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Ask HN: Joining a Late Series Startup in SV. Please Help

5 points by throwaway1zz ↗ HN
Hey HN,

I came across this thread - https://news.ycombinator.com/item?id=19624164 and after reading the horror stories I am really in a fix whether this is a step in the right direction.

I cant reveal more details but here are a few things.

1. The startup is an interesting space and ARR of $XX millions.

2. There are backed by very good SV VC`s who have a good track record of ensuring companies go public.

3. I will be in a position to declutter the tech stack/work on a couple of new exciting products and potential room for growth is good.

4. I have had a couple of meetings with the execs; I am impressed with their track record and everyone seems genuine and honest.

I am taking a pay cut to join the company and I would have to spend > $100K to exercise my options at the joining date which I am told is the best way to avoid AMT and has other tax benefits if the company were to grow exponentially in the next years.

I would have a take a decent chunk of money out of my savings to pay this amount, my question is what risk factors should I consider; Usually people only talk about the negative experiences, so please give me a reality check both good/bad;

Thanks!

15 comments

[ 2.9 ms ] story [ 44.3 ms ] thread
was_boring
Don't spend any money until you are sure you'll be getting a return -- def. not on day one.

I've never actually heard of a compensation structure which has >$100k of options to even spend on day one. Most of the time they are vested on a schedule.

throwaway1zz
There's 1 year cliff for vesting but apparently one can excercise at the current strike price on day one and that's pretty common among other startups with folks who want to avoid the AMT
zindlerb
Imo you are taking on a huge risk. Your shares will be worth nothing the majority of the time. In the future if your shares are worth a lot and you need to pay taxes that will be a nice problem to have.
NonEUCitizen
It's "83(b) election." It's interesting a late stage startup is offering this. But do NOT do it.

Do this only for very early stage startups where your total expense might be a few thousand dollars for maybe 1% or more of the startup. At most, you lose a few thousand dollars.

Spending $100K to optimize possible future taxes is a bad idea. At this stage, you should just think that future AMT is a good problem to have. Put the $100K in safer instruments.

throwaway1zz
At some point in the future, if it becomes clear that the company is on path for an ipo I could pay for it then.

I will hold off until then.

kenneth
That's a common way to save on taxes by paying a bit upfront. It's usually not done at such a late stage because of the cost when the strike price is high. It's more common in pre-A or at least pre-B companies when the strike price is smaller.

I certainly wouldn't drop 100k unless they offer a commensurate signups bonus (the 100k goes to the company so they could give you a bonus of $100k if you exercise the options which should help, though you'd still be on the hook for the taxes on that bonus).

NonEUCitizen
Don't take a pay cut.
seattle_spring
Big companies are offering $400k+ for E5 (mid-senior) engineers. No startup in the world will be able to match that in liquid compensation.
lostdog
Then they should raise enough money to afford their employees. (Or make their equity meaningful, with longer exercise windows or by loaning the money for early exercise).
throwaway1zz
They have raised a significant amount but have been stingy in the stock options grant.
streetcat1
So yellow/red flags:

1. ARR in the XX mil, but you are taking a pay cut?

2. You will declutter the tech stack and work on exciting products?. Usually in a startup (or any other company) - you touched it, you own it. So once you declutter the tech stack, I am not sure that you will have time to work on the other exciting projects (or even if they will still be relevant).

3. Why do you even need to declutter the tech stack? what happen to the original programmers? what happen to proper process? do they have unit tests? CI/CD? Can you sandbox this code in a micro service and just call it?

4. The option thing looks like they are increasing your switching cost. I.e. once you buy the options than you will be limited in your moves both inside and outside the company.

throwaway1zz
1. I should have been clear, I am not taking a pay cut in the base but the overall pay(base + rsus)

2. I am glad they were upfront and honest about it. The manager said 50:50 split.

4. Yeah I agree with this.

streetcat1
So the manager can be honest, but it is usually not even his call. The company will likely to put a lot of value on the maintenance side (which bring the money) and less on new projects (which get postponed if there are any issues in the maintenance side).

I do not think that the manager is lying to you. TODAY he see it as 50/50. But what happen if the cluttered project is late? What happen if there is a need for new features in the cluttered project. I would accept the job only if you are ok staying in the cluttered project team for at least a year or two.

throwaway1zz
Thanks for the insight you are dead right about the managements view.
lacbuddah
Cash is king - keep your savings in the account. We're really overdue for a rebalancing of the economy and you want the cash at that time. That is a gaurantee. This startup, where it could succeed will more likely not go public.

Keep your current job or get a job that pays you better, but hold on to your CASH!