Employee Equity - Sam Altman
Jared Sperli stashed this in startup
First, I think employee stock and options should usually not be transferrable. It causes considerable problems for companies when employees sell their stock or options, or pledge them against a loan, or design any other transaction where they agree to potentially let someone else have their shares or proceeds from their shares in the future in exchange for money today.
I think it’s fair that if founders sell stock, they should offer an opportunity to employees that have been at the company for more than a certain number of years to sell some portion of their shares. And some companies offer an employee liquidity program even when the founders don’t sell any shares themselves. But otherwise, I think it’s reasonable for employees to wait for an acquisition or IPO.
Second, I think it’s time to consider other vesting ideas. The standard at startups is 4 years with a 1-year cliff. So you get 25% of your options after you’ve been there for a year, and 62.5% if you leave after 2.5 years.
It’s possible that 4 years is now too short—companies are often worth more than they were 10 years ago, but they take longer to reach liquidity. I’ve seen some startups offer 5 or 6 year vesting schedules. To compensate for this, they offer above-market grants.
Another structure I’ve seen is back-weighted vesting. For example, 10% of the grant vests after the first year, and then 20%, 30%, 40% in the following years. Again, the startups I know that do this tie it to above-market grants, and I think it helps them select for employees that really believe in the company and want to be there for a long time. (Also, companies that have vesting schedules like this usually do it for founders too.)
Finally, a third structure I’ve seen is a new way of thinking about refresher grants. For a company using options, it’s nice to grant employees options early while the strike is low. It’s possible to give “forward-dated grants”—i.e., you can give a high-performing employee a refresher grant today where 1/3 of it starts vesting immediately and the other 2/3 starts vesting when their initial grant is fully vested. This guarantees them a low-strike price and presumably a relatively large grant in a few years. Dustin Moskovitz at Asana does something like this, and I think it makes a lot of sense.
6 year vesting does not sound like a good idea.