Startup saying they cant offer me any RSUs as part of joining bonus

NetApp hellokitty
Sep 3, 2017 16 Comments

I recently got an offer from one of the startups in Bay area and they're saying they can't offer me any stock as joining bonus because it is not a publicly owned company. They gave me an option of buying x numver of stocks at a price after 1 year (25%) and 36 subsequent months.

I see lot of people here getting stocks, ownership etc. at companies like Uber which are not IPO yet. So is there any difference between the startups and how they can award stocks?

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TOP 16 Comments
  • LinkedIn frogsickle
    I agree with the previous post; it sounds like they're offering _options_ which is typical with a startups. What matters most with startup options are quantity, strike price, total shares available and previous liquidity events, like fundraising. It helps determine growth potential and your stake.

    FWIW, Netflix did the same thing for years, even after being publicly traded. Many large corporations still offer only options. With a public company, you won't necessarily write a check if you exercise your options and the stock price has gone up. With options, sometimes you win, sometimes you lose. Hold onto them and watch them grow. RSUs just feel better because they feel more like cash in hand.
    Sep 3, 2017 0
  • Microsoft / Sales
    Ric

    Microsoft Sales

    PRE
    Dell
    Ricmore
    So you can buy stock but they can't give it to you?
    Sep 3, 2017 4
    • NetApp hellokitty
      OP
      Yes, that's what they are saying. I can write them a check after 1 year to get the 25%, however they cant give me any now "legally" as joining bonus
      Sep 3, 2017
    • Microsoft / Sales
      Ric

      Microsoft Sales

      PRE
      Dell
      Ricmore
      Sounds weird but then again I'm not a lawyer, and there may be truth in that, maybe giving stock would be diluting value especially if there is a finite number of them. Years ago I worked at a startup (Pharma sales) and they paid me very little but loaded it with pre ipo stock, but it's about the corporate structure I guess
      Sep 3, 2017
    • Databricks / Eng
      datadicks

      Databricks Eng

      BIO
      I suck
      datadicksmore
      Msft guy has no idea what ISOs are. It is extremely common and not weird
      Sep 3, 2017
    • Microsoft / Sales
      Ric

      Microsoft Sales

      PRE
      Dell
      Ricmore
      Databricks guy has stick up his ass
      Sep 3, 2017
  • Jet QphU38
    I can't talk about the legalities of it but based on my experience at 2 startups (1 successful and 1 not-so much) employees are typically given stock options and not stock. If you exercise those options by giving them a check for exercise price time number of shares, then you have stock. If there is a liquidity event prior to you exercising the options are converted to cash (and you pay income tax rather than capital gains). I've only seen RSUs at public companies with a typical vesting schedule of 3 or 4 years.
    Sep 3, 2017 0
  • Google / Eng
    goog|e

    Google Eng

    PRE
    Microsoft
    goog|emore
    Uber was offering options until 2 years back. This is a very common practice. Almost all companies offer options in the beginning and starts offering RSUs once they are closer to IPO.
    Sep 3, 2017 1
    • New / Eng EeCM86
      Yep, GoPro did this.
      Sep 4, 2017
  • Microsoft pubg
    This used to be a lot more standard. Microsoft gave everyone stock options well into the 90s. Since the startup is new you are hoping that when/if it goes public the option price will be a lot less than the IPO price. It usually ends up being you option price is so low it's almost free stock anyway.
    Sep 3, 2017 2
    • HouseCanary rBqo26
      Except that it's not liquid, and you get to pay AMT on the difference between your cost basis and the so called "market value" of the stock if you exercise.
      Sep 3, 2017
    • Databricks / Eng
      datadicks

      Databricks Eng

      BIO
      I suck
      datadicksmore
      You only pay AMT if you are rich enough to hit AMT. usually the spread is small enough that it doesnt matter
      Sep 3, 2017
  • Airbnb rmashburn
    You are getting offered ISO's. Not RSU's. The difference is indeed that you'll have to buy them.
    Sep 3, 2017 0
  • Exponential / Other
    CiXN27

    Exponential Other

    BIO
    in house lawyer
    CiXN27more
    If it's not a late stage startup then this is normal. Legally they CAN offer stock but it's a pain and almost impossible because it will require board approval under most corporate charters.

    Consider it impossible unless you're an exec and even then, I would think that would be a deal breaker for them because you're upsetting the balance of the exec team.

    The 4 yr vest/1 yr cliff structure for ISOs is very normal.

    Id also caution that a lot of companies that give late stage RSUs give at very inflated valuations. Buyer beware as that worth will be set by the market in IPO, not buy the last investment rounds which have been rather high IMHO.
    Sep 3, 2017 0
  • Capital One / Eng EID350
    Be glad you don’t have to shoulder the tax liability of RSUs if the company most likely tanks.
    Sep 5, 2017 0
  • Cisco KLPD
    What is the strike price and how many options? Makes all the difference.
    Sep 3, 2017 0

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