[nbclark]

Agree with you on this. We do that at my company Divvy. Each prospective hire is given 3 different options (varying levels of cash / equity). The "implied" value of all three at the current valuation is the same, but as you mention some people prefer more equity upside and some prefer more cash in hand.

[RhysU]

But why not give everyone cash consistently and then allow them to buy equity as they desire, when they desire, by reinvesting in the business at the current prevailing rate?

As even Homer Simpson figured out "Money can be exchanged for goods and services."

[lacker]

There typically is no "prevailing rate" for a startup. So just figuring out the tax implications is too much work to do it like this. Also, usually you're giving people options rather than equity; you can afford to give people larger option grants because of vesting than you could afford to sell them equity.

[nbclark]

Interesting thought. We're a private company, so the stock is still illiquid. That wouldn't prevent purchasing stock, but the question is where it would come from. Option pools are used for new employee grants so that could work, but when that runs out you need to typically create additional shares and dilute the other holders. Will put a little more thought into this.

[lostinquebec]

Isn't there a tax implication? Tax is one reason part why people choose non-monetary remuneration. I'm not American, but my guess is in all jurisdictions that tax would vary based on the type of non-monetary remuneration.

[cperciva]

One issue here is insider trading. Not necessarily in a breaking-the-law sense, but people who work at a startup may have a better and more up to date sense of how things are going than whoever performed the last valuation.

[mattpratt]

This 3-tier presentation is used at a couple places and would caution it as a way to anchor you on salary and equity. A lot of hires will negotiate the “salary high” and “equity high” option, saying they want no sacrifices, get both and join thinking they got a great deal.

[tmp538394722]

Interesting. I wonder how this plays out in practice - what choices people tend to make.

I wonder if there are politics for people who take more cash and less stock - does mgmt assume it implies less good will, since the employee is literally “less invested” in the outcome?

[nbclark]

Can only speak to my experience, but I am completely indifferent to their choice. Either of the 3 tend to be relatively substantial in equity, so everyone is invested in some regard. I also believe that in the long run, unvested options aren't the best retention strategy and that a challenging and rewarding work environment coupled with competitive compensation is the way to build an invested team.

[boulos]

Awesome! Any lessons learned? (The main one I’ve seen and worried about is sophistication of employees with their equity. Options are confusing! But that’s true whether it’s a single offer or multiple perspectives).

[nbclark]

In general, it seems to be appreciated. We initially set it up this way to help take some of the stress out of negotiation (as that favors certain people over others). A few learnings off the top of my mind:

1. Regardless of the structure, the offer needs to be competitive. This wouldn't really help with lowballing offers.

2. Across the ~30 offers I've given out, I don't think that either of the 3 variants is more common. I suppose that indicates that different candidates are indeed optimizing for different situations.

3. Our hiring has intentionally skewed more senior and I think the variants of offers has helped create more family friendly offers.

Regarding options, I tend to make sure to offer to spend a good bit of time laying out the details of how they work (strike price, preferred value, vesting, cliffs, early exercise, etc.). They are indeed confusing and I find that people typically either overvalue the value of the options today, or undervalue the potential upside.

[SkyPuncher]

Wow. That's an absolutely fantastic way to do this.