Really interesting post, thanks! You mentioned a few recommended readings (High Output Management, The Score Takes Care of Itself), which are all great general management books. Have you noticed much divergence from their advice when specifically applied to engineering management at high-growth startups?
without cash in a checking account, people often have to resort to predatory financial products like payday loans or high-interest credit cards in order to make ends meet.
In the testing for this product, was there a noticeable decrease in employee reliance on payday loans?
As a long-time Pythonista who's been using Ruby for work for a year now, I've really grown to appreciate anonymous multiline blocks, and wish they were a Python feature.
I am not a fan of all the syntactic variants in Ruby, and think they add some unnecessary complexity but on balance I think this is something that Ruby does better.
Parsing through this stuff makes me feel like I'm in a Stross or Stephenson novel. Does anyone know of any visualizations or interesting insights drawn from this?
Hey - founder of http://offerletter.io here - some thoughts, in no particular order.
My first thought is, get a lawyer and accountant, immediately.
My second thought is, yes, you kind of screwed up. Generally if you have the opportunity to early-exercise + 83(b), you should take it if you can afford it - it's far, far cheaper in virtually every case, especially for the really early stage.
In terms of forward action, you have a few options:
1) Do a full (or partial) exercise with your own money, pay AMT on the spread
2) Take a loan from someone to help finance the full or partial exercise, let them offset your risk in the short term.
3) See if someone (probably an investor, or your former co-founder) is willing to buy your stock back (probably at a discount)
4) Do nothing and see what happens over the next few months/years, and only take (a potentially much more expensive, but also much more certain) once the company is reaching some liquidity event (or lack thereof).
Also, even though they're not "your" lawyers, per se (they are the company's) you should still reach out to the company's legal team to understand your options. And if you have a good, open relationship with the cofounder and/or board, then you have a lot more latitude in terms of next-steps as well - if they're doing well they can nicely ask an investor in a subsequent round to give you some liquidity should you desire it.
If you really believe in the company, it may make sense to exercise now and pay the taxes, but if doing so requires a meaningful portion of your net worth, you'll have to make sure you understand you're putting a lot of eggs in one basket. You would basically be going in on an asset that is opaque, and statistically failure-prone. But if you believe in it, it may be worth it. Maybe.
Drop me a line [ mallyvai at offerletter dot io ] if I can be helpful here more specifically too.
No easy solutions - all have tradeoffs - but it's definitely a manageable situation. Disclaimer: I am not a lawyer or accountant, this is not intended to be formal legal or tax advice, etc etc.
Founder of http://OfferLetter.io here - Harj, love what you're doing with a common YC app, and the spirit of the hiring manifesto.
I'm curious about your approach to making sure the candidate experience is really top-notch since it's still your platform, and how deep you plan on going - even good startups may put forth exploding offers, lowball candidates, forget candidates due to high-pressure sales tactics, etc. This doesn't leave a great taste in engineers' mouths.
Pure top-of-funnel filtering is important, but seems oversaturated. The candidate experience and matchmaking process seem like the real differentiators. What do you feel is the best way to address these?
Patrick's got a ton of great insight into salary negotiations, and this post is no exception. Everybody (especially engineers) - needs to get comfortable talking about compensation and wages in safe spaces. This shouldn't come from a sense of ego, but from a much more humble and sincere sense of information-sharing.
The people who are hurt the most by keeping compensation info secret are precisely the ones that need the information the most - folks from low income backgrounds, people worried about making more than their parents, etc.
As a practical tip, one thing I encourage everybody who's a client to model their equity grant in a simple excel spreadsheet. You need to know
* your strike price
* preferred share price
* company valuation
* total # shares outstanding
As a rule of thumb you can assume your shares are "diluted" (that is your total % ownership relative to valuation) will decrease anywhere on the order of 15%-40%) after each funding round depending on company's performance. Plotting this beforehand, along with where you believe the company will end up, will give you a great sense of what your equity is worth.
[Source: I founded http://OfferLetter.io - We help engineers and other tech workers get what they're worth. If you're interested in free data, you should join Offer Drive (http://offerletter.io/drive.html to learn if you're paid fairly]
I have incredibly mixed feelings about this. Zero-negotiation policies are great tools for eliminating unfairness if executed well, the problem is that you still force the employee to end "trusting someone at their word", and every company claims they're going to make a fair, standard offer. Here's the thing:
1) Yes, being strict and almost formulaic will reduce inequality and increase probability that folks are compensated according to actual value.
2) But you need meaningful transparency around this. I guarantee you, 100% that if I had a live offer at Reddit, I could find some way to negotiate some additional crap that amounted to a meaningful compensation bump in the end.
3) Every company that does this ends up making exceptions for people the higher-up you go. Wealthfront, Stack Exchange, and now Reddit, will join the club of companies that negotiate with execs they hire, VCs, and bizdev partners, suppliers - basically, everybody except their employees. And even then only "most of the time"- there are always exceptions - just hold out for a higher comp band. Get a stronger inside referral. It's always possible.
Ellen, Alexis - If you're reading this, I'd love a chance to understand your challenges in crafting these policies, and see if I could offer any input from my perspective as well.
(Source I founded http://OfferLetter.io - we help engineers and other tech workers negotiate for what they're worth. I've personally had literally hundreds of conversations with folks about this.)
It's not a marketplace per se, but at http://OfferLetter.io, we guide candidates on exactly this offer selection problem. More generally, we preach that everybody should have the best career on the best terms. We've found that by approaching the conversation in a structured way, we can eliminate a ton of the uncertainty and stress that generally accompanies the process.
One of the most high-leverage things we've seen help is simply creating a spreadsheet with (Company, Conversation-State, Date, Last Impressions ) can add a ton of value.
Looks fantastic Patrick! Your original blog post on salary negotiation actually helped lay early mental groundwork for what later became http://OfferLetter.io .
One thing I'd love to get your thoughts on, in more detail, is how you see the product and service evolving over time, given that you're charging companies. We believe (as do our customers) that incentive alignment is extraordinarily important. By charging candidates alone, we eliminate the messy incentive dynamics that happen with companies and their sourcing channels. We can go to bat for candidates, every time, unconditionally. That simply doesn't happen under many of the traditional recruiting models. If you've found a way to subvert the original messy dynamic while still charging companies, that's wonderful.
Good luck with Starfighter, super excited to see how things go!
1) A lot of people do make money off of employee stock, you just have to be reasonably intelligent about it. This blog post is a good way to model risk/reward.
2) Thinking of your employer as your enemy is a great way to set yourself up for failure.
3) Don't think of stock as worthless, think of it as a bunch of lottery tickets. It has some probability of being worth something based on the lottery.
This is a great rundown - I'd like to chime in with our own blog post [1] Basically, there are a handful of questions you must ask about your options:
> What is the number of shares outstanding on a fully-diluted basis?
> What is the fair market value (FMV) of my shares?
> What is the exercise price (aka strike price)?
> Do you allow early-exercise of options?
> Do you allow an 83(b) Election?
> What is the vesting schedule?
> What are some potential exit scenarios?
This helps lend context to the stuff in Ian's post. Also, ALWAYS TALK TO A LAWYER who can review your paperwork! A few hundred bucks for a couple hours of time could save you hundreds of thousands (or potentially millions) in taxes and losses down the road! Do not compromise on this!
> What is the number of shares outstanding on a fully-diluted basis?
> What is the fair market value (FMV) of my shares?
> What is the exercise price (aka strike price)?
> Do you allow early-exercise of options?
> Do you allow an 83(b) Election?
> What is the vesting schedule?
> What are some potential exit scenarios?
Equity is complicated. Options are complicated. Even well-meaning founders may inadvertently introduce disfavorable language into an employee options plan at the behest of an investor or board member. It is contingent on the individual to figure this out and stand up for themselves.
I also encourage virtually every engineer i chat with these days to retain an equity lawyer to help them pore over the contents of their grant paperwork and minimize surprise. It's going to cost a few hundred bucks and potentially save you from millions in losses down the road.
Agreed about not naming the first number, deflecting, and broken mental models.
But this post paints a woefully incomplete picture of the negotiation process - the mental model of which can vary between people based on background and experience, and will also change dramatically based on if the position is at a startup, big tech company, etc.
First: "Once we know how much they make, we will offer them 5-10% more than they currently make." - This is false. A lot of bigger places may be able to do this, but there's a whole slew of great startups that will absolutely refuse to match that cushy $165k base salary you're making as a staff engineer at Google. They'll compensate you in equity instead, but matching or even increasing the base? Forget about it.
Secondly, it's absolutely silly to talk about salary without talking about equity. The two are tied together at tech companies - the total gross compensation package, and the package that matters in the event of a meaningful outcome, is what matters. There are little tradeoffs.
Finally - Recruiters and HR are not evil. They are simply people trying to do a job. It's your job and nobody else's (well, except http://OfferLetter.io 's ) to stand up for you.
I'd like to put in a word for the Career Agency team at http://OfferLetter.io - we are building the first true talent agency for tech. We align incentives with individual engineers (and do not take money from companies), help them improve their messaging and polish, intro them directly to CTOs and VPs to help cut past recruiting bullshit, and provide negotiation advice.
We want everyone to find "the team", not "a team".
I'm an ex-Twitter (Growth) / ex-Amazon (Identity) engineer, and am building what I would have wanted at every step of my career.
Why did you guys pivot away from employee referral amplification? The original idea seemed incredibly powerful - we all know hiring is broken, and amplifying the referral graph seemed like a great way to add a lot of value to growing orgs.
Thanks for the feedback! Unfortunately TypeForm (which we're using right now) is a little difficult on the internationalization front, but you're welcome to input the specific unit of currency alongside the value.