I personally prefer not to own a home in
these circumstances but if you really want
to buy a home I’ll happily help you by
writing a letter.
A couple reactions:
1. The employee in an early stage startup should know better, but:
2. You, as their CEO, someone they hopefully trust and respect, shouldn't be doing anything to encourage them getting into a financially untenable position.
edit: I want to mention another scenario. Let's say you have six weeks of cash left, and prospects for a bridge round are shrinking by the day. For whatever reason you've decided not to tell your employees what's up.
What do you do then? Still tell this poor bastard, "if you really want to buy a home I’ll happily help you by writing a letter"? That's incredibly risky at best and morally repugnant at worst. Maybe things work out and you get more cash. Maybe you don't, but he's able to get another job within days. Maybe you don't, he can't, and he loses his house.
That's a serious gamble you're taking not with your own life and livelihood but with someone else who has placed their trust in you. What's your reaction? 'Them's the breaks with working at a startup,' perhaps?
I know Mark lives in L.A., but I've seen similar behavior occur in both Seattle and SF companies, and I find it abhorrent.
Here's another part that bugs me:
If you find employees building spreadsheets
and spending time on exit scenarios and what
their take would be then you know your company
has “optionitis.”
Or they're about to figure out that it doesn't matter if the company exits when they own 0.75% or 0.49%, because their percentage is going to net them exactly dick either way.
The cultural memory of stock options revolves around the Microsoft IPO, where in a pre-internet age, secretaries (which indicates how long ago it was) became millionaires via tiny slices of equity. The Google chef brought the misconception into the internet age.
Even at a billion dollar exit, 1% is borderline fuck you money after taxes.
Absolutely right, but, as I'm fond of pointing out to friends who join startups: you are not joining Google, Facebook, or Microsoft. The odds of you even joining Zillow or Yelp are so remote as to be a rounding error to a rounding error.
In fact, the Microsoft IPO was so long ago that it didn't even start out at a billion. The IPO valuation was $519 million.
But what really established the options mentality is that Microsoft grew another 1000-fold to the peak of the dot-com bubble. Someone who joined Microsoft before the 1986 IPO got rich. But so did someone who joined after the IPO. In fact, even someone who joined in 1995 would still get rich. That's why there were tens of thousands of Microsoft millionaires.
The other key difference is that Microsoft was mostly-bootstrapped. They did take investment, but not enough of it to significantly dilute the founders and employees. At the time of the IPO, Bill Gates owned 45% of Microsoft, Paul Allen owned 25%, and Steve Ballmer owned 7.5%.
It's very different today. You get tiny slices of equity, often junior to the VC investment. The company is more likely to be bought out for cash than to IPO. And when you're bought out by a larger company, your options are either cashed out or converted into options on the larger company. Those options are highly unlikely to grow another 1000-fold.
Well the 5 year share save for BT due next year will return about £60k (tax free) and I know there will be a lot of people taking redundancy after that.
It is when you have enough years in and with BT's redundancy terms you can max out your pension (ie if you worked any longer you would not get any more pension) get a huge tax free bung plus £60k ss on top.
Rule of thumb. Deliver bad news all at once. Let good news leak out a bit at a time.
Furthermore the CEO's advice was not bad. I looked for a job, in tech, in Los Angeles, in 2003. I know what that market was like. Even if the company folded, the employee would have had a good shot at finding another one quickly. Whether or not to trust the ability to do that is another question. But whether to take the risk really is a question of choice.
1. The employee in an early stage startup should know better, but:
2. You, as their CEO, someone they hopefully trust and respect, shouldn't be doing anything to encourage them getting into a financially untenable position.
edit: I want to mention another scenario. Let's say you have six weeks of cash left, and prospects for a bridge round are shrinking by the day. For whatever reason you've decided not to tell your employees what's up.
What do you do then? Still tell this poor bastard, "if you really want to buy a home I’ll happily help you by writing a letter"? That's incredibly risky at best and morally repugnant at worst. Maybe things work out and you get more cash. Maybe you don't, but he's able to get another job within days. Maybe you don't, he can't, and he loses his house.
That's a serious gamble you're taking not with your own life and livelihood but with someone else who has placed their trust in you. What's your reaction? 'Them's the breaks with working at a startup,' perhaps?
I know Mark lives in L.A., but I've seen similar behavior occur in both Seattle and SF companies, and I find it abhorrent.
Here's another part that bugs me:
Or they're about to figure out that it doesn't matter if the company exits when they own 0.75% or 0.49%, because their percentage is going to net them exactly dick either way.