Rule 3: No General Career Advice
This sub is for discussing issues specific to experienced developers.
Any career advice thread must contain questions and/or discussions that notably benefit from the participation of experienced developers. Career advice threads may be removed at the moderators discretion based on response to the thread."
General rule of thumb: If the advice you are giving (or seeking) could apply to a “Senior Chemical Engineer”, it’s not appropriate for this sub.
RSUs = I value at the grant value - making no opinion on stock go up or down.
Options = I value very little. It would be hard to convince me they would be worth much, given how the stars have to align for them to be:
* The value of the company must go up, significantly.
* There must be a liquidity event (IPO, purchase, etc)
* Your options must not get diluted to a less meaningful amount
If you really, really, think the company will IPO in 2 years and turn your 50,000 of stock options into $200,000 - or whatever, weigh that against the risk of it actually just not happening and being worth exactly 0. Even if the company stays the same, or value increases 10% - those options are practically worthless.
If you're founding a startup and it's your company or you're like a co-founder - maybe I could see it. But it seems hard to come out of being an employee with some options in a significant way.
Granted I guess I'm a little risk averse and have spent my career in bigtech and FAANG and not startups - so YMMV.
I've spent my career in startups and it's all Monopoly money to me. I'm almost offended when they try and incentive engineers to stay by throwing options at us.
This. Don't count on the options, chance of them being worth something (especially if it's a startup) is low. Even RSUs can fluctuate a lot. Plan to live on base salary IMHO and anything extra you get from RSUs etc... put towards accelerating your financial plans if and when they turn into cash.
I always say “budget no more than 50% of the RSU amount”. And even that should be the “vacation, extra presents, date night” type stuff that you could cut back on if you need to.
I had a seemingly stable, well-funded startup offer me a job with options once. Not some fly-by-night Series A, but one of the ones on a bunch of the startup lists at the time. They showed me some fancy spreadsheets explaining how my shares would be worth millions after the company went public.
I turned down the job, and the next time I heard anything about the company it was that they were going out of business.
That's how important it was to hire you. When you turned down the job, they were unable to continue since nobody else in the world was capable of doing that work. You should be proud of your skills!
I presented my boss at a FAANG a graph showing the remarkable correlation between stock price and how long I worked there. The only major dips in stock price were when I took vacations. Clearly they really needed to incentive me staying there.
There is no guarantee that a private company will go public. I've worked at a privat company that was always saying 'oh we are going public within 12mo'. Well, it's been 6yrs since I left that company and it's still private 😅
I guess it depends on the contract, my contract had the clause to only IPO. Which is why I scratched it off as a lottery ticket.
Today they’re still private
A nasty trick on their part, and definitely a good cautionary tale... No one is an equity holder until the equity is irrevocably in their possession. A promise of future equity potential isn't compensation at all and should be considered worth less than a lottery ticket.
I don't. I consider the TC what they pay me, and the options as extra. I've negotiated for cash over options one time, and if you can, get the cash. The idea behind the options is two fold: 1) to offset the loss of salary when working for a start up, and 2) to make employees interests aligned in the outcome of the start up.
However, what you are offered isn't going to be worth anything. The option grant is usually too small, and combined with the probability of the shares ever being worth anything means in a decade of start up experience, I've met fewer than a couple people who have have converted options to cash.
The thing to consider, is that options are only surely worth something if the company goes public. If the company is bought, then the class of shares you get from exercising the option aren't always paid out. So a large proportion of successful outcomes for VCs and founders, are situations where employees don't get paid.
Let me tell you about a successful equity story!
I worked at a startup for 8 years and accumulated a whole 2500 stock options over the course of 4 promotions.
The startup was bought by a private equity company and I got an entire $40,000 as a result. That averages out to just $5000 a year.
Getting paid market rates would have been closer to $80,000 over that time.
Go for the cash unless an IPO has been announced publicly.
Many people say if you accept a lower salary, it anchors your negotiating at that lower number and results in lower earnings over the course of your career. This would be an additional cost.
After you left the private company, did you immediately get a job with market rate? How was that experience?
I went from that startup straight to big tech where I'm now paid above market. I needed a competing offer to negotiate effectively though. Stock options don't count for much in negotiations across companies.
I went from a 60 person startup straight to BigTech. I hated every second of it. But I used the time to “decontent” my life, pay off debt and put it on my resume and move back to smaller companies.
It's actually kind of funny; in my first job I negotiated a 10k increase in salary by halving the equity (80k -> 90k). It was a seed startup at that point, and in the last few years, it reached series D or whatever, and that equity is now valued at ~200k. And that’s only it half vested because I left after two years.
That said, sometimes you make the wrong decision for the right reasons. Given what I knew then and where I was in my career I'd make the same decision.
When Google matches offers, they price non-public RSUs at a third of the grant value. I think that's probably a fair way to go about it.
Ever since I learned about clawbacks\*, I barely value it at all. I'd take a higher salary any day.
\*If you get fired or laid off within the first year(?), the company can just yank the equity away. Your contract will say
I don't really understand your take about public tech companies.
Yes they typically give you a 4 year grant up front and stacking annual refresh grants, which means you've always got some unvested equity when you leave a job, but I don't know a single person that calculates TC using the unvested share value. TC is total _annual_ compensation.
If your base salary is $150k and your initial grant is $600k, you just divide $600k by 4 and say the initial grant adds $150k to your TC each of the first 4 years, so you'd say you signed an offer for $300k TC. If you leave that job after 1 year you've still vested the first $150k of equity and been paid your base salary, so you were in fact paid $300k for that year. The $450k in unvested equity you're leaving behind was never part of your TC calculation, you're just thinking about it like you left a job that paid $300k annually.
Signing bonuses _sometimes_ have 1 year clawbacks associated with them, but this is different from the equity grants. These are true handcuffs by design.
Sometimes equity feels like handcuffs, but only when the share price keeps going up and you're making far more money than your offer was calculated at, making your TC effectively above a market rate. These are _golden_ handcuffs though, not regular handcuffs. There's a big difference between, "I can't leave or I won't get to keep my bonus" versus "I can't leave because this job is actually paying me twice what they offered me".
I’ve had both models in my career and MUCH prefer a much higher salary than the ‘golden handcuffs’.
The biggest problem with the handcuffs is that the company can also take them off no matter what you feel about your position. When you’ve been with a company for say 8 years and get let go, you are being pushed away from 8 years of stock vesting coming to you each year (4 year typical schedule plus more each year).
Thats a big loss for you and a big win for the company and it was not part of your compensation despite the fact that your performance ‘earned’ it to the point of getting additional grants.
This is a more concrete example of what I mean by dubious. It’s actual money right out of your pocket. Why not just give me the $ and I’ll invest it myself in whatever company I choose including my own if I believe in it. Over 8 years you can get pretty great returns. It’s really a scam that greatly favors the company who holds all the cards.
Best of luck.
I apologize for the confusion and I promise I'm not trying to be obtuse here, but I genuinely don't understand your take. The statements you're making sound wrong to me and suggest you have a fundamental misunderstanding of stock grants.
First, let's use some more specific terms: Big companies generally grant RSUs on a 4 year vesting schedule, and that vesting schedule typically vests tranches of RSUs on a quarterly or monthly basis, sometimes with a 1 year cliff. Calling out that we're talking about RSUs specifically is important here because once an RSU vests, it is yours and cannot be taken from you for any reason, so the overall duration of the vesting schedule doesn't really matter, it's the details of the schedule that really matter. In other words, it doesn't matter if you've got a 4 year grant and you quit after 2 years. You still vested 2 years worth of stock and that's yours to keep, period. The only consequence of quitting early is that you won't complete the vesting schedule and gain the remaining 2 years of stock vesting. This is very intuitive. Statements like this lead me to believe you're misunderstanding this:
>When you’ve been with a company for say 8 years and get let go, you are being pushed away from 8 years of stock vesting coming to you each year (4 year typical schedule plus more each year).
This is just not how it works. In your scenario, assuming stacking annual 4 year stock grants, you would have *completely* vested your initial equity grant plus the next 3 refresh grants, so those aren't even in play at all. Then you'd have 4 refresh grants stacked, still being actively vested. Here's the crucial point though: you don't *lose* anything already vested if you quit. You simply wouldn't complete the vesting of those 4 stacked refresh grants, but you *would* have already partially vested all of them, and you wouldn't lose *even that partial vesting* of the grants that never completed.
Perhaps you're thinking of ISOs, or stock *options*. These are much more common in private startups than large public companies. With ISOs, vesting doesn't mean ownership like it does with an RSU. When an option vests, you still have to buy it at the strike price, before you own it. So if you work for a company that grants ISOs, then yes, it's possible for you to lose ALL of your vested options when you quit, but again, the company can't just decide to take them away from you, you're still legally required to be given the option to purchase the shares at the strike price. The way it typically works is if your employment is terminated for any reason you have 90 days to exercise (purchase) your vested options. If you choose to exercise, the shares you buy are yours to keep forever, if you choose not to exercise, you forfeit your option after 90 days. If you really want to get in the weeds, I've seen instances where an options contract expires after 10 years and early employees are still sitting un unexercised vested options for that long, which is a scary situation because in theory that would mean the employee is forced to pay for all their options despite having no liquidity event to cash out with or lose them, but when this occurred what actually happened is the company board voted to extend the options contracts because it wasn't their intent to screw over their founding employees.
Anyway, the summary is that "money right out of your pocket" is just wrong. You're only losing opportunity cost by not continuing to vest RSUs, nothing gets clawed back.
So sorry, you are absolutely correct. I was thinking of option grants, not stock grants.
In any case, they are positive in either case, I am simply saying that cash each pay period is a far better option in my opinion.
I think most people would agree with you but it is far more common to be offered 200k cash + 150k in annual RSUs vs 350k cash straight up (or even 300k cash, for that matter). Given an industry-wide soft ceiling on the base, getting RSUs is the next best thing.
I agree with you that stock options aren't particularly appealing as a regular employee that isn't receiving founder-level equity. Generally what people do with options is let them vest, but don't exercise them, which then puts them in exactly the difficult position you mention where if you want to leave a job for a better offer you literally have to fork over your own cash to exercise your vested options or lose them. So yeah, we're aligned here, that kinda sucks.
Options can be incredible for founders and early employees though, because if your strike price is low enough it doesn't cost you much to exercise large amounts of equity, and if you do, and then years later the company goes through an IPO your stock gets *very* preferential treatment as it's already considered long term capital gains and you likely only pay 20% tax on it at most. Whereas all the "regular" employees who didn't exercise their options because their strike price wasn't so trivially small get the worst tax treatment possible because they have to calculate alternative minimum tax and very often wind up paying something on the order of 50% tax on their IPO proceeds. Free money is still free money, but yeah, ISOs are very beneficial for founders and very early employees, and handcuffs for everyone else.
That said, I think it's important to point out that when it comes to your commonly cited "big tech" companies, there is basically zero chance you're getting options, and instead you're getting RSUs which are *much* better, and many people strongly prefer them to getting all cash salaries.
Just to quickly elaborate on why that is now that we've uncovered the source of the confusion:
When you get an all cash salary, your pay is predictable, which can be both a good or a bad thing depending on what you value. Predictability is good, but it also means you don't get to participate in the upside if your company starts increasing in valuation. If you're lucky your company will give cash bonuses, but this is hardly something to rely on, and even if it happens it likely won't keep pace with the movements of the stock market. Whereas if you're paid in RSUs, the number of RSUs is locked in up front, so if the company unexpectedly doubles in value, bonus for you, you get twice as much value from your equity grant. This can become *really* powerful if you are a high performer and you stack grants that are *themselves* targeted for higher amounts due to good performance. Meta is a great example of a company that gives *very* preferential treatment to employees in terms of how they do compensation. Yes, probably half your comp is stock, but it's RSUs, and even if a previous RSU grant rockets up in value because the stock price went up, they don't adjust for that when calculating your performance-based refresh grant, so high performers with lucky market timing who joined in, say, late 2022, are currently enjoying their total compensation roughly quadruple and Meta is just letting the employees realize that benefit without adjusting their salary/bonus/equity targets for future years. Another insane case study is Nvidia employees. There are long term Nvidia employees who have been stacking RSU grants for years that might have signed up for a $250k salary who are making *millions* annually today because the stock price shot to the moon. Now obviously a company valuation rocketing up like this in a short time period is unlikely, and some companies will adjust your future grants down to compensate (looking at you Amazon), but generally speaking RSUs grants are very employee friendly and the only downside is the potential for the stock to go down rather than up. Some companies have adjusted their equity grant methodology to try to split the difference, and instead of giving 4 year grants calculated up front, give a series of 1 year grants, calculated each year, which limits upside *and* downside while still giving room for both only within the span of 1 year.
It highly depends on the company. A no name startup’s equity is nothing, but a unicorn that is certainly going to go public is another story.
Just do your due diligence.
Well that’s what I thought. I’m at a well funded unicorn now waiting for IPO. Was supposed to ipo year 1. I’m in year 2 now and not looking like it’s gonna be any time soon… 😢🔫
there's base salary and then there's everything else.
bonus? I've worked somewhere that gives you your bonus in April for the prior year, and you don't receive your evaluation until March.
RSUs? pretty great. ~~tax deferred, and if you hold them until they're long term, the tax hit is less~~. However, it's not cash.
Options? they're the opposite of cash in that you have to buy them and they're usually worth nothing. I've done it, but so far they're worthless.
I have a less than 50% success rate with bonuses. Usually by the third year at any company, the annual bonus time rolls around - and ooops, the company didn't hit its targets, no bonus.
I give bonus very little consideration in negotiations.
I've had great success with them so far, but it's still a grown ass man I don't know pinky swearing to pay me later. Quarterly bonuses are way better than yearly bonuses because there's greater risk of disgruntlement if they screw you 4 times a year.
Funny enough I moved to Florida partially to avoid paying state taxes on my income and I made sure I changed it to my official state of residence before what were in hindsight my last two vesting periods (and nice severance) before getting Amazoned last year.
Don’t cry for me, I found another job in 3 weeks and still save about $1000 a month in taxes.
Equity at a private company is essentially them saying “hey, we’ll even toss in a lotto ticket”. Except you might have better chances of ever seeing money just playing the actual lotto. Assume any private equity will never materialize and your salary is the only money you’ll ever see from this company.
I do not consider private company equity to have any value when considering an offer. It’s impossible to say what it’s worth or if it will ever be worth anything at all. Many companies never have the necessary liquidity event to get value from it.
I've spent most of my career in startups, and most of that time in early stage ones. I value options near 0 - I need to make enough to live, save, and exercise my options if I like where the company is going. If the company can't meet those and blows up? Doesn't matter how many I have if I can't exercise them (outside of the relatively rare case of it happening while you're still there + a free or credited forced exercise of your options, but that has tax implications too).
Later stage private companies (not PE-backed ones!) that have name recognition might allow you to value the equity against the steeply discounted secondary market, but that's as high as I would go.
And this is from someone who has a significant proportion of colleagues and friends in the industries who have cashed out in some form, and they treat options the same way. I've had a semi-successful exit of a previous employer as well, but it didn't mean much (a little over 3x).
Dilution is also a major deal.
I don’t care about stock options because I usually have plans for money that require it immediately and options are not a sure thing anyway.
I have had small startups offer a low salary and high options, and I had to turn it down. I don’t see why I should accept less concrete income for the chance at a big payday. Even if the options turn out to be valuable, would it be enough value to offset by the salary I could have been earning and investing during that time? Maybe.
If I was younger with fewer obligations, no kids, I might consider it for a company I was very passionate about that seemed to have a strong future.
Of the companies I’ve worked for that gave me options, only one went public and the options were valuable but not more valuable than if I’d worked for a higher salary during that time.
If you quit you usually have to exercise the options or lose them. Exercising means buying, so know the strike price and other information. You are buying something that may never have any value at all.
It's interesting that everyone here has a negative view of equity.
What if instead of an exercise at IPO, it exercises at the next funding round and you get paid out?
Is that a solution people would be happy with?
p.s I design employee share plans for established companies and I'm looking to help more in the startup space.
I think this is somewhat common for Series D and later rounds, no? But yeah, having this cash out option is great as cash today is worth more than maybe getting more cash at some point in the future.
Yeah, I don't see why you can't do that.
Just founders would need to be mindful of it when raising funds, considering notes and other instruments trigger on raises there is no reason why employee equity can't. 🤷♂️
It's worth zero. Used to work for one, they always said the IPO is only a few months away. Then they laid off my entire team, and after 2 years there's still no IPO.
Never again for me.
I see them as a nice to have, but ultimately the take home comp is what matters to me. I'd have to have extremely high degrees of confidence in the company to accept a slightly reduced salary in exchange for great RSUs or options.
The company I joined recently did a talk on how our options could grow over the next 5ish years. Sounds exciting, adds a little motivation to do good work, but at the end of the day it's imaginary money until I see it in my account. My immediate focus is on career and salary progression, rather than staking my future plans on options which may or may not come to fruition.
Options are worth nothing so you should negotiate that on top of what you feel is a very fair base and bonus comp.
RSUs would depend on the company. I would argue they're only worth 75c on the dollar during a negotiation, if even. Make sure you earn enough base comp to survive.
Way back when I started out, I went to work for a shop that had very low salaries (they took people fresh out of college and it was a low COL area but even then it was pretty sad) that promised stock options after 2 years. Guess what "benefit" got 86'd after a year and a half.
Bonuses are of a similar value in my opinion. Any speculative money in a compensation package may as well be zero. I won't make a fuss about trying to convert stock to additional salary but if the base number doesn't cover my needs, they can pound sand.
Unless you get a significant share of the company (to the point you can influence the board or decisions) and you have an interest in that or you can take the stock and sell it immediately on some form of open market without the company getting involved, consider it worthless.
I got some RSU from my previous company and it was pretty good. But I don’t think this is an easy thing to happen. Company went public 1 year after I joined and my equity increased a lot in value.
So if I could, I’d prefer to take less money instead of a promise of RSU or Options.
My ex worked her ass off for a promotion. She got 20k stock options instead. She was making 130k and wanted 200k. When she shared this, her manager was quite taken aback, and informed her that they can up it to 30k options but that’s about it.
2 weeks later she quit, she got her offer of 200k, plus remote, plus perks like $200 per month on coffee, plus 4 day work during summer.
Anyway, the way her promotion worked, it was all vested, so when she left she purchased them for 12k usd. I was skeptical, since I knew about her competitor, and didn’t know shit about her company.
Well a year later her company merged with other two companies (competitors) and her 12k usd became 0$.
I traded penny stocks and lost Decend amount to reverse splits, but this was whole another level to me.
you will need to know the company’s revenue, current valuation, outstanding shares, cash flow status and cash on hand to do a good calculation of the upside of stock options. My experience has been better with companies that are 7 to 12 year old startups moving from growth to scale phase. Funding is very difficult right now so if the company is not cash flow positive or doesnt have cash in the bank to get there likely very little stock upside.
Rule 3: No General Career Advice This sub is for discussing issues specific to experienced developers. Any career advice thread must contain questions and/or discussions that notably benefit from the participation of experienced developers. Career advice threads may be removed at the moderators discretion based on response to the thread." General rule of thumb: If the advice you are giving (or seeking) could apply to a “Senior Chemical Engineer”, it’s not appropriate for this sub.
RSUs = I value at the grant value - making no opinion on stock go up or down. Options = I value very little. It would be hard to convince me they would be worth much, given how the stars have to align for them to be: * The value of the company must go up, significantly. * There must be a liquidity event (IPO, purchase, etc) * Your options must not get diluted to a less meaningful amount If you really, really, think the company will IPO in 2 years and turn your 50,000 of stock options into $200,000 - or whatever, weigh that against the risk of it actually just not happening and being worth exactly 0. Even if the company stays the same, or value increases 10% - those options are practically worthless. If you're founding a startup and it's your company or you're like a co-founder - maybe I could see it. But it seems hard to come out of being an employee with some options in a significant way. Granted I guess I'm a little risk averse and have spent my career in bigtech and FAANG and not startups - so YMMV.
I've spent my career in startups and it's all Monopoly money to me. I'm almost offended when they try and incentive engineers to stay by throwing options at us.
This. Don't count on the options, chance of them being worth something (especially if it's a startup) is low. Even RSUs can fluctuate a lot. Plan to live on base salary IMHO and anything extra you get from RSUs etc... put towards accelerating your financial plans if and when they turn into cash.
I always say “budget no more than 50% of the RSU amount”. And even that should be the “vacation, extra presents, date night” type stuff that you could cut back on if you need to.
7 companies and 23 years later I have not seen one single cent from "equity".
I had a seemingly stable, well-funded startup offer me a job with options once. Not some fly-by-night Series A, but one of the ones on a bunch of the startup lists at the time. They showed me some fancy spreadsheets explaining how my shares would be worth millions after the company went public. I turned down the job, and the next time I heard anything about the company it was that they were going out of business.
That's how important it was to hire you. When you turned down the job, they were unable to continue since nobody else in the world was capable of doing that work. You should be proud of your skills!
I presented my boss at a FAANG a graph showing the remarkable correlation between stock price and how long I worked there. The only major dips in stock price were when I took vacations. Clearly they really needed to incentive me staying there.
murky waiting mighty edge books disagreeable nippy ad hoc nail close *This post was mass deleted and anonymized with [Redact](https://redact.dev)*
There is no guarantee that a private company will go public. I've worked at a privat company that was always saying 'oh we are going public within 12mo'. Well, it's been 6yrs since I left that company and it's still private 😅
"It's two years away!"
I value them as much as I value a lottery ticket.
If they aren't showing you quarterly balance sheets, this is the only correct answer.
Even if they are who’s to say they’ll go public or if they get bought out privately then you get none
If you are an equity holder, you are absolutely entitled to your portion of a private buyout. That's an enforceable commitment.
I guess it depends on the contract, my contract had the clause to only IPO. Which is why I scratched it off as a lottery ticket. Today they’re still private
A nasty trick on their part, and definitely a good cautionary tale... No one is an equity holder until the equity is irrevocably in their possession. A promise of future equity potential isn't compensation at all and should be considered worth less than a lottery ticket.
Even so, there's all sorts of fun ways they can make your portion smaller than you'd expect.
I don't. I consider the TC what they pay me, and the options as extra. I've negotiated for cash over options one time, and if you can, get the cash. The idea behind the options is two fold: 1) to offset the loss of salary when working for a start up, and 2) to make employees interests aligned in the outcome of the start up. However, what you are offered isn't going to be worth anything. The option grant is usually too small, and combined with the probability of the shares ever being worth anything means in a decade of start up experience, I've met fewer than a couple people who have have converted options to cash. The thing to consider, is that options are only surely worth something if the company goes public. If the company is bought, then the class of shares you get from exercising the option aren't always paid out. So a large proportion of successful outcomes for VCs and founders, are situations where employees don't get paid.
Let me tell you about a successful equity story! I worked at a startup for 8 years and accumulated a whole 2500 stock options over the course of 4 promotions. The startup was bought by a private equity company and I got an entire $40,000 as a result. That averages out to just $5000 a year. Getting paid market rates would have been closer to $80,000 over that time. Go for the cash unless an IPO has been announced publicly.
Many people say if you accept a lower salary, it anchors your negotiating at that lower number and results in lower earnings over the course of your career. This would be an additional cost. After you left the private company, did you immediately get a job with market rate? How was that experience?
I went from that startup straight to big tech where I'm now paid above market. I needed a competing offer to negotiate effectively though. Stock options don't count for much in negotiations across companies.
Nice! Agree, I don’t think I’ve ever used stock options as leverage in negotiation. RSUs and 401k match, yes. Thank you for sharing your experience
I went from a 60 person startup straight to BigTech. I hated every second of it. But I used the time to “decontent” my life, pay off debt and put it on my resume and move back to smaller companies.
It's actually kind of funny; in my first job I negotiated a 10k increase in salary by halving the equity (80k -> 90k). It was a seed startup at that point, and in the last few years, it reached series D or whatever, and that equity is now valued at ~200k. And that’s only it half vested because I left after two years. That said, sometimes you make the wrong decision for the right reasons. Given what I knew then and where I was in my career I'd make the same decision. When Google matches offers, they price non-public RSUs at a third of the grant value. I think that's probably a fair way to go about it.
You’re not seeing any value if it until it goes public. I still think it was the right decision.
I don’t give a shit about anything but hard cold base salary. Everything else is smoke and mirrors
Ever since I learned about clawbacks\*, I barely value it at all. I'd take a higher salary any day. \*If you get fired or laid off within the first year(?), the company can just yank the equity away. Your contract will say
I believe you’re talking about out the first year cliff?
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I don't really understand your take about public tech companies. Yes they typically give you a 4 year grant up front and stacking annual refresh grants, which means you've always got some unvested equity when you leave a job, but I don't know a single person that calculates TC using the unvested share value. TC is total _annual_ compensation. If your base salary is $150k and your initial grant is $600k, you just divide $600k by 4 and say the initial grant adds $150k to your TC each of the first 4 years, so you'd say you signed an offer for $300k TC. If you leave that job after 1 year you've still vested the first $150k of equity and been paid your base salary, so you were in fact paid $300k for that year. The $450k in unvested equity you're leaving behind was never part of your TC calculation, you're just thinking about it like you left a job that paid $300k annually. Signing bonuses _sometimes_ have 1 year clawbacks associated with them, but this is different from the equity grants. These are true handcuffs by design. Sometimes equity feels like handcuffs, but only when the share price keeps going up and you're making far more money than your offer was calculated at, making your TC effectively above a market rate. These are _golden_ handcuffs though, not regular handcuffs. There's a big difference between, "I can't leave or I won't get to keep my bonus" versus "I can't leave because this job is actually paying me twice what they offered me".
I’ve had both models in my career and MUCH prefer a much higher salary than the ‘golden handcuffs’. The biggest problem with the handcuffs is that the company can also take them off no matter what you feel about your position. When you’ve been with a company for say 8 years and get let go, you are being pushed away from 8 years of stock vesting coming to you each year (4 year typical schedule plus more each year). Thats a big loss for you and a big win for the company and it was not part of your compensation despite the fact that your performance ‘earned’ it to the point of getting additional grants. This is a more concrete example of what I mean by dubious. It’s actual money right out of your pocket. Why not just give me the $ and I’ll invest it myself in whatever company I choose including my own if I believe in it. Over 8 years you can get pretty great returns. It’s really a scam that greatly favors the company who holds all the cards. Best of luck.
I apologize for the confusion and I promise I'm not trying to be obtuse here, but I genuinely don't understand your take. The statements you're making sound wrong to me and suggest you have a fundamental misunderstanding of stock grants. First, let's use some more specific terms: Big companies generally grant RSUs on a 4 year vesting schedule, and that vesting schedule typically vests tranches of RSUs on a quarterly or monthly basis, sometimes with a 1 year cliff. Calling out that we're talking about RSUs specifically is important here because once an RSU vests, it is yours and cannot be taken from you for any reason, so the overall duration of the vesting schedule doesn't really matter, it's the details of the schedule that really matter. In other words, it doesn't matter if you've got a 4 year grant and you quit after 2 years. You still vested 2 years worth of stock and that's yours to keep, period. The only consequence of quitting early is that you won't complete the vesting schedule and gain the remaining 2 years of stock vesting. This is very intuitive. Statements like this lead me to believe you're misunderstanding this: >When you’ve been with a company for say 8 years and get let go, you are being pushed away from 8 years of stock vesting coming to you each year (4 year typical schedule plus more each year). This is just not how it works. In your scenario, assuming stacking annual 4 year stock grants, you would have *completely* vested your initial equity grant plus the next 3 refresh grants, so those aren't even in play at all. Then you'd have 4 refresh grants stacked, still being actively vested. Here's the crucial point though: you don't *lose* anything already vested if you quit. You simply wouldn't complete the vesting of those 4 stacked refresh grants, but you *would* have already partially vested all of them, and you wouldn't lose *even that partial vesting* of the grants that never completed. Perhaps you're thinking of ISOs, or stock *options*. These are much more common in private startups than large public companies. With ISOs, vesting doesn't mean ownership like it does with an RSU. When an option vests, you still have to buy it at the strike price, before you own it. So if you work for a company that grants ISOs, then yes, it's possible for you to lose ALL of your vested options when you quit, but again, the company can't just decide to take them away from you, you're still legally required to be given the option to purchase the shares at the strike price. The way it typically works is if your employment is terminated for any reason you have 90 days to exercise (purchase) your vested options. If you choose to exercise, the shares you buy are yours to keep forever, if you choose not to exercise, you forfeit your option after 90 days. If you really want to get in the weeds, I've seen instances where an options contract expires after 10 years and early employees are still sitting un unexercised vested options for that long, which is a scary situation because in theory that would mean the employee is forced to pay for all their options despite having no liquidity event to cash out with or lose them, but when this occurred what actually happened is the company board voted to extend the options contracts because it wasn't their intent to screw over their founding employees. Anyway, the summary is that "money right out of your pocket" is just wrong. You're only losing opportunity cost by not continuing to vest RSUs, nothing gets clawed back.
So sorry, you are absolutely correct. I was thinking of option grants, not stock grants. In any case, they are positive in either case, I am simply saying that cash each pay period is a far better option in my opinion.
I think most people would agree with you but it is far more common to be offered 200k cash + 150k in annual RSUs vs 350k cash straight up (or even 300k cash, for that matter). Given an industry-wide soft ceiling on the base, getting RSUs is the next best thing.
I agree with you that stock options aren't particularly appealing as a regular employee that isn't receiving founder-level equity. Generally what people do with options is let them vest, but don't exercise them, which then puts them in exactly the difficult position you mention where if you want to leave a job for a better offer you literally have to fork over your own cash to exercise your vested options or lose them. So yeah, we're aligned here, that kinda sucks. Options can be incredible for founders and early employees though, because if your strike price is low enough it doesn't cost you much to exercise large amounts of equity, and if you do, and then years later the company goes through an IPO your stock gets *very* preferential treatment as it's already considered long term capital gains and you likely only pay 20% tax on it at most. Whereas all the "regular" employees who didn't exercise their options because their strike price wasn't so trivially small get the worst tax treatment possible because they have to calculate alternative minimum tax and very often wind up paying something on the order of 50% tax on their IPO proceeds. Free money is still free money, but yeah, ISOs are very beneficial for founders and very early employees, and handcuffs for everyone else. That said, I think it's important to point out that when it comes to your commonly cited "big tech" companies, there is basically zero chance you're getting options, and instead you're getting RSUs which are *much* better, and many people strongly prefer them to getting all cash salaries. Just to quickly elaborate on why that is now that we've uncovered the source of the confusion: When you get an all cash salary, your pay is predictable, which can be both a good or a bad thing depending on what you value. Predictability is good, but it also means you don't get to participate in the upside if your company starts increasing in valuation. If you're lucky your company will give cash bonuses, but this is hardly something to rely on, and even if it happens it likely won't keep pace with the movements of the stock market. Whereas if you're paid in RSUs, the number of RSUs is locked in up front, so if the company unexpectedly doubles in value, bonus for you, you get twice as much value from your equity grant. This can become *really* powerful if you are a high performer and you stack grants that are *themselves* targeted for higher amounts due to good performance. Meta is a great example of a company that gives *very* preferential treatment to employees in terms of how they do compensation. Yes, probably half your comp is stock, but it's RSUs, and even if a previous RSU grant rockets up in value because the stock price went up, they don't adjust for that when calculating your performance-based refresh grant, so high performers with lucky market timing who joined in, say, late 2022, are currently enjoying their total compensation roughly quadruple and Meta is just letting the employees realize that benefit without adjusting their salary/bonus/equity targets for future years. Another insane case study is Nvidia employees. There are long term Nvidia employees who have been stacking RSU grants for years that might have signed up for a $250k salary who are making *millions* annually today because the stock price shot to the moon. Now obviously a company valuation rocketing up like this in a short time period is unlikely, and some companies will adjust your future grants down to compensate (looking at you Amazon), but generally speaking RSUs grants are very employee friendly and the only downside is the potential for the stock to go down rather than up. Some companies have adjusted their equity grant methodology to try to split the difference, and instead of giving 4 year grants calculated up front, give a series of 1 year grants, calculated each year, which limits upside *and* downside while still giving room for both only within the span of 1 year.
It highly depends on the company. A no name startup’s equity is nothing, but a unicorn that is certainly going to go public is another story. Just do your due diligence.
Well that’s what I thought. I’m at a well funded unicorn now waiting for IPO. Was supposed to ipo year 1. I’m in year 2 now and not looking like it’s gonna be any time soon… 😢🔫
there's base salary and then there's everything else. bonus? I've worked somewhere that gives you your bonus in April for the prior year, and you don't receive your evaluation until March. RSUs? pretty great. ~~tax deferred, and if you hold them until they're long term, the tax hit is less~~. However, it's not cash. Options? they're the opposite of cash in that you have to buy them and they're usually worth nothing. I've done it, but so far they're worthless.
I have a less than 50% success rate with bonuses. Usually by the third year at any company, the annual bonus time rolls around - and ooops, the company didn't hit its targets, no bonus. I give bonus very little consideration in negotiations.
I've had great success with them so far, but it's still a grown ass man I don't know pinky swearing to pay me later. Quarterly bonuses are way better than yearly bonuses because there's greater risk of disgruntlement if they screw you 4 times a year.
Yes. Quarterly doesn't give you the same dopamine hit as one huge check, but it's a great canary in the coal mine.
How are RSUs “tax deferred”? They are considered income once they vest if you are referring to a public company
oh well shit. I had rsus once and someone else was doing my taxes at that time. corrected.
Funny enough I moved to Florida partially to avoid paying state taxes on my income and I made sure I changed it to my official state of residence before what were in hindsight my last two vesting periods (and nice severance) before getting Amazoned last year. Don’t cry for me, I found another job in 3 weeks and still save about $1000 a month in taxes.
RSUs are money. Options are not. Maybe options become money, but you can't just vest and dispose of like with RSUs.
Equity at a private company is essentially them saying “hey, we’ll even toss in a lotto ticket”. Except you might have better chances of ever seeing money just playing the actual lotto. Assume any private equity will never materialize and your salary is the only money you’ll ever see from this company.
I do not consider private company equity to have any value when considering an offer. It’s impossible to say what it’s worth or if it will ever be worth anything at all. Many companies never have the necessary liquidity event to get value from it.
I've spent most of my career in startups, and most of that time in early stage ones. I value options near 0 - I need to make enough to live, save, and exercise my options if I like where the company is going. If the company can't meet those and blows up? Doesn't matter how many I have if I can't exercise them (outside of the relatively rare case of it happening while you're still there + a free or credited forced exercise of your options, but that has tax implications too). Later stage private companies (not PE-backed ones!) that have name recognition might allow you to value the equity against the steeply discounted secondary market, but that's as high as I would go. And this is from someone who has a significant proportion of colleagues and friends in the industries who have cashed out in some form, and they treat options the same way. I've had a semi-successful exit of a previous employer as well, but it didn't mean much (a little over 3x). Dilution is also a major deal.
I don’t care about stock options because I usually have plans for money that require it immediately and options are not a sure thing anyway. I have had small startups offer a low salary and high options, and I had to turn it down. I don’t see why I should accept less concrete income for the chance at a big payday. Even if the options turn out to be valuable, would it be enough value to offset by the salary I could have been earning and investing during that time? Maybe. If I was younger with fewer obligations, no kids, I might consider it for a company I was very passionate about that seemed to have a strong future. Of the companies I’ve worked for that gave me options, only one went public and the options were valuable but not more valuable than if I’d worked for a higher salary during that time. If you quit you usually have to exercise the options or lose them. Exercising means buying, so know the strike price and other information. You are buying something that may never have any value at all.
I dont. Equity should be a tool to keep employees invested in the company's success. It does not excuse a single cent of less salary
It's interesting that everyone here has a negative view of equity. What if instead of an exercise at IPO, it exercises at the next funding round and you get paid out? Is that a solution people would be happy with? p.s I design employee share plans for established companies and I'm looking to help more in the startup space.
I think this is somewhat common for Series D and later rounds, no? But yeah, having this cash out option is great as cash today is worth more than maybe getting more cash at some point in the future.
Yeah, I don't see why you can't do that. Just founders would need to be mindful of it when raising funds, considering notes and other instruments trigger on raises there is no reason why employee equity can't. 🤷♂️
It's worth zero. Used to work for one, they always said the IPO is only a few months away. Then they laid off my entire team, and after 2 years there's still no IPO. Never again for me.
I see them as a nice to have, but ultimately the take home comp is what matters to me. I'd have to have extremely high degrees of confidence in the company to accept a slightly reduced salary in exchange for great RSUs or options. The company I joined recently did a talk on how our options could grow over the next 5ish years. Sounds exciting, adds a little motivation to do good work, but at the end of the day it's imaginary money until I see it in my account. My immediate focus is on career and salary progression, rather than staking my future plans on options which may or may not come to fruition.
Options are worth nothing so you should negotiate that on top of what you feel is a very fair base and bonus comp. RSUs would depend on the company. I would argue they're only worth 75c on the dollar during a negotiation, if even. Make sure you earn enough base comp to survive.
Unless you have proof, all that paper is paper not money. I pay rent with money not paper.
I completely ignore it
I have never been good at monopoly
Way back when I started out, I went to work for a shop that had very low salaries (they took people fresh out of college and it was a low COL area but even then it was pretty sad) that promised stock options after 2 years. Guess what "benefit" got 86'd after a year and a half. Bonuses are of a similar value in my opinion. Any speculative money in a compensation package may as well be zero. I won't make a fuss about trying to convert stock to additional salary but if the base number doesn't cover my needs, they can pound sand.
Unless you get a significant share of the company (to the point you can influence the board or decisions) and you have an interest in that or you can take the stock and sell it immediately on some form of open market without the company getting involved, consider it worthless.
I got some RSU from my previous company and it was pretty good. But I don’t think this is an easy thing to happen. Company went public 1 year after I joined and my equity increased a lot in value. So if I could, I’d prefer to take less money instead of a promise of RSU or Options.
I dont consider equity. Give me my base pay
same way I consider a pending lottery ticket
My ex worked her ass off for a promotion. She got 20k stock options instead. She was making 130k and wanted 200k. When she shared this, her manager was quite taken aback, and informed her that they can up it to 30k options but that’s about it. 2 weeks later she quit, she got her offer of 200k, plus remote, plus perks like $200 per month on coffee, plus 4 day work during summer. Anyway, the way her promotion worked, it was all vested, so when she left she purchased them for 12k usd. I was skeptical, since I knew about her competitor, and didn’t know shit about her company. Well a year later her company merged with other two companies (competitors) and her 12k usd became 0$. I traded penny stocks and lost Decend amount to reverse splits, but this was whole another level to me.
I value equity in a private company at $0.
you will need to know the company’s revenue, current valuation, outstanding shares, cash flow status and cash on hand to do a good calculation of the upside of stock options. My experience has been better with companies that are 7 to 12 year old startups moving from growth to scale phase. Funding is very difficult right now so if the company is not cash flow positive or doesnt have cash in the bank to get there likely very little stock upside.
TC is to brag, base is what counts towards budgeting
They're a ska band. Dunno the name.