Joe Cabrera greedo

Who pays when startup employees keep their equity?

JD Maturen, 2016/07/05, San Francisco, CA

As has been much discussed, stock options as used today are not a practical or reliable way of compensating employees of fast growing startups. With an often high strike price, a large tax burden on execution due to AMT, and a 90 day execution window after leaving the company many share options are left unexecuted.

There have been a variety of proposed modifications to how equity is distributed to address these issues for individual employees. However, there hasn't been much discussion of how these modifications will change overall ownership dynamics of startups. In this post we'll dive into the situation as it stands today where there is very near 100% equity loss when employees leave companies pre-exit and then we'll look at what would happen if there were instead a 0% loss rate.

What we'll see is that employees gain nearly 3-fold, while both founders and investors – particularly early investors – get dilute

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Installation

sudo curl https://gist.githubusercontent.com/steve-jansen/61a189b6ab961a517f68/raw/sep -o /usr/local/bin/sep
sudo chmod 755 /usr/local/bin/sep
sudo chown root:staff /usr/local/bin/sep

	import jwt

	from django.conf import settings
	from django.contrib.auth.models import User

	from rest_framework import exceptions
	from rest_framework.authentication import TokenAuthentication


	class JSONWebTokenAuthentication(TokenAuthentication):

	# -- coding: utf-8 --

	import datetime
	from south.db import db
	from south.v2 import SchemaMigration
	from django.db import models
	from django.db.models import get_app, get_models


	class Migration(SchemaMigration):