely think you have some serious misunderstandings about what a union can and does do for its members.
I disagree so I must just be mistaken rather than genuinely having a different opinion?
> I don't know of one union that would prevent you from negotiating your own contract or terms and conditions.
Many unions agree union rates which can only be negotiated by the union and the employer. You as an individual get locked out. Not all unions do... but when it becomes the majority view...
> In the US you dont like unions
I’m British. One of the very worst things about unions here is most of them fund one particular political party! That alone is crazy to me. I think many many people would find it extremely offensive to be funding that party.
I don’t want to get involved in it.
I’m sure unions are in some cases great for individuals, just like some employers are great for individuals. But I don’t think they’re really any more benevolent. Both are looking out for their own overall interests and I’m the little guy and if I want what they don’t I’m stuck.
Given that, why get a union involved? Why do I want to negotiate with two sometimes-less-than-benevolent masters rather than one?
Can you understand I may disagree rather than just insisting I’m ignorant?
Many governments have been built in ways to try to mitigate this. For example, in the US we have the electoral college and the Senate (where each state has an equal vote). Not saying I support the electoral college (I don't), but at least there's some thought behind it...
Another example is the parliamentary system where each party gets some type of representation in the government and where absolute majorities are rare.
Point being that governments, while democratic in flavor, have implemented some safeguards against this type of tyrany of the majority.
Not sure if I necessarily agree that the issue we face in the US has to do with "tyrany of the majority", but even if it does I would never claim that the system is perfect, hence the "try to mitigate this" part of the statement above.
In this scenario, is it better to have one larger Bloc cripple the smaller one?
They are deemed unlawful when you force people to join, teachers freedom of speech was considered violated when they're forced to join but disagree with the demands of the union. Is it fair to be forced to join, your dissenting opinion ignored and pay people who work against your own interests?
HOAs are also democratic and owned by their members - yet I hear 10 people complaining about their HOA for every person I hear speaking out in support of them.
HOAs differ vastly in quality due to lack of regulation and a wide range of community challenges and needs. It would be good to get a broad survey of folks in HOAs instead of relying upon anecdata but the lack of regulations make reliable reporting on this surprisingly difficult.
I’ve known some folks with HOAs and I see an inverse correlation with HOA dues and satisfaction which is usually correlated with HOA responsibilities and enforcement. I know folks with a $50 / year HOA and the HOA I was in was about $400 / mo for a condo that was maybe $1800 / mo.
There are regular surveys that cover how many people are in unions and the overall perception of unions. The numbers back up the idea that unions are dying and people don't think highly of them.
Huh, you're right about the popularity when asked in the abstract. It isn't at the old level of popularity, but support has risen quite a bit in the last few years and is back to a majority. That being said, popularity of a topic is often higher when you talk in the abstract - only 30% of people have 'quite a lot' or a 'great deal' of confidence in unions as an institution which is what I was remembering[1]. Also in that data - only ~40% of people want to see union influence grow.
> Also in that data - only ~40% of people want to see union influence grow.
~40% want to see grow to ~30%, giving them ~57% share of people with an opinion.
The confidence stat is silly - I don't have a huge amount of confidence in unions either because of their obvious decline in the last few decades.
Don't really see how you can see the [1] poll and not think that there is clearly a fair bit of support for unions. [2] seems completely irrelevant to popular opinion, which is what we were discussing.
It's been declining for decades and over half a century. They didn't know how bad they were. Who supports unions in the US and what majority? Who said that?
Some large unions have been corrupted, but that doesn't mean conceptually unions are bad. This is a great example, where UPS deliberately sought out a bad union for its employees to stifle more progressive organizing: https://isreview.org/issues/58/rev-ups.shtml
Part of the problem is the lack of good well paying employment options for engineers in small or medium sized companies and companies that are not FAANG. Especially outside of SV. Many of us at FAANG companies would love to leave, but it's getting increasingly hard to find good employers doing interesting work who a) aren't FAANG companies and b) aren't looking to be acquired by a FAANG company.
In the Bay Area there are definitely more options, but outside of there sometimes you have to go to a startup just to find interesting work and a smaller, focused, team.
No one ever got fired for going with IBM/Oracle/MS/Amazon. I suspect there is an equal and opposite statement to be made for the ire displayed against the same companies. If I were to make a stab at such a statement it would be, "no one ever paid attention to the ire expressed against small company".
One is a lottery: invest time in this startup, accept a lower compensation, but if it works out, you'll never have to work another day in your life after 5 years.
Employee equity is so tiny, only a handful of companies have been able to retire rank-and-file employees, even after big exits. Founders, on the other hand, do quite well in exits usually.
On the big exits, the early employees are often doing very well, but obviously not those that were employee 1000 or joined a week before the announcement. Founders do better, but that's expected, they also carry much higher risk.
And really, playing the lottery to win a million is still playing the lottery, even if others who spend even more on the lottery are trying to win a billion. Don't want to lose money on the lottery? Don't play it. I don't, and I never get a bad feeling thinking of what else I could've spent that money on.
The board of directors has a fiduciary duty to act in the best interest of ALL stock holder EQUALLY.
The case law that established this was the Trados[1] case.
If your company issues a huge bonus to executives for completing a sale of the company, you might have a case against the company. There are lawyers that make a very good living taking cases like this on contingency. I'm sure that's what these employees are doing in this case.
Isn't it pretty common for early employees to be screwed down the line during IPOs and acquisitions? That's been my experience and that of many colleagues, and has been a topic here on HN over the years, driving the idea that working for a startup is usually not in your interests except for particular cases.
I wish YC with all of its power and influence could try to change things for the better here. Early employees' blood, sweat, and tears, not to mention burning the midnight oil, often go into actualizing the founders' vision. Often these key early hires are alongside the founders working equally hard since day 10 or even day 1.
I remember Sam Altman posting lamenting that the most talented engineers are more interested in working for FAANG than startups. If anybody could insist on their portfolio companies' founders writing founding team friendly employment contracts, it's him.
While I'm against wealth taxes on principle, I can certainly understand the motivation for having them. I'm sure founders with fresh $100+M paychecks from acquirers can spare a few $M for those that believed in their vision enough to sacrifice the often-large opportunity cost of working for Google.
One of the reasons Woz is a personal hero of mine (alongside his engineering brilliance) is that he made sure his colleagues who toiled in their garage were treated fairly. When Jobs and Apple's investors didn't spare any would-be lucrative Apple stock for said employees, Woz made sure to "give away" some of his own to them. I'd argue Woz was still compensated quite lavishly after the "damage".
In fact, any YC startup that is currently having trouble hiring engineers might want to look into this. I would be interested in working for one that gave me more than 1% of the pie (alongside the usual "VP of Engineering" title that they always bestow to their first employee, which actually doesn't mean anything at all) as a founding eng.
EDIT: Also kudos to Cruise, which is a YC company, for actually stepping in and offering to make the founding employees whole.
There are so many VCs now, and all of them are looking for an edge. There is an obvious edge in building a term-sheet that creates a full ratchet for the employee stock option plan at 10%, where each employee earns points toward the total based on days worked, and 10-year exercise windows.
Then that VC needs to lead rounds and talk constantly about how the employees and companies they fund have the best chance of an equitable exit for all. How if you are not at one of their companies, you will almost definitely be screwed through dilution and bad founder actions.
YC took VC from shareholder focus to founder focus. The next YC will balance employee and founder interests in a way that delivers outsized outcomes the way that YC delivered outsized outcomes for shareholders by understanding that the founders were more important than getting an extra 1% or some other BS term in the deal.
I'm just not sure how someone who is not already able to command lead investor-ship through their reputation and added value would be able to sell such a "short deal" to founders. YC can. Maybe they could demonstrate much more effective recruiting.
Founders try to optimize for their own share, but investors basically destroy the employee share to get founders to agree. I don't believe most founders are sophisticated enough to model employee interests until it is too late.
My belief is that a new structure could be sold to founders by being a thought leader. In a world with tons of money and no edge, I believe its worth it for someone to try.
But... I'm not a VC, and personally believe its the most difficult gig in investing (which investing is the most difficult gig in any job long-term). So, take anything I say with a massive grain of salt.
Not sure why reading any of PG’s writing - especially his tweets - would give the impression that he’s anything other than firmly parked on the side of capital in the class war.
So as per you the largest offer for common stockholders always wins? That is definitely not true since there are other considerations at play such as value creation post acquisition and/or strategic considerations.
> The board has a fiduciary duty to act in the interest of shareholders.
The problem is the 'shareholders' is made of multiple groups.
A relatively common setup is Investors, Founders, Other Common Share Holders (Employees, Gifts). If there are 10 seats, Other Common will likely only hold 1 vote.
So the board voted in its best fiduciary duty that represents 90% of the votes. It's quite easy to see how employees can get the raw end of the stick.
In most jurisdictions there are strict rules on protection on minority shareholders that make it illegal for the majority of votes from robbing other shareholders of their rightful share; in such events the minority shareholders are entitled to compensation, and this is what's happening now.
What's often misunderstood is what "fiduciary duty" means. It doesn't mean "make the most amount of money possible", it means "act in the best interest of".
It is absolutely true that the board has a fiduciary duty to shareholders, and many states have statutes specifically protecting minority shareholder rights. Delaware is fairly unfavorable to minority shareholders though.
If you’re hired by a Delaware Corp as a California resident holding shares in that company, wouldn’t the California rights be the ones the individual suing would have?
Otherwise one state would have a monopoly based on it being business friendl... oh wait, maybe that is the case.
In contracts that our lawyers gave us (and that we use) the state whose law will govern the contract is specified. It's always Delaware.
The corporate charter, and the bylaws of the corporation are all explicitly governed by Delaware law. These documents control what powers different share classes have regarding corporate ownership and operation.
TLDR: Delaware law is almost certainly the controlling law regardless of where the shareholder lives.
I think this is a misunderstanding between "shareholders" and "board members".
Shareholders can indeed vote however they want.
Board members are fiduciaries, and vote on behalf of all shareholders. That a board member is also a shareholder (say, the founder) doesn't remove her duties to all shareholders.
Seems like HN is doing something that’s breaking the direct linking to that Wikipedia page. Have to click through to the suggested page to get to the true article
employees probably got nothing from the actual sale given they had raised $800M before the acquisition assuming standard liquidation preference terms, so can’t really blame them
One important factor in deciding which buyer for a startup, especially for the founders, is which company will most likely carry out the vision and mission of the original startup.
For example, if the higher rival offer was from Yahoo/Verizon, then Amazon almost assuredly the right choice.
If they exercised their stock options before they left the company, they receive all details (including executive comp). But they wouldn’t know what the other offer was.
Btw this applies to those who are still employees too (if they explicitly bought vested options)
My advice to anyone joining a startup - if you have the negotiating power, insists that you must pre-exercise and purchase all options immediately when you start your job. You must put some money, but if you don’t believe in the company, why spent years there. Most companies don’t like this and their VC will object. This is why I said “if you feel you have the power to ask that”. If you can’t do that, exercise as soon as they vest
Edit: to clarify - this isn’t same as accelerated vesting. Vesting rules still apply - but you become a shareholder with appropriate rights.
It's my understanding that early exercise is mainly only useful for tax purposes. You still won't be a shareholder until at least 1 share vests, which for a new employee, likely won't be for a year. Is that incorrect?
that's the risk of investing in equity. The employee needs to come to terms with it - there's no situation where this risk can be mitigated (without someone else taking a hit).
Yes, you are right about that. This situation is slightly better with AMT bracket moving up with Trump tax changes. But the basics still apply.
I corrected by saying "vesting rules still apply". But the tax consequence (AMT or otherwise) will discourage one to exercise as the estimated stock price becomes bigger and bigger as the company grows.
If you do month 1: Strike price = $1. Pre-exercise, file 83-b with tax. Pay 0 AMT. You quit after 2 years, get to keep half the shares, company might pay you back the principal for the lost half (yes, there is a risk there)
If you do this 2 year when you quit, may be perceived value of stock is $10. Now you out-of-pocket cost = $1 + AMT tax on (income + $9). Moreover, you probably hate the company when you leave, so even more unlikely you will want to buy your options. I have friends who have lost $100k+ with that attitude.
These days, AMT cut off is much higher, but this could apply to some of the valley's sought after engineers.
It does depend on the cash you have on hand, though. If you can afford to pay that AMT, you'll get most of it back in credits over the following years. But I suspect many people wouldn't be able to cover that tax bill without selling those shares that they can't sell.
Wei and Zhang are asking the court to order Zoox to open its books “in order to determine whether it is appropriate to pursue litigation against all or some members of the Board and/or Company management or others based on the apparent wrongdoing in connection with the Acquisition.”
As shareholders they may have a right to certain acquisition information, even if they aren't still employed. At the very least, current employees cannot be stopped from sharing such information with shareholders.
They can, actually. Almost all employees are required to sign an NDA as a prerequisite to employment. Disclosing company confidential information would at least be grounds for termination, at worst could expose the employee to a suit for damages.
> including employees who put in years at the company but left before May 2020. Zoox was founded in 2014.
I mean, I don't want to get into the legal side, or even the ethical side, but on a practical note, former employees with stock should really expect to be at the very bottom of the pecking chain here. If you leave and hold stock, you're coming out in decent shape if you aren't completely screwed over.
Like, Amazon doesn't care about you -- you're not joining the company. The startup doesn't care -- you've already left, there's no need to retain you. Even your former coworkers likely don't give a shit; you're profiting off of work they put in to get over the finish line (to paraphrase their thoughts).
You kind of have to be on the rocket when it reaches orbit, to get the payout. I dunno what they're trying to accomplish other than make a few quick bucks to make them go away.
The options one vested during their tenure was part of their compensation and encouraged them to work harder in a riskier environment than later employees, and arguably if later employees have continued to see their options gain in value, it's in large part for the work these earlier employees put in. Work that was compensated in salary and stock options.
The argument you're making is putting early employees against later ones, at the benefit of executives and investors. It's not a good argument, if you're hoping to make an empathetic and moral one.
On the practical side breaking the law doesn't always work though. Shareholders are owners, and regardless of how they got their shares (vesting, purchase, gift, poker game) there are rights that go along with that.
Following this logic, all acquisition should have 0 cash, with what would've been the money for the acquisition going to retention bonuses instead.
This is definitely better for retention, and the share holders that aren't working there anymore? Well they aren't working there anymore so have nothing more to contribute right?
Will some shareholders sue? Probably. Will they recover any additional value? Maybe! Have to see how it plays out in court if a settlement doesn't occur first.
If that were the case then options or shares would have a clause stating that they only retain their value if you are still employed. They do not, and for good reason - you paid for them in sweat and opportunity cost, and probably well below market pay, during a period when the company was very risky. The whole point is to be rewarded greatly for that effort in case of company success. It has nothing to do with whether you were employed when the exit occurred.
You know, the employees who get subjected to unregulated dilution, tyrannical bosses, unreasonable hours and unclear compensation for trading off the prime years of their life? The ones who sign papers that look like an official company that has rules and structures, only to find that it's really "whatever the CEO wants to do"?
You would think people would be up in arms about that.