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I've been here almost 25 years, he started in Sept 2008. Also another question, is salary of your CEO usually common public knowledge at a startup? The Phoenix thing and the high salary are the real red flags. I'd write this company off and continue to work there because the economy sucks, but be ready to look for a job in the next 12 months.
I graduated that year and got offered $34k/yr by the UC, but quickly moved to Taos, making $50k/yr. Piaw had told me to take that class under Lenstra, he said Lenstra was good, these were Piaw's words: "Lenstra is very good. I have never worked so hard on a class with so little result, before or since, exept for the final. " And I took this ghostly advice, again and again during the exam, and got all but one problem. Fortunately, Lenstra had said, "if you don't like one problem, throw that one out. Oh, and BTW, if you do well on the final, we'll replace your mid-term grade, too." And that is how Piaw's awesomeness got me an A in Math 55, when I started with a C+. I doubt Piaw remembers me, but I sure won't ever forget him. And if some friend of Piaw's wants to send this on to him, feel free. I have never experienced a more powerful moment of happiness than when I exited that final exam--1 hour early, looking back at everyone else struggling with it, knowing I'd aced it. Stockwise it sounds like you just accepted the offer you were given. You can go to your CEO and tell him you want more stock. You don't think he should make 4X what a developer makes? His options might be out of line, but that's not coming out of your bottom line anyway. I hear him on company conf call if I want to but I've missed the last 4, I've been way too busy to care. I'd feel better about slaving away all week if he were around to watch. We recently layed off a bunch of developers and a couple of sales account execs, I think to impress the board of directors with our cost cutting skills. we shouldn't be paying our fatass CEO (he's HUGE) 1/2 mil a year and more equity than every other non founder employee COMBINED.
if this guy owns 10% of the company, then you are looking at your options being worth $30k, not a sum which would greatly affect your life. If he owns 5% of the company, then you seem to need some pretty optimistic growth expectations to have your options to be worth more than a car ... unless the expectation down the road is you'll be getting lots more options and the current grant is more like a bonus up front rather than the sum of your vesting expectations. Run the numbers on a billion dollar valuation, and your options are going to be worth a nice vacation. VC's want to give the founders/CEO enough money to feel like they have to work their asses off to make a living. The salary is just enough to get by (ya, $250K sounds like a lot, but it's not that ridiculous). Don't think that "10,000 options" is a lot, you really have to look at it as a percentage of total outstanding stock. A friend of mine was negotiating and asked that question and they told him that the board wouldn't allow them to share that number. I call bullshit, but does anyone know if there's any truth to this? As for the stock options, lets assume there are 1M outstanding. Non-founder CEOs generally get 2-5% of outstanding stock. So that would leave him with about 50K options on the high end and you with 1K (or 01%). How long have you been out of school and how many employees were there when you started? I hope you didn't get screwed on a super-low salary because they told you the stock would make you millions. Lastly, this CEO in Pheonix thing sounds like the biggest red flag of all. Sounds like he is a sales-CEO type and travels a lot with a big budget. In your example, the CEO would be getting 50K options and the worker bee 1 option. At a public company, the top five compensated employees salaries are in the 10-K filed every year, so the CEOs salary is almost always one of those, and therefore public knowledge.
html Piaw's Blog Thursday, January 01, 2009 Stock Compensation At Startups Typically, startups offer stock options to employees (especially engineers--who can't obviously be paid through a commission). The obvious numbers involved are the number of options, the strike price, and the vesting period. The number of options and the vesting period is typically known before you take the job, but the strike price can change between when you take the job and when you start and when the options are priced. Typically, the offer letter will contain language such as, "I will recommend to the board that you receive 10,000 options to purchase company stock at the prevailing market price." There's nothing suspicious about this--I've never heard of a company that did not live up to such promises in the offer letter. Here are the variables in stock compensation that you should think about. Number of Options This is the top-line of options compensation--it represents the amount of equity you own in the company. Many people focus on the number of options they get as though the absolute number means something--it doesn't. What matters is the percentage of the company you actually own. As such, this number only means something when you also know the number of outstanding shares in the company. To emphasize this, one of my friends joined Commerce One back before it did an IPO. She was offered 20,000 options but the company had so little revenue that at the IPO, the investment bankers reversed-split the stock, so she only had 10,000 options. What's the difference between 10,000 options at $600/share and 40,000 options at $150 a share? Typically, the percentage compensation goes something like this: Table 3-1. Typical Stock Compensation Title Percentage of company VP of Engineering 05% and up Senior Engineer and above 01% and up Entry-level Engineer 005% Note that these numbers are typically adjusted by the stage of the startup (and thus the amount of risk you're taking by joining the company at this stage) as well as the generosity of the founders and the board/venture capitalists involved in the company. My advice to founders is to spread the stock around--having motivated employees participate in your success will be something you'll be extremely proud of. Now, that percentage of the company you own is not fixed. A study I read once indicated that dilution in Silicon Valley is about 1% of the company per year, but for startups, that tends to change dramatically as new money comes in. If the company is successful, the valuation of the company will increase at each funding round, so the dilution is usually not a big deal. Hardware startups, however, require huge infusions of capital after the design phase is over and the company has to fund production, so in those cases a big dilution event could pre-date launching the product. This is one of many reasons why so many companies have gone to outsourcing their production, so their upfront costs are reduced. Obviously, if a company's schedule slips or customers don't show up as expected, then further rounds could be "down-rounds", so the dilution could be substantial in those cases as well. Vesting Period The vesting period is the time it takes for you to own all the rights to your stock-options. The Silicon Valley period is 4 years with a one year "cliff." That means if you leave the company within a year of joining, you forfeit all rights to any options at all. After the first year, the standard is that each month another 1/36^th of your options continue to vest. That means if you got 10,000 options and left the job after 3 years, you get 7500 options when you leave. Note that most option agreements tell you that you have a limited period of time after you leave to exercise those options, so if you think the company has a good chance of success, don't quit your job and forget to exercise those options. It also means that if you really hate your job after 11 months, grit your teeth and stick around for another month just in case the company turns out to be valuable. I have occasionally heard of 5 year vesting periods (usually also with 1 year cliffs). These are usually far more common outside Silicon Valley, ...
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