[HN Gopher] DoorDash removing 1-year cliff for equity grants
___________________________________________________________________
DoorDash removing 1-year cliff for equity grants
Author : matan_a
Score : 116 points
Date : 2021-07-07 20:29 UTC (2 hours ago)
(HTM) web link (blog.doordash.com)
(TXT) w3m dump (blog.doordash.com)
| carkmorwin wrote:
| Does DoorDash also grant RSUs based on fixed bonus amount and not
| number of shares? It's hard to believe this would be pro-
| employee.
|
| https://www.teamblind.com/post/Lets-Boycott-Interviewing-at-...
| r00fus wrote:
| I think it's common in the industry to see RSU grants shown as
| say, "$50k" - but that's $50k in stock as of the grant time.
| Once the grant is finalized, the value of the RSU grant grows
| with the stock. ie, if the stock is $100, then it's the same as
| 500 share grant.
|
| This Blind post is saying that Instacart/Stripe says you only
| get $50k no matter the price of stock? How would you even
| structure that kind of grant? Why not just make it a bonus?
| dabfiend19 wrote:
| all of my friends at google say the grant is in dollars and
| stays in dollars at google. at the end of the quarter you get
| a variable number of shares based on current stock price.
| While this reduces upside, it also reduces downside.
| ericjang wrote:
| Googler here. dabfiend19 is correct, around ~2019 I believe
| new L3 hires were switched to this new grant schedule.
| Prior to that, it was based on a fixed number of shares.
| [deleted]
| z0r wrote:
| you have misunderstood your friends, or your friends have
| misunderstood their grants
| potatolicious wrote:
| I've been at Google fairly recently, that's not how it
| works.
|
| Your offer states that you will get $X of shares, vesting
| over 4 years. The $X is converted to a number of shares
| shortly after joining, based on market price, and is locked
| in from that point forward.
|
| Your friends are mistaken.
| QuercusMax wrote:
| This is correct. I believe the share-price they pick is
| something like the average daily share price for the next
| full month after you join. So if you join Jan 28, the $$
| value of your stock grant will be evaluated around March
| 1 to determine your grant-price, and then you'll get your
| first vested shares monthly (around the 25th, I think?).
|
| I believe they used to due quarterly vesting for folks
| who didn't get much equity, but now that you can have
| vesting of fractional shares, ~everybody should be on a
| monthly vesting schedule.
| nostrademons wrote:
| Wasn't true when I was (re-)hired a year ago. Grant is in
| dollars, it's converted to shares based on the share price
| when you start, and then you that fixed number of shares
| divided by the number of vesting periods over the term of
| the grant. The vesting period depends on how big the grant
| is; low-level employees will likely vest quarterly,
| mid/high-level monthly. No cliff; they removed it a couple
| years ago.
| Rebelgecko wrote:
| Your friends might be getting mixed up with annual
| refresher grants. Except for some rounding of fractional
| shares, your initial grant will vest the same # of shares
| every month for 48 months
| dabfiend19 wrote:
| I work at a smaller company, and here we convert the $ price
| to a number of shares by taking the 100 day VWAP of the stock
| from the date of the board meeting where your grant is
| approved.
| devoutsalsa wrote:
| I had to google it...
|
| VWAP == Volume Weighted Average Price
|
| https://www.investopedia.com/terms/v/vwap.asp
| r00fus wrote:
| I stand corrected, however, shares are fixed at time of
| grant is my point.
| flatiron wrote:
| Either we work at the same place or that's very common.
|
| When I joined I got a random email that said "your rsu $ to
| shares conversion was X shares and here's your schedule"
| and my schedule is all in # of shares not $
| B-Con wrote:
| This is very common. It's basically the point of paying
| in RSUs and not in fixed dollars, to give employees
| incentive to care about the company/stock performance.
| echelon wrote:
| Yes, but then they take that calculation to grant you a set
| number of shares (ISOs, RSUs, etc.) that doesn't change.
| The value of your award grows with the growth of the
| company.
|
| ESPP-like programs, on the other hand, are always dollar
| denominated and exchanged at a set rate at the end of the
| offering period.
| xutopia wrote:
| Because that 50k isn't necessarily exercised immediately and
| means that you are potentially going to benefit from a rising
| stock price.
| bradlys wrote:
| It's number of shares based on when you joined. It is the
| original format as 1-yr cliff but now you just get your stock
| faster.
| almost_usual wrote:
| I was expecting a catch with the equity grant period shortening
| but it seems it's still four years? If so this is great for
| employees.
| shaohua wrote:
| awesome
| bww wrote:
| > Because we see equity as part of total compensation, we believe
| employees should receive equity as it's earned -- every quarter.
|
| This reads to me like someone looked at the data and discovered
| that almost everybody who stays employed for a quarter goes on to
| stay for a year. So they decided to try to juice some marketing
| value out of a policy change that makes no functional difference
| to anyone.
|
| Why else would they choose to have equity vest quarterly instead
| of with each pay period? Or monthly, which is already typical
| after the cliff? If you believe equity is part of total
| compensation why does it need a different schedule at all?
| novok wrote:
| TBH I'd feel jittery working at door dash. COVID is going to end
| completely soon and the boom in deliveries is going to drop with
| it, probably along with their stock price. If was to go work
| there, I could start selling every month.
|
| But they also don't give you units of RSUs as stock comp, just
| cash equivalents, so that is another major downside working
| there.
| ekzy wrote:
| Covid might have created some habits in people, not sure the
| deliveries are gonna drop that much
| mupuff1234 wrote:
| Have any of these food delivery companies actually reached
| profitablity?
|
| What's the endgame?
| Animats wrote:
| This does not, of course, include the people who actually do the
| deliveries.
| sergiotapia wrote:
| of course, they are not employees
| justaguy88 wrote:
| This is great!
|
| Allows bad-fits to leave asap rather than hanging around till 366
| days
| ram_rar wrote:
| Depending on how you look at it. This is good for employees who
| dont have to wait till the cliff. But on the other hand, if your
| RSUs are based on a fixed amount (which I believe is the case for
| all the new hires in DD) and not no of units, then you're missing
| out on stock growth. Since the compensation is capping the upside
| of stock.
|
| Overall, this is not bad for a company that has already IPOed. I
| hope the startups that are on the verge of the IPO dont use this
| as a way to cap out giving RSUs to employees.
| potatolicious wrote:
| > if your RSUs are based on a fixed amount (which I believe is
| the case for all the new hires in DD) and not no of units
|
| That's quite surprising. Generally RSU comp is based on a
| particular monetary amount, but converted to no. of units upon
| issuance based on market prices (usually at/close to start
| date). Is this not the case with DoorDash?
|
| If that's the case that seems... awful? That's a cash bonus
| with a downside.
| jypepin wrote:
| What I've seen is generally the conversion happens once for
| the whole package, when you sign. So if the stock grows
| during your vesting period, the value increases (goes both
| way obviously).
|
| I think here they are mentioning value based, which means
| that instead of being given X amount of shares/rsu over 4
| years, you're given "the equivalent of $X" at the begining of
| each years. So after 1 year, of the stock doubled in price,
| you will effectively receive half the amount of stocks (still
| the same $ value tho).
| nostrademons wrote:
| That's typical, but I've heard of a move away from it, to a
| plan where you get a set dollar amount every month(?) and
| it's converted to employee shares at the market rate then.
| Sounds like DoorDash just moved to it, and someone has
| linked a Blind thread where apparently Stripe/Instacart
| have, and I heard from a friend that Lyft just moved to
| that as well.
|
| I can see the importance of this from the company end -
| with tech company shares skyrocketing, a fixed share amount
| gives them potentially unlimited stock compensation
| liabilities which could drag on earnings. But from an
| employee perspective, it sucks. You get none of the upside
| of company stock appreciation but all of the downside of
| being forced to purchase company stock with a portion of
| your compensation. You're much better off taking higher
| cash compensation and using that to purchase the stock of
| hot tech companies on the open market.
| potatolicious wrote:
| Agreed, this seems deeply negative for the employee. It's
| not semantically different than just being paid a cash
| bonus, except you are forced to buy company stock with
| said cash bonus.
|
| Which I suppose you can just immediately sell and get
| back the cash - which begs the question of why not just
| model this as cash bonus compensation entirely?
|
| The entire attraction of equity is that it can appreciate
| as it vests - that your (presumed) contribution to the
| company's market cap during your tenure is rewarded.
| pm90 wrote:
| If I was looking at offers I would just not accept this
| nonsense. Not only are you compensating employees less,
| you remove the feeling of shared ownership that comes
| with stock grants, which is a powerful motivator.
| almost_usual wrote:
| > That's typical, but I've heard of a move away from it,
| to a plan where you get a set dollar amount every
| month(?) and it's converted to employee shares at the
| market rate then. Sounds like DoorDash just moved to it,
| and someone has linked a Blind thread where apparently
| Stripe/Instacart have, and I heard from a friend that
| Lyft just moved to that as well.
|
| Wow that sucks
| potatolicious wrote:
| Boy if that's true that's a real bummer. That's not very
| different than just getting a cash bonus.
|
| The entire point is to encourage people to stay by letting
| their wealth grow with the company? A scheme like that
| seems wildly counterproductive.
| jahabrewer wrote:
| > you're missing out on stock growth
|
| Is that necessarily true?
| ram_rar wrote:
| yes, have been lucky enough to exit 2 IPOs including DD. When
| there are hockey stick growths during pre-IPOs, you miss out
| on a lot of $$ on the table.
| m-ee wrote:
| I don't see how this change would make that worse, could you
| explain?
| mulligan wrote:
| it means you are vesting (and paying taxes) every quarter, so
| you won't see growth on that pre-tax amount
| [deleted]
| darthvader101 wrote:
| hope more companies adopt this practice
| DebtDeflation wrote:
| Not surprised. I'm probably a fair bit older than the average HN
| reader (finished undergrad in 1995). This is the hottest job
| market I've seen since the height of the dotcom bubble (mid 1999
| to early 2000), and if it continues along it's current trajectory
| it will pass that by year end.
| marktangotango wrote:
| > This is the hottest job market I've seen
|
| Clearly this is anecdotal, but what types of things lead you to
| this conclusion?
| arnvald wrote:
| I live in EU and there are a few things that have changed:
|
| - tons of remote offers, even with technologies like Java
| where in the past very few offers were remote
|
| - salaries significantly up compared to 1-2y ago (getting
| 90-100k eur for a remote position in EU was rare, now it's
| not surprising to see such numbers)
|
| - companies shorten interview processes, both in terms of
| numbers of rounds but also the time the whole process takes.
| In the past companies could reply to your application after a
| week, now I saw a few cases where a week after applying they
| send an offer
| dpaleka wrote:
| Is it really?
|
| I'm graduating soon, but recruiters haven't started reaching
| out yet. But in a normal year, I suppose they would:
|
| https://danielpaleka.com/docs/cv-daniel-paleka.pdf
| digianarchist wrote:
| Browsing /r/cscareerquestions it looks like entry level folks
| are having a hard time breaking into the industry. Employers
| are mostly recruiting senior levels it seems.
| milofeynman wrote:
| I think this is a problem across the industry. Companies
| don't want to give engineers adequate raises so they get
| trained as juniors and walk out and get 20-30k raises. So
| then everyone is only interested in seniors.
|
| Senior has all but lost its meaning too... It describes how
| long you've been in the industry, not if you have the skills
| to be a technical leader, etc.
|
| At larger corps when a senior leaves, you're often given
| budget to re-hire a senior, so there is no incentive to hire
| a junior/entry level. A lot of companies don't even have
| pathways from internships to entry-level positions. They just
| let them finish their internship and say "good luck"
|
| This is a problem for diversity as well. Look at the makeup
| of the seniors in the industry. Now look at the junior/entry
| level folks coming out of master programs, colleges and boot
| camps.
| pm90 wrote:
| I don't think it's a question of raises, more like they're
| just not willing to invest the time.
|
| Most non giant companies don't have good processes for on
| boarding engineers so it's mostly yolo. They want engineers
| to be productive very quickly. Someone just out of college
| will likely not have the skills required to drive projects
| on their own to completion without help/supervision.
|
| Bigger companies have pretty great onboarding tools and
| processes and dev tools that abstract most complex things
| away, allowing developers to become productive rapidly. I
| think of them as factories that can extract the most value
| out of new grads.
|
| I say this as someone who was a junior not that long ago,
| but of course my experience is anecdotal so take it with a
| pinch of salt.
| mason55 wrote:
| Yeah I always see this expressed as a criticism, like "oh
| these small companies just hate junior devs! Everyone
| wants to hire a senior dev, no one wants to hire a junior
| dev and train them!"
|
| But it's not always that easy. If you're a small company
| still looking for product-market fit or doing a fair bit
| of greenfield development, there's just not much work for
| a junior dev to do. These companies aren't all stupid or
| lazy or discriminating against new grads for some reason.
|
| It's the same reason estimates are hard - we're building
| brand new things that we've never built before and a lot
| of the work is in the design. Junior devs need to be told
| what to do. The architects/senior devs become a huge
| bottleneck because they can only design so much stuff at
| once, so until you can find more of them you can't hire
| more junior devs because there's not going to be anything
| for them to do. Until you get to a point where you're
| doing repeatable work or your design/architecture is
| solidified enough to keep people on the guard rails,
| there's just not a ton of work for a junior dev to do.
|
| Finally, you also have the issue that a lot of devs don't
| want to get into any kind of management but they want to
| be managed by technical people. You end up with a
| shortage of decent managers (where "decent" means both
| someone who's ok at the job of management and is
| acceptable to the team).
|
| If we had more work to give to junior devs we'd happily
| hire them - they are so much cheaper!
|
| And one other contributing factor is a lack of unions.
| Say what you will about seniority-based comp/perks, they
| do make people stay in one job for longer, which makes it
| more worthwhile to invest in a junior dev.
| paxys wrote:
| I know many new college grads who got offers from multiple
| tier-1 and tier-2 silicon valley software companies in the
| same range as what I got as a senior engineer with 8 years of
| experience a few years ago. I'm talking base salary
| $160K-$180K, $300K equity grant, 10% annual bonus, sign on
| bonus, relocation...the works.
|
| Not to say that everyone can simply walk in to these jobs
| (and they shouldn't!), but if a graduating CS major cannot
| find _any_ decent software job today I 'd be more inclined to
| suspect their skills than the industry itself.
| deregulateMed wrote:
| Is it really "the works" if you have to move to SV?
|
| I'm profiting 100k/yr in the Midwest, and it's a junior-ish
| position.
|
| Could be worse, could be Tesla 90k/yr revenue.
| Alex3917 wrote:
| > Employers are mostly recruiting senior levels it seems.
|
| Because no one is going to hire a junior developer to work
| remote. The job market isn't especially hot, it's just
| temporarily distorted in a way that favors more experienced
| developers.
| MattGaiser wrote:
| Eh, even as someone with 1.8 years experience (at least I
| still feel very junior) I get a steady flood of recruiters
| and can easily get a pile of interviews.
|
| I think it's that if you have zero experience, you are a
| huge unknown. Anything more and work abounds.
| MattGaiser wrote:
| There are a surprising number of people who graduate CS/CE
| without writing any meaningful amount of code.
|
| To me a decent junior should be able to build a basic Hacker
| News.
|
| There are a lot out there who have never done so much as make
| a web page with more than copy/pasted Jquery and expect to
| get jobs.
| deregulateMed wrote:
| I've seen these people get a job in testing and never
| leave... Or they move to a program management position.
|
| On the flip side, self taught coders can do pretty much
| anything with bad form. Although even at my job I find
| myself doing things with bad form unless the task requires
| it to be written well.
| MattGaiser wrote:
| This is one of my concerns about myself.
|
| I have never really had the opportunity to work with
| experienced developers for a long period of time (at
| least not experienced with the work I was doing) so for
| all I knew I am doing all sorts of things with bad form.
| fridif wrote:
| >"To me a decent junior should be able to build a basic
| Hacker News"
|
| In what time period? With what features? With what non
| functional requirements? Show me a senior who can!
|
| I have a better test for evaluating anyone's skills:
|
| Write a function that puts Strings in an array. Then write
| another function that goes searching for a string in an
| array.
|
| Write a unit test to confirm your code is working. Explain
| what happens to the performance of our code if we can
| guarantee our array is sorted.
|
| If they can past this test, you're already better than most
| candidates in my eyes, and it takes about 10 mins to find
| out.
| MattGaiser wrote:
| I would be satisfied with anything approaching a forum,
| with wide flexibility in specific features.
|
| If you know enough about a web framework to get it going,
| use it to complete a specific set of tasks, and get it
| deployed with a database, it would put you ahead of a
| heck of a lot of grads that I know.
|
| I wasn't suggesting this as an interview question, but
| more a self check for juniors. Can you actually bring
| something end to end? Yours works better in an interview
| setting, although it seems fairly trivial.
| bogota wrote:
| Yes unfortunately almost all US and likely other computer
| science degrees are geared largely at making you a good
| researcher. I was lucky in that i loved playing with some
| home servers and with that led to figuring out how to build
| my own software before finishing school. I think college
| does a very bad job of preparing you for the real world use
| such as most having people turn in zip files and not even
| using git (maybe this has changed).
| MattGaiser wrote:
| I graduated two years ago. We learned subversion :)
| dahfizz wrote:
| I think there is a bit of a selection bias going on in that
| subreddit.
|
| I finished undergrad last May and had multiple offers to
| choose from well before I even graduated. Maybe covid has
| slowed hiring since, though.
| antiterra wrote:
| New grad jobs are often a completely different pool from
| the rest of the roles, so that doesn't necessarily
| conflict.
| rejectedandsad wrote:
| I only had 4 offers to choose from. It's a bimodal
| distribution between the 200K+ 0YOE folks and everyone
| else.
| smabie wrote:
| 4 is a lot
| skeeter2020 wrote:
| >> I only had 4 offers to choose from
|
| I busted ass to get a single job; how is "only" 4 offers
| not amazing?
| whimsicalism wrote:
| Eh, I talk to a fair number of undergrads and I think it
| has been tough this past year.
| jshen wrote:
| Something is off then. Are they in big cities? Do they
| not know where/how to apply? We've had a hard time hiring
| anyone, including entry level.
| whimsicalism wrote:
| I mean, what sort of compensation are you offering?
|
| Also - I'm talking about last year, not now.
|
| But I am recently out of college and have not even passed
| resume screen by a few companies despite referral,
| credentials, etc.
| jshen wrote:
| We're not a big tech company, so comp isn't quite what it
| is at Amazon, FB, etc. but, it's solid. 100k+ salary,
| annual grant of restricted stock units, good health and
| other benefits etc.
|
| Having said that, there's a contradiction in claiming
| that college grads can't find jobs while suggesting that
| a company offering six figures can't find people because
| of comp.
| whimsicalism wrote:
| > while suggesting that a company offering six figures
| can't find people because of comp.
|
| Never said that - but if you had answered $50k, I
| probably would have!
|
| I'm surprised you are having trouble hiring people - but
| perhaps if you are in the Bay and hiring new grads, they
| might be surprised when it is in the low $100ks.
| zo1 wrote:
| Are you offering remote? That might be a big factor that
| could influence things at this point in time.
| bboylen wrote:
| What city are you in, if I may ask?
| jshen wrote:
| We offices in several cities. LA, Seattle, and more.
| akomtu wrote:
| Have you adjusted your pay for inflation? The rent prices
| have nearly doubled in ten years, so if you offer 100k
| today, it's like offering 60k in 2011.
| jshen wrote:
| Starting salaries were around 75-80k ten years ago.
| Again, there's a contradiction in the claim that college
| grads in comp sci can't find jobs, and the suggestion you
| are making.
| tshaddox wrote:
| I suspect that is no more the case than it has always been.
| While the overall job market demand might be very high now, I
| doubt that the _proportions_ of demand for entry-level and
| senior roles has changed significantly.
| bboylen wrote:
| As a self taught guy transitioning from chemical engineering,
| I hope its not too hard. Starting my search in a couple
| months
| oehtXRwMkIs wrote:
| Doing something similar, good luck. Can't tell if it's very
| difficult or very easy.
| bboylen wrote:
| I don't think it is super easy. I think it is doable
| though
| deregulateMed wrote:
| I did this.
|
| Engineering was more rewarding than software, but software
| pays better.
|
| I do engineering in my personal projects now.
| fallmonkey wrote:
| With Google doing front loading(33/33/22/11) and other companies
| also shifting away from conventional 25% per year vesting to make
| first few years more attractive, they gotta catch up to stay
| competitive. Uber recently did the same of removing cliff.
| breck wrote:
| Do you have a link for Uber dropping the cliff? I didn't know
| they did that.
| B-Con wrote:
| Source on Google doing front loading?
| thebean11 wrote:
| I don't have a link, but seen this on Blind quite a bit
| thebean11 wrote:
| Ehh, aren't the front loaded grants smaller in total? I don't
| see front loading as a good thing necessarily.
| bentlegen wrote:
| The article seems to intentionally obscure whether the previous
| vesting period was quarterly or not.
|
| My cynical read of this is that they are changing the vesting
| schedule to quarterly (instead of monthly, which is more
| typical), and burying the lede on that by painting this as a
| benefit to employees (when it really only impacts new employees).
|
| Does anyone know if this is true or not?
| fshbbdssbbgdd wrote:
| I've seen quarterly vesting much more often than monthly in
| offers from several different companies over the years.
| mynameisvlad wrote:
| > instead of monthly, which is more typical
|
| Is it? Almost all my and my friends' RSUs have been quarterly,
| with a typically 1 year cliff as described in the article.
| piercebot wrote:
| Typically, there's a "cliff" after the first year, at which
| point it switches to quarterly.
|
| So you get nothing the first three quarters, but after quarter
| 4 (your first year at the company), 25% of your 4-year grant is
| immediately vested. Every quarter after that is another 6.25%
| of your initial grant.
|
| I believe the point they were trying to make in the article is
| that, instead of quarterly grants following the pattern of:
| [0%, 0%, 0%, 25%, 6.25%, 6.25%, ...]
|
| It would instead follow the pattern: [6.25%,
| 6.25%, 6.25%, 6.25%, 6.25%, ...]
|
| ```
| [deleted]
| soheil wrote:
| It looks like DoorDash just put up a big banner at their front
| door saying if you want to stay less than a year and still get
| paid highly apply here.
|
| Wouldn't this move incentivize employees seeking short term
| employment thus diluting stocks given out to existing long term
| employees?
| ralph84 wrote:
| People who are only staying because of vesting tend not to be
| the most productive. Better for everyone to have someone who's
| not working out or doesn't want to be there leave after a
| quarter instead of dragging it out for a year.
| paxys wrote:
| The number of people looking for full-time jobs and intending
| to only work for 3-9 months is way less than you think.
| bradlys wrote:
| People who find out the company is a bad fit. It is _very_
| common within the valley for people to leave just after they
| 're 1-yr vest because it was a bad fit. If you can get this
| bad fit employee out faster, the better.
| soheil wrote:
| The world is a dynamic place. If you think this won't have a
| large impact on the number of people job hopping not sure
| what you think will.
| nostrademons wrote:
| I think they do this to keep bad hires from sticking around
| until the cliff.
|
| It takes _a lot_ to fire someone legally - oftentimes you have
| to document ~6 months of poor performance, put them on a PIP,
| give them a chance to remediate, etc. Combine that with normal
| long ramp-up times in a tech company, and by the time you know
| it 's not working out and can fire them, they're pretty close
| or past the 1 year vesting point anyway. It's much more
| efficient if the employee decides to leave on the their own, if
| they _know_ it 's a mutual bad fit.
|
| This removes the incentive to stick around for the windfall -
| if you're not enjoying your workplace, go leave and find a
| better one, and you get paid fully for time served. It's a lot
| like the buyout offers at places like Zappos or Coinbase,
| designed to make sure that everyone is on-board with the
| existing company culture.
| soheil wrote:
| I get the point about unhappy employees sticking around just
| for their cliff to vest, but what about attracting a new
| breed of employees looking for short term employment?
| nostrademons wrote:
| That's already a risk in tech, because wages are so high
| but ramp-up times are pretty long.
|
| They get weeded out relatively quickly and usually run out
| of desirable employers, though. That's why employers are
| skeptical of employees with multiple short-duration stints
| or gaps on their resume.
| soheil wrote:
| So if they do get weeded out quickly then why would any
| rational employee even care about not having a cliff when
| looking for a new job to begin with?
|
| This is simply increasing the risk of hiring short term
| employees in addition to existing risks including the
| high cost of ramp-up times.
| skzrskzr wrote:
| Facebook has had the same policy for a while and didn't run
| into that problem. It's more about getting talent in the door
| and keeping current with market.
| adoxyz wrote:
| Good, pro-employee move.
|
| Next, I'd like to see pre-IPO startups offer longer periods to
| exercise shares when you leave. 90 days being standard is way too
| low.
| tyingq wrote:
| Seems like a pro employer move too. Less people hanging around
| that have already decided to leave...just waiting on a vesting
| cliff.
| TechBro8615 wrote:
| Or you get a bunch of ex employees you fired after three
| months lingering around on the cap table (assuming you're not
| a public company).
| hn_throwaway_99 wrote:
| I totally agree with the above, and have commented on it many
| times before, but note the 90 day standard is because that is
| the maximum amount of time allowed for ISOs by the IRS. To
| allow for conversion after that time (e.g. 5-10 years seems to
| be what a lot of people are pushing for), the ISOs convert into
| non-qualified options. Still worth it in my opinion. Even
| better would be for the IRS to change the law (not sure if it's
| a law or a reg), because with companies staying private so much
| longer it's a different world.
| borski wrote:
| (Preface: IANAL)
|
| Only worth it if you aren't early. ISOs provide preferential
| tax treatment, and early on are usually very very cheap, so
| many companies (mine included) also offer early exercise with
| ISOs, which is an unbeatable tax win (afaik).
|
| The issue occurs when options get expensive (aka the company
| is doing well) and then you have to do the math between ISOs
| or NSOs. The longer expiration _may_ be better, but certainly
| not for every employee.
|
| That said, as companies get bigger they stop being able to
| offer as many ISOs (there is a max cap), so at that point
| they should extend the timeline for expiration.
|
| One thing companies do have to worry about though: a 10-year
| expiration means your cap table is in flux for 10 years,
| potentially, which makes calculations, acquisitions, etc,
| tougher.
| fishtoaster wrote:
| Wouldn't that only be an issue if a company offers NSOs
| _instead_ of ISOs? What I 've seen in the past is "here's
| some ISOs, they automatically convert to NSOs 90 days after
| you leave." That way you get all the benefits of an ISO
| (tax on sale) while you work there, then all the benefits
| of an NSO (doesn't disappear in a puff of smoke at day 90).
| Seems like strictly a win, regardless of company phase.
| jkaplowitz wrote:
| Several startups have already amended their plans to allow
| expanded post-termination exercise windows. The impression I
| get, although I'm not a tax/legal/financial professional, is
| that the options remain ISOs all the way through the first 90
| days of the exercise window and only then convert to non-
| qualified options.
| [deleted]
| devoutsalsa wrote:
| Is there any real incentive to offer more favorable terms to
| employees that plan to leave?
| pm90 wrote:
| In this case they would be leaving with a smaller fraction of
| their stock grant and would allow the company to hire someone
| who would _want_ the job sooner. Seems like a win-win.
| woah wrote:
| Offering more favorable terms means being able to hire better
| employees
| echelon wrote:
| > Next, I'd like to see pre-IPO startups offer longer periods
| to exercise shares when you leave. 90 days being standard is
| way too low.
|
| It should be at least 365 days so that you can split it between
| tax years.
|
| I've still got options of a public company I need to "dispose"
| of, and I don't want to do it all at once.
|
| Perhaps until the options expire (typically 10 years) would be
| too much to wish for, but that would be ideal.
| alasdair_ wrote:
| Niantic offers 10 years to exercise as an NSO and has done so
| for almost six years now.
| jkaplowitz wrote:
| My employer (not yet reflected in my profile and I'm not
| speaking for them here) made this change last year for every
| employee with at least 2 years tenure. For such employees, the
| post-termination exercise window equals the years of service up
| to a maximum of 4 years. I've heard similar things at a handful
| of other well-known tech startups.
| londons_explore wrote:
| The 1 year cliff never really made sense...
|
| It effectively gave the company a discount on employees who
| stayed only 364 days - or to look at it another way, a 'trial
| period' of 1 year where the pay was substantially less.
| jdavis703 wrote:
| It helps keep the cap table small. After more than 2000
| shareholders the company must register with and report
| information to the SEC. This is both a costly and time-
| consuming process.
| KallDrexx wrote:
| Not only that, Door Dash might still have an effective 1 year
| cliff anyway.
|
| Usually signing bonuses have a 1 year paypack period. So sure,
| you may get stock even if you leave before a year, but you
| still have to pay back the signon bonus you received (and you
| don't get the taxes you paid on the sign-on bonus back either)
| RussianCow wrote:
| Am I the only one that doesn't see that as unreasonable? It's
| not like you aren't accruing equity during that time; you still
| get the full year's worth of options at the 365 day mark. And
| the ramp-up time with new engineers can be so long that the
| first year isn't nearly as productive as consecutive ones.
|
| A buddy of mine who worked at a giant company (not strictly
| tech but you'd recognize it) said he heard from his boss that
| the company effectively considers the first year of a software
| engineer's employment a wash as far as cost/benefit. I can't
| imagine they're the only ones. In that case, why would you
| reward people who jump ship before your break-even point?
| breck wrote:
| I think the larger the company the longer it takes to ramp
| up, but at a small startup you can have a big impact in month
| one.
|
| I've always found the one year cliff funny, since _investors_
| don 't have a cliff.
|
| I've been hoping startups would start doing this for a while,
| and think DD is really a pioneer here and think this will
| become a trend. I know personally I turned down a few
| opportunities at promising startups simply because I was
| young, in my twenties, and a year felt like a long time. I
| found the probability of a life changing event that would
| require me to move and leave a company too high, and didn't
| want to bust my butt for 10 months with a salary cut, then
| have to leave and get no equity. So I said "no" to a few
| opportunities that otherwise would have been great.
|
| Currently incentives first your first year are to focus on
| not getting fired. Now it can be on making an impact.
| RussianCow wrote:
| > I know personally I turned down a few opportunities at
| promising startups simply because I was young, in my
| twenties, and a year felt like a long time. I found the
| probability of a life changing event that would require me
| to move and leave a company too high, and didn't want to
| bust my butt for 10 months with a salary cut, then have to
| leave and get no equity. So I said "no" to a few
| opportunities that otherwise would have been great.
|
| I'm curious: Did you try to negotiate? I have had luck
| negotiating the terms of equity in the past, but I'm not
| sure if my experience generalizes.
|
| > Currently incentives first your first year are to focus
| on not getting fired. Now it can be on making an impact.
|
| If someone is so unmotivated at a job that they're not
| making an impact, I don't know if removing the cliff would
| help; they likely shouldn't have taken the job in the first
| place. If you join a new place and realize that it's a poor
| fit, it's usually best to cut your losses and move
| elsewhere immediately, even if your equity hasn't vested.
| The presence of a cliff doesn't significantly change that
| math.
|
| I agree about missing out on hires because of the cliff, I
| just don't think it's that unreasonable to have one.
| Beaver117 wrote:
| Reward? They only join in the first place because of the
| expected total compensation.
| RussianCow wrote:
| But it's not like the one year cliff is a hidden detail
| that you don't find out until you join; employees have all
| the information up front. If you choose to take the job
| anyway, you know that your compensation will be lower if
| you leave within the first 365 days, so if you still choose
| to leave, that's on you.
| pm90 wrote:
| I think we need to consider each company separately.
|
| Smaller firms may have smaller codebase and less complex
| infrastructure and processes to get familiar with. Learning
| all of that wouldn't take more than a week or a month, tops.
|
| Larger, public companies like FAANGS will often have
| completely custom stacks, specialized developer tools and a
| ton of checks before anything you write hits production.
| Learning to navigate this will take a lot longer. IIRC
| Facebook has a bootcamp of several weeks (months?) just to
| get new engineers familiar with their shit.
|
| In either case, I personally don't think it's a "wash" since
| even at the bigger company it's not like you're not doing
| anything and once you get familiar with the stack you can be
| productive af.
| RussianCow wrote:
| You're completely right--to be fair, the company I was
| referring to is giant and likely has several months' worth
| of things to learn, which is very different than joining a
| startup. But even if a one-year cliff seems excessive for
| most companies, I still don't think there's anything wrong
| with a cliff of some sort. Maybe 6 months makes more sense
| for a medium-sized company, but there's still a breakeven
| point for new hires, and unless you're one of the first 5
| or so employees, that point is probably somewhere between 3
| and 9 months. I don't think it's unreasonable for companies
| to want to pay less during that "trial" period; if you
| don't like it, join a different company, or just hold out
| until your equity vests.
| hrpnk wrote:
| A cliff forces one to consider decisions with a different time
| horizon and tends to avoid short-term thinking (e.g. attempt to
| tune financial results ahead of a certain quarterly report).
|
| Sometimes, companies include in their annual reports the
| conditions of employee shareholding plans. In Europe, for
| management, plans with 1 year vesting and 1-3 years blocking
| period is a practice. This means that you cannot exercise the
| options until 2-4 years in. Further, all unexercised options
| are forfeited if the employee moves to the competition within a
| defined timeframe.
| jkaplowitz wrote:
| Having been fired once at the 10-month mark early in my
| career, not for misconduct and not after any prior
| performance warnings, the 1-year cliff can be heavily abused
| by employers. Your argument assumes the employee has the
| control over when they leave, which isn't always true.
|
| (In actual fact I was then a pretty underperforming employee
| who misunderstood the situation, but the apparent trigger for
| me getting fired was my own request for help addressing the
| situation since I realized something was wrong. The startup
| founders were as early-career as me and didn't really know
| how to give me the feedback I needed. My next employer did
| give me the necessary constructive criticism, after which I
| made the necessary changes, got subsequent positive feedback
| from that same employer, and have been a decent to good
| employee everywhere I've been since then.)
| tengbretson wrote:
| Depending on the amount/cost of onboarding it's very possible
| that an employee that only stays for 364 days is a net drain on
| resources.
| khazhoux wrote:
| LOL contrast this with Uber's offers in 2016:
|
| Standard vesting schedule with 1-year cliff... but you would be
| prevented from selling any stock grant for the first year after
| it vests. Love it, thank you but no!
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