1. OP says: Once you’ve cliffed, you have the right to buy shares in the company.
"Cliffing", when used as a verb, refers to firing someone just before the cliff-- not an employee achieving it. It's something you'd rather avoid.
2. If the company isn't publicly traded, you should ask to see the cap table. If you're employee #30 and your share is 0.05%, that might be fair if it's a biotech that has already taken a $100M infusion from the venture capitalists (who'll typically take 90%, in that case). For a web startup, it's terrible. You need to know how much equity the investors, executives, and employees at various levels have, so you can evaluate your likelihood of getting an improvement if you perform well. Without the cap table, you don't know enough about the startup to decide whether to take a job there.
You can ask feel free to ask for a pony in a salary negotiation, and in general I bow to no one in advising "ask for more", but that specific ask has the dual unhappy properties of being very awkward for founders to grant and yet not very useful to you the prospective employee. (Even an idealized employee who'd be capable of understanding what it meant.)
"What was your most recent valuation?", "What is the size of my grant relative to the full dilution of the company as of today?", etc, get you more signal with less social awkwardness. I mean, at a minimum, it's more of an imposition than "Give me the salary details for everyone at this company", which is for better or worse radioactive almost everywhere, and in addition to similarly being against the corporate interest also tends to disclose privileged information about folks who wouldn't even be listed in salaries.csv.
P.S. In my n=2 experience as a very small angel investor I am struggling to remember ever seeing the full cap table. I'd have to check my docs to see if I'm allowed to ask for it, but my limited social radar for the Valley suggests that's the sort of thing that would be socially contentious. Founders I invested in were very circumspect about getting explicit permission to be able to quote the fact of the investment publicly, to say nothing of the amount.
P.P.S. Disregard the above if somebody who does this on a more regular basis suggests that you're more in touch with reality than I am. It's possible.
Cap table isn't the same thing as salary. It's the (future, in case of options) ownership of the company.
Cap table transparency would go a long way in making VC-istan honest because the equities in salary tend to be small while those in equity are massive. If engineers in a typical VC-istan startup found out that the non-tech VPs and "product people" working 10-to-4 were making $140k while they make $110k, nothing would happen. That's not enough of a difference to set most people off. If they found out that those people had 1% while they had 0.05%, it'd be epic. (That's why VC-istan hides cap tables. It doesn't want to have to admit that engineers are commodities to it.)
You don't need cap tables to know that the employee equity is small compared to investor equity. It obviously is. Most everyone I talk to knows that. VCs aren't "hiding" it.
If you don't want to work at a company where a pencil-pushing meeting-dwelling financier is going to earn an outsized reward compared to your efforts as a software developer, don't work for VC-funded startups. On the other hand, VC-funded startups tend to work on fun speculative problems, because they're powered by other people's money.
What a "non-tech VP" makes has nothing to do with an engineer's outcome. Obsessing about what other people in the company make is unhealthy.
I've asked that at every non-public company where I've had "options" and they've never complied. Just have to treat the options as confetti from then on.
Same here. I keep hearing that platitude, and have yet to come across a company that will cough up the numbers. I've decided it's one of those things that sounds good on the face of it, makes sense, but isn't really true.
But your final sentence is the best advice: treat the options as a potential windfall, but don't otherwise factor them into your decision.
Just have to treat the options as confetti from then on.
Agree. (1) Don't ever take a salary drop for options w/out cap table, and (2) don't make sacrifices that would hurt your career or home life because of them either.
Most people in the startup world have evolved enough to get (1) but (2) is where startup culture tends to go off the rails-- people start working 80-hour weeks on career-incoherent grunt work for their options, blissfully unaware of the 10-100x larger grants given to all of the nontechnical VPs who go home at 3:30.
Engineers are smart these days. Is anybody really doing 80h/week for shady options? I doubt it. Employees stuck in this position generally aren't so bright or don't have any other choice for some other reason. But still very rare.
Exactly what does the cap table have to do with your expected outcome, presuming you know the percentage of your allocation, the liquidation preferences and valuation, and the company's runway?
If you don't know who owns the company you don't even know who you work for. It might not matter to most people as long as the cheques don't bounce, but if you want to even hallucinate having a meaningful role in the direction of the company it starts to matter. I really don't know what people are willing to disclose to employees but the SEC rule for public companies is a 5% stake or more is disclosed.
This is not true. It matters who your company directors are. It does not matter how much of a stake some random angel investor ended up with, or how much the VP of Product Marketing got. I have founded a company where I didn't know what the cap table was (obviously, I could have) and I assure you I had all the influence I wanted on it's direction.
The cap table is, to this whole conversation, a MacGuffin.
are companies typically forthcoming with information about liquidation preferences? At jobs I've asked and been told the percentage of allocation, valuation, and runway, but have never asked about liquidation preferences.
Also, does it really matter if I know? A later round could have wildly different liquidation preferences that wipe out my gains, right? Though I guess that's true of dilution as well...
You know whether it's probable that you'll get more equity, and what it takes to get there.
Most engineers who join startups think that the 0.03% allocated when they join will be increased later on, and that the initial grant is just a "teaser". I mean, it has to improve, just because it's so ridiculously low, right? (Well, no. In fact, it usually won't.)
Perhaps 5 percent of the engineers who join VC-funded startups would still join if they knew that (a) their equity allotments wouldn't improve, and (b) the founders wouldn't take a personal interest in furnishing them with the connections/credibility to be founders in their next gig. That number becomes closer to 1-2 percent when you're talking about good engineers.
This is silly. Just assume that your allocation will not improve. If you're in a position to improve your grant later in your tenure, you'll either (a) know it, and secure it through negotiation, or (b) not know it and probably not get it.
Having the cap table --- which you won't get anyways --- does not actually help you here. A feeling of entitlement isn't what gets you improved compensation. An understanding of your value on the market and a willingness to stand up for yourself is what does that.
Put differently: so what if the cap table suggests you're unlikely to get an improved allocation? If you're worth an improved allocation, you'll get one or the company will lose you.
> If you're employee #30 and your share is 0.05%, that might be fair if it's a biotech that has already taken a $100M infusion from the venture capitalists (who'll typically take 90%, in that case).
Could you point me in the direction of some sources that back up the "90% [in the typical case]" claim? I'm genuinely interested in learning more.
Biotech has different rules. Investments tend to be much larger but the Vc's get a larger percentage. It's probably fairer and more straightforward than what happens to most web startups, where the initial take is a small percentage but the Vc's demand rapid growth and risk-taking. (That is, I'd rather the VC's take 90% upfront for $100 million than take 20% but ensure, by how they manage the company and the risks they force me to take, that they get 90% of the upside in the end.)
1. OP says: Once you’ve cliffed, you have the right to buy shares in the company.
"Cliffing", when used as a verb, refers to firing someone just before the cliff-- not an employee achieving it. It's something you'd rather avoid.
2. If the company isn't publicly traded, you should ask to see the cap table. If you're employee #30 and your share is 0.05%, that might be fair if it's a biotech that has already taken a $100M infusion from the venture capitalists (who'll typically take 90%, in that case). For a web startup, it's terrible. You need to know how much equity the investors, executives, and employees at various levels have, so you can evaluate your likelihood of getting an improvement if you perform well. Without the cap table, you don't know enough about the startup to decide whether to take a job there.