Stripe RSU math vs traditional 4-yr grants

Microsoft / Eng
_absurdist

Go to company page Microsoft Eng

_absurdist
Jan 5 62 Comments

I modeled a Stripe L3 comparing it with a FANG E5/L5 offer. The numbers are representative of typical offers being given out these days. I see a lot of skepticism around Stripe's equity structure saying that the employees lose out on the upside. However, the model seems to indicate that the higher recurring stock value makes up for the lack of 4-yr grants.

A few key points:
1. I have assumed the same base-pay, sign-on and target annual bonus (15%).
2. I believe Stripe has more growth left in spite of being a 100B company already. Hence, I have modeled two scenarios - one with 10% average annual growth and another with 20%.
3. Stripe performance equity target is 0-270k for L3s. I was told by the recruiter that between 1/3 and 2/3 of the employees will get some form of performance equity. These vest over 2 years. I have assumed a 100k refresher when you get one and 0 when you get none.
4. There is no 4-yr cliff with Stripe's model. This is arguably better for people in the long run.

Does this change your opinion about Stripe's equity structure? If you think I've missed anything in here, happy to correct that and re-run the model.

#stripe #valuegrant #avg #l3 #e5 #l5 #model

Stripe RSU math vs traditional 4-yr grants

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TOP 62 Comments
  • I joined Opendoor at ATH and TC is down by 60%. I now think Stripe's model is actually better for most of the unicorn tech employees
    Jan 5 8
    • There is always this one as*hole who joined the company at 5 cents and commenting If It GoEs DoWn , LeAvE.

      Yes , People are going to leave but this is not a net 0 loss decision.
      Jan 5
    • Dropbox
      chubbyFIRE

      Go to company page Dropbox

      chubbyFIRE
      You can’t just quit and rejoin to reset your equity grant. It takes a lot of effort to go through interviews so it’s not “free” to just switch companies if the stock drops a bit. If you’re still within the first year, there’s also vesting cliff and bonus payback to consider.
      Jan 5
  • Buddy you can’t just give FB an CAGR of 10% and Stripe 20% and call it a day. At some point Stripe must slow down and match other FAANGs or else surpass them. You really think Stripe should have a higher valuation than FB or Amazon? Even 1/2 or 1/3?
    Jan 5 4
    • The point is you’re not holding enough things constant to compare equity structures. Even considering just the first two columns, if I’m reading your spreadsheet correctly, the FB person gets 150k equity a year and the Stripe gets 2/3 of that plus another 225k in recurring equity. Of course if Stripe gives more than double the equity then it ends up being higher TC. But that’s not due to the equity structure, Stripe’s just giving out more equity.

      If the 225k recurring/refreshers were converted to initial equity then obviously that would win.
      Jan 5
    • Microsoft / Eng
      _absurdist

      Go to company page Microsoft Eng

      _absurdist
      OP
      @Grammarly: I have as many things constant as can be in the first two columns. The yearly equity differential is the main difference that I am trying to highlight here. Stripe unlike FANGs gives guaranteed equity every year forever that vest in a single year - this is a big difference. Then there is a variable performance grant like FANG refreshers that are also supposed to be significant - and these vest in just 2 years. So, both the equity structure AND the amount play a role here.
      Jan 5
  • Google
    sweetooth

    Go to company page Google

    sweetooth
    This model shows that it's not worth it tbh. I accepted a new grad offer from stripe and declined FB and Google but feeling slight regret. The stock money from stripe is illiquid, liquidity is worth more than the difference your model shows. It's not too difficult to sell some of the FB stock and invest in more high return stocks, crypto. While owning stripe stock only will expose you to too much risk with too little you can do.
    Jan 5 4
    • Microsoft / Eng
      _absurdist

      Go to company page Microsoft Eng

      _absurdist
      OP
      I assumed only 10% growth just to keep the comparison apple-to-apples. My personal thesis is that they will at least 2x in the next couple of years. Or at the minimum beat FANG growth by the time they IPO.
      Jan 5
    • Square
      axela

      Go to company page Square

      BIO
      SW engineer
      axela
      This is not about liquidity bout about diversifying your portfolio
      Jan 5
  • Google
    daaMD233

    Go to company page Google

    daaMD233
    I think it makes sense but why would someone join a private company as oppressed to FANG if there’s no equity upside? Career growth could be one reason.

    IMO people join startups/pre-ipos for their upside and not because of comp being similar to FANG.
    Jan 5 4
    • Adobe
      Yvoo38

      Go to company page Adobe

      Yvoo38
      Most of the blinders got used to 5x-10x stuff in the stock market over past 4-5 yrs and got lured into the thinking of perpetual stock growth. There are increasingly many signs that few years worth of perfect execution is already baked into most of the valuations even after a small correction. In this market of falling knives, Stripe's model is a less risky option to be part of a growth company.
      Jan 5
    • Microsoft / Eng
      _absurdist

      Go to company page Microsoft Eng

      _absurdist
      OP
      @Adobe: Agreed. Being guaranteed fixed equity value every year is a good hedge against say a post-IPO 20% dip. As long as Stripe does have a liquidity event, I don't think I mind this equity structure.
      Jan 5
  • Uber
    herenorth

    Go to company page Uber

    herenorth
    What's the saying? A bird in the hand is worth...

    I think Stripe's model as you have shown has potentially more upside, but how easy is it to hit in your example 100k performance equity?
    Jan 5 6
    • Apple
      dnsb253wvs

      Go to company page Apple

      dnsb253wvs
      @uber that’s not how coinbase’s subsequent stocks work. You get the same stocks year 2 as you do year 1. The difference is that you can get a stock multiplier for year 2 if you had good performance ratings year 1.
      Jan 5
    • Uber
      herenorth

      Go to company page Uber

      herenorth
      @apple thanks for the clarification! I probably misunderstood from what a blinder explained to me. Mb for sharing incorrect info
      Jan 5