Speaker 1: Afro Tech San Francisco, California. Eric Moore, managing direct Draft
Speaker 1: based Ventures, is in an afro tech founder and investors
Speaker 1: line was taking questions about how to successfully pitch a
Speaker 1: VC and he offers some words of wisdom for new
Speaker 1: founders looking to raise an early seed round. Don't come
Speaker 1: to an investor without some sort of product. I mean,
Speaker 1: these days, it doesn't take that much money to build
Speaker 1: a product. And if you don't have the money, you
Speaker 1: can probably find or theoretically you should be able to
Speaker 1: find an engineer that can help you build a product. Uh.
Speaker 1: And then so even if it's an m v P uh,
Speaker 1: you know, a minimum viable product or the alpha version
Speaker 1: of what you're building. Uh, it's gonna be a lot
Speaker 1: more helpful and you will stand out that much more
Speaker 1: if you have that already built before approaching a potential investor.
Speaker 1: I'm well, Luke, it's Mrs Black Tech, Green Money. I
Speaker 1: wanta introduce you to some of the biggest names, some
Speaker 1: of the brightest minds and brilliant ideas. If you're black
Speaker 1: in building or simply using tech to secure your back,
Speaker 1: this podcast is for you. Malcolm meth Bridge is a
Speaker 1: certified financial planner, speaker and bloggers in these areas of
Speaker 1: expertise and glue retirement planning, investment, portfolio development, tax planning
Speaker 1: and insurance, stock options, and other executive benefense. He leverages
Speaker 1: that expertise to help senior managers and tach workers make
Speaker 1: sense of some of the most complex financial situations that
Speaker 1: working professionals tend to face. On a recent lunch table
Speaker 1: live discussion, what You're about to Hear, I asked Malcolm
Speaker 1: about what exactly equity is and if there are any
Speaker 1: unique traits of equity when you work for a tech startup. Yes. So,
Speaker 1: so equity camp used to be unique to the tech industry.
Speaker 1: I'm I'm learning as time goes on that millennial specifically, right,
Speaker 1: we got folks who are twenty eight, thirty thirty, two
Speaker 1: thirty five, let's say twenty to thirty five. I'll give
Speaker 1: us the window who are working for companies right now
Speaker 1: who maybe aren't in tech, but they have uh friends
Speaker 1: who are, and they're seeing the money that their friends
Speaker 1: are making and the fortunes that are being created from
Speaker 1: owning equity in the company that they work for, and
Speaker 1: so they're starting to demand themselves regardless of what the
Speaker 1: shop is that the company pay them in equity. So
Speaker 1: a lot of companies outside of the text Fear are
Speaker 1: also jumping on the bandwagon now and offering that, but
Speaker 1: in Silicon Valley, right, I'll use Silicon Valley as the
Speaker 1: general broad right, uh grouping, even though folks in tech
Speaker 1: are working in Texas and Florida and god knows where
Speaker 1: else at this point. But like it used to be
Speaker 1: that that was something that was reserved for those people
Speaker 1: in Silicon Valley in tech companies, and they refused to
Speaker 1: work for a company they didn't offer them a piece
Speaker 1: of the pie, right, And so I want to own
Speaker 1: a piece of the work product that I am hoping
Speaker 1: to create. I saw and all these agreements when I
Speaker 1: come in the door. Let's say I can't take any
Speaker 1: of the work product with me, right, if I create
Speaker 1: some service or some features some app. Google lets you
Speaker 1: do your ten percent time. Right, if I create Google
Speaker 1: Maps or Gmail during my ten percent time, I can't
Speaker 1: take that with me. Google owns it. But at least
Speaker 1: I get to participate in the upside and the value
Speaker 1: creation that that add on I created happens to generate
Speaker 1: over time. By owning equity in the shop, and so
Speaker 1: it's kind of you know, everybody's happy right on both sides.
Speaker 1: When when you say, let's say I created a feature
Speaker 1: in email and I work for Google, and let's not
Speaker 1: just leave its Google. Let's say any startle I create
Speaker 1: a feature that becomes a thing. How valuable could that be?
Speaker 1: You know, both to the company and to me as
Speaker 1: an individual who's on the payroll here, Like, how talk?
Speaker 1: Can you talk about some instances where that could actually
Speaker 1: provide a serious windfall? Oh my god? Yeah, So I'll
Speaker 1: give you a real specific, if example. I won't give
Speaker 1: too many details to to not tell anybody's life story
Speaker 1: for them, But I happen to have a client who
Speaker 1: worked for a coin base for a while, right we
Speaker 1: all know coin based iPod recently and uh two big
Speaker 1: acclaim right on on day one. I can't remember what
Speaker 1: the starting price was supposed to be, something like forty bucks,
Speaker 1: and it shot all the way up to like close
Speaker 1: to three hundred on on this first day of trading.
Speaker 1: So this particular person, his net worth was about a
Speaker 1: hundred thousand dollars before coin based I p O coin
Speaker 1: based I p O s and he's now an eight
Speaker 1: millionaire so like, just think about like how life changing
Speaker 1: that money is for somebody in their thirties who like,
Speaker 1: had student loans, Suddenly they don't, didn't own a home,
Speaker 1: suddenly they do. Didn't even have the word legacy anywhere
Speaker 1: close to the tip of their tongue, and now they do. Right. So, like,
Speaker 1: those kind of things are what happens from being that
Speaker 1: close to value creation. So the rule, I won't call
Speaker 1: it a rule, but one of the things I always
Speaker 1: tell people who are like, you know, I want to
Speaker 1: get rich, right, I want to work and get rich.
Speaker 1: You can save your way to about two to three
Speaker 1: million dollars over the course of a thirty five or
Speaker 1: so year career by diligently saving, not spending anything crazy.
Speaker 1: Like I've seen it happen to have clients that are
Speaker 1: in their sixties now, they've been working really hard, they
Speaker 1: command a high salary, they don't spend anything crazy, and
Speaker 1: they have about two and a half to three million
Speaker 1: dollars that they've saved over time doing it. The quote
Speaker 1: unquote right way you want to go beyond that three
Speaker 1: million dollar threshold, you're either gonna have to be attached
Speaker 1: to some sort of value creation, right. So you're one
Speaker 1: of the first employees at a company that ends up
Speaker 1: doing something big, or you're gonna have to do it
Speaker 1: in real estate by holding onto assets for a very
Speaker 1: long time and allowing them to appreciate until one day
Speaker 1: you look up and on paper you're worth a time
Speaker 1: and you start liquidating that stuff. Those are the two
Speaker 1: ways that I personally have seen where clients have like
Speaker 1: significant life changing lineage changing money that happens. And more
Speaker 1: to the point you were making when we first started,
Speaker 1: one of the ways that that that allows you to
Speaker 1: be attached to that value creation that it's happening is
Speaker 1: you own uh an interest in the company that you're
Speaker 1: working for. So if I'm at you know, Microsoft, I'll
Speaker 1: use as an example because it's a popular enough company
Speaker 1: and I own shares of Microsoft. I worked there for
Speaker 1: five years. I accumulate you know, half million dollars worth
Speaker 1: of shares in the five years that I'm there. I leave,
Speaker 1: but I don't sell them. I hang on to them.
Speaker 1: And then we all have seen what the fang stocks Facebook, Amazon, Netflix,
Speaker 1: and Google have have done. Microsoft included in that bucket.
Speaker 1: They've you know, quadrupled over like that that tenure span
Speaker 1: that the NASDAC has been on this run. That's life
Speaker 1: changing money for some people. Right, your five hundred thousand
Speaker 1: dollars worth of equity you had as part of your
Speaker 1: total comp package that came to you when you came
Speaker 1: on board is now two million dollars by you going
Speaker 1: along for the ride. That's life changing money. Versus you
Speaker 1: work as a software engineer. I pay you a hundred
Speaker 1: and eighty thousand dollars, the I r S takes half
Speaker 1: of it, depending on what state you live in. Right,
Speaker 1: and your hundred and eighty turns into ninety thousand, and
Speaker 1: it's up to you to decide how to spend that
Speaker 1: ninety thousand and make sure you keep a piece of it.
Speaker 1: But it's really not likely to continue to grow at
Speaker 1: the ridiculously outsized rate as you owning equity and something
Speaker 1: where constantly new products are being created, new ideas are
Speaker 1: being kicked around. All that is happening while you're sleep
Speaker 1: frankly like you're not contributing anymore. You left the company,
Speaker 1: but the value creation is still happening without you, but
Speaker 1: because you were tied to it at one point, you
Speaker 1: still get to reap the benefits. That's how the game
Speaker 1: is one. So who I'm gonna ask two questions and
Speaker 1: one which I hate to do but I think you
Speaker 1: can handle. This is who has leverage to ask for
Speaker 1: equity when working out a startup? And do I have
Speaker 1: to be an engineer? Awesome questions, So you don't have
Speaker 1: to be an engineer. I'm gonna ask the answer the
Speaker 1: last one first because it's easier. You don't have to
Speaker 1: be an engineer. I have seen administrative assistance who administrative
Speaker 1: assistant early enough on that they got a piece of
Speaker 1: the pie, and they even are attached to that that
Speaker 1: wealth creation at at the end of the day and
Speaker 1: are walking away with some decent cheers. So no, you
Speaker 1: can be you know, I won't say you can be
Speaker 1: the staff who works in the cafe as an example,
Speaker 1: because those people are usually contractors. But if you're one
Speaker 1: of those people and you can work your way into
Speaker 1: write a conversation about it, by all means do it.
Speaker 1: But you know, the average employee from the lower part
Speaker 1: of the totem poll to the very top can actually
Speaker 1: participate in the equity pool at almost any company at
Speaker 1: this point, So you don't have to be an engineer
Speaker 1: to participate. The second part you said, how do I
Speaker 1: get equity as part of the conversation, Um, you gotta
Speaker 1: ask for it. That's really, that's really it. So one
Speaker 1: of the things that I always encourage people to focus
Speaker 1: on when they negotiate this compensation package is not just
Speaker 1: how much can I get in salary? Right, that's important,
Speaker 1: but there comes a point when enough is enough, and
Speaker 1: every incremental dollar you have them pay you has a
Speaker 1: diminishing rate of return. Right, So you hit you know,
Speaker 1: two hundred thousand dollars, let's say, and you live in
Speaker 1: a place like you know, New York or California, where
Speaker 1: after taxes, again, fift of that's going out the out
Speaker 1: the window. Where if I were to to ask instead
Speaker 1: for shares in the company, as long as I hold
Speaker 1: onto those shares for an extra twelve months after you
Speaker 1: know they vested and been issued to me, I'm paying
Speaker 1: that long term capital gains. So long term capital gains
Speaker 1: tax rates. My ordinary income tax rate I just told
Speaker 1: you is fifty after state and federal get done with me. Right,
Speaker 1: that's at delta that you've now been able to find
Speaker 1: just by getting paid in that equity versus having them
Speaker 1: pay it to you in in actual cash money. So
Speaker 1: just having a longer vision to be able to see
Speaker 1: the way the game is played in one will help
Speaker 1: to keep you know, a few people at least from
Speaker 1: asking for the wrong thing at the wrong time. Do
Speaker 1: you find that younger folks beginning their careers working at
Speaker 1: startups and tech companies are more and more sophisticated and
Speaker 1: know to ask for equity versus the larger paycheck? And
Speaker 1: or if you find those who aren't who just said
Speaker 1: they want the bag today, how do you have that
Speaker 1: conversation with them to convince and that look, the better
Speaker 1: play here potentially is to take less up from capital
Speaker 1: and to go for equity. Yes, So one of the
Speaker 1: challenges that I have as a financial planner is helping
Speaker 1: people figure out there enough point. That's one of the
Speaker 1: things that I really like about this work is that
Speaker 1: there's a book that I read and I always recommend
Speaker 1: to people called Your Money or Your Life. It's the
Speaker 1: book that's credited with helping to to launch the fire movement,
Speaker 1: the financial independence retire early movement um. But essentially the
Speaker 1: key tenant of the book is figuring out your enough point,
Speaker 1: Like how much house is enough? How much car is enough?
Speaker 1: How much vacation is enough? How much you know? All
Speaker 1: these things, we get on the treadmill and run this
Speaker 1: race four to constantly be chasing at some point enough
Speaker 1: is enough and you have enough luxury and you have
Speaker 1: enough like whatever, figuring out what that enough point is
Speaker 1: and then planning beyond that. And so I always try
Speaker 1: and help people see the forest for the trees that yes,
Speaker 1: you could get an extra dollars by joining company X, right,
Speaker 1: but if if it means then that you're gonna be
Speaker 1: working one point two times is hard right to to
Speaker 1: to be a kind of specific what could you be
Speaker 1: doing with that extra of your time versus the twenty
Speaker 1: dollars that you're gonna earn because you already make enough
Speaker 1: money to pay your mortgage, pay your kids daycare, You're
Speaker 1: driving nice enough car, you're live in a nice enough neighborhood.
Speaker 1: Like you're not chasing safety at this point, we're just
Speaker 1: chasing access. And so helping people figure out like enough
Speaker 1: is enough and the difference now is pay me an
Speaker 1: equity instead. And one other negotiating piece that I would
Speaker 1: encourage people to consider is companies are a lot more
Speaker 1: willing to part with shares of equity than they are
Speaker 1: with additional cash. If you just think of it from
Speaker 1: the CFOs perspective, Right, if I have if I commit
Speaker 1: to a salary that I owe you, that's every day,
Speaker 1: every year, that's a line item that goes against the
Speaker 1: P and L that I got to count for. Right,
Speaker 1: I owe you two hundred thousand dollars. You're asking me
Speaker 1: for an extra twenty That twenty grand is going against
Speaker 1: the P and L. Every year you asked me for
Speaker 1: dollars worth of shares. That's a totally different equation because
Speaker 1: those shares are sitting on a spreadsheet somewhere in in
Speaker 1: you know, in in somebody's like hard drive. They're not
Speaker 1: an actual thing I've got a hand over to you.
Speaker 1: So yes, they still have to be accounted for, but
Speaker 1: we don't hold onto them and keep them as tightly
Speaker 1: guarded as we would if you're asking for cash. Also,
Speaker 1: if you're thinking from the HR person's perspective, I gotta
Speaker 1: be able to to justify why I gave you to twenty.
Speaker 1: But the software engineer who sits next to you is
Speaker 1: getting too, And then the next person who comes in
Speaker 1: the door is gonna want to know what they can
Speaker 1: actually get as far as cash comp and now I've
Speaker 1: got to do I all for that person to twenty
Speaker 1: two because I just gave it to you. Whereas with
Speaker 1: the shares, it's a little bit different than a little
Speaker 1: bit more fluid. And I'm speaking broadly right, every company
Speaker 1: is different the way they treat this. But what I've
Speaker 1: seen and and also talking to hire uh recruit technical
Speaker 1: recruiters personally, like they're way more willing to come up
Speaker 1: off of additional equity shares versus cash money. So for
Speaker 1: folks who and obviously the startup side of the table
Speaker 1: would understand this, but I want to make sure the engineer,
Speaker 1: the talent, the HR person, the legal person understands this side.
Speaker 1: Legal people might give it, but let's under let's talk
Speaker 1: about what the cliff means. So if I come in
Speaker 1: as an engineer and I say, hey, I'm gonna give
Speaker 1: you a hundred thousand shares with a three year cliff,
Speaker 1: what does that mean? Perfect perfect setup? So the cliff
Speaker 1: best that you're talking about, it's how long you have
Speaker 1: to be at the company before you actually take ownership
Speaker 1: of those shares. So to to keep from being too
Speaker 1: super nerdy er super technical, the I r S and
Speaker 1: and the company have this trade that happens, which is
Speaker 1: called constructive receipts. So you have constructively received at the
Speaker 1: end of a three year period those shares, which means
Speaker 1: with it you also have taken on the tax liability
Speaker 1: for those shares and and whatever they're worth at the time.
Speaker 1: So a hundred thousand dollars worth of shares, you wait
Speaker 1: the three years that you have to vest, right, you
Speaker 1: have to be at the company three years before those
Speaker 1: shares vest, and technically now you own them at that
Speaker 1: point the moment they get issued to you, regardless of
Speaker 1: whether they're restricted stock or non qualified stock options or
Speaker 1: performance share units or whatever. Once you take ownership of
Speaker 1: those shares, you also take ownership of the tax liability.
Speaker 1: Prior to you taking ownership of the shares, you don't
Speaker 1: own anything. You also don't own the hundred thousand dollars, right,
Speaker 1: because you don't have the shares, but you don't own
Speaker 1: the tax liability. So with that additional cash also comes
Speaker 1: the additional tax liability. So just something to be aware
Speaker 1: of at at the exact same time. But to answer
Speaker 1: your question very specifically, companies as retention tool will put
Speaker 1: a time clock on how long they have to be
Speaker 1: able to get work product out of you before they
Speaker 1: give you those shares. That that it kind of gives
Speaker 1: you your walking papers to right. If I think about
Speaker 1: it purely from the company's perspective, I know I've got
Speaker 1: you on the hook for three years. If you've got
Speaker 1: a three year vesting requirement. Beyond three years, you're a
Speaker 1: free agent. Every year. I gotta constantly be doing things
Speaker 1: and bringing things to you to make you feel good
Speaker 1: about staying with this team and want to be here. Right,
Speaker 1: But for that three year period you're on that that
Speaker 1: rookie contract, if you will. If you think about it
Speaker 1: in terms of the NFL, you're gonna play and perform
Speaker 1: regardless of of what's happening, because you've got to hit
Speaker 1: that three year that number before we can issue you,
Speaker 1: you know, the shares. That's good for me to know
Speaker 1: and playing around as the company. So that's something to
Speaker 1: also kind of think about. They'll also issue you UH
Speaker 1: shares not only as as investing based on tenure, but
Speaker 1: also as a retention and tool. So you get past
Speaker 1: that three year window. Maybe I'm worried that that somebody
Speaker 1: is gonna compote you right. Tech companies are a bit
Speaker 1: incestuous at this point about stealing talent from one place
Speaker 1: to the next, and the same people kind of moving
Speaker 1: every three years or so, and so one way that
Speaker 1: I can keep you from making that jump is to
Speaker 1: offer you additional shares as a retention bonus every single
Speaker 1: year that you stay. And maybe those shares just have
Speaker 1: to you gotta be here one year after you get
Speaker 1: them in order for them to vest, or there's no
Speaker 1: investing timetable on them. Those are all things you want
Speaker 1: to know and negotiate going in the door so that
Speaker 1: you can give yourself the most flexibility and freedom to
Speaker 1: be able to maneuver however you want to and still
Speaker 1: get you know, the majority of those shares, if not
Speaker 1: all of them, before making any other moves. I do
Speaker 1: have people watching the chat on Facebook and lunch table,
Speaker 1: so if you do have questions, I want to make
Speaker 1: sure I get to those, um so it makes sure
Speaker 1: go feel free to drop your questions in the chat
Speaker 1: and we will get as many of them as we can.
Speaker 1: And in the meantime, going down that road of investing
Speaker 1: periods and cliffs and etcetera. I wonder if let's say
Speaker 1: this remarkable opportunity happens, you know, which is doesn't happen
Speaker 1: all the time. But you give me a hundred thousand
Speaker 1: shares on day one. I have a two year let's
Speaker 1: just still just to get easy map, a two year
Speaker 1: investing period, so I can't get my full amount of
Speaker 1: shares for that two years. In that two years time,
Speaker 1: those shares go to the moon. So these are Google numbers,
Speaker 1: Apple numbers, Amazon numbers, Facebook numbers. So I'm on paper,
Speaker 1: super duper wealthy on paper, but I don't have any
Speaker 1: of that liquor cash. How does my life change in
Speaker 1: the meantime while or how could it change in the
Speaker 1: meantime or does it so? Uh? Two separate answers, because
Speaker 1: that goes to separate ways. Right, So if you're talking
Speaker 1: I work for a private company, I work for a
Speaker 1: startup and they've made an announcement that they plan to
Speaker 1: go public at some point. Right, I'm thinking about door
Speaker 1: Dash as a really good example of this. Tons of
Speaker 1: people who started at different rates COVID happens, those shares
Speaker 1: are now gonna be to the moon, like you said,
Speaker 1: because like all of a sudden, door Dash is posting
Speaker 1: the best numbers they've ever posted. Nobody in the company
Speaker 1: is doing any work anymore because everybody's imagination is flying around.
Speaker 1: I'm gonna be like super super wealthy because I'm gonna
Speaker 1: get those shares and I'm gonna go buy this beach
Speaker 1: house and I'm gonna and I mean literally like can't
Speaker 1: get anybody off Zello, can't get anybody off. Everybody is
Speaker 1: spending that money. But there's also this thing called a
Speaker 1: lock up where you've got to wait six depending on
Speaker 1: where you are in the food chain right the hierarchy,
Speaker 1: and how close you are the privileged information. There's also
Speaker 1: this thing called a lock up where you've gotta wait
Speaker 1: six months after the company goes public before you can
Speaker 1: do anything, So those shares could come crashing back down
Speaker 1: the earth in that time before you're legal allowed to
Speaker 1: sell anything, because they don't want you moving the stock
Speaker 1: price around, which I've seen happen unfortunately. But also to
Speaker 1: your point, with a publicly traded company like a Facebook
Speaker 1: or an Amazon or Google or whoever who's going on
Speaker 1: this run, the more advantageous way to work out your
Speaker 1: equity grants is to have them coming to you on
Speaker 1: a monthly basis instead of annually for that reason right there.
Speaker 1: So if I get a new uh tranches the word
Speaker 1: that we use, or slice or whatever of shares that
Speaker 1: come to me every single month, then as the price
Speaker 1: is doing what it does, I can plan my own
Speaker 1: life around what else I need to do financially and
Speaker 1: whether I'm gonna sell this month or not. If I've
Speaker 1: got to wait an entire year to make that cell
Speaker 1: or whole decision, then I'm at the mercy of wherever
Speaker 1: the company is in that moment. It may not even
Speaker 1: make a difference with a company like Amazon, like you said,
Speaker 1: who can't seem to go but in one direction. But
Speaker 1: for a company who does take a very nasty dip
Speaker 1: at some point, I'm kind of at the mercy of
Speaker 1: whatever the market does. And so developing that plan in
Speaker 1: advance of when and how to sell is going to
Speaker 1: be super helpful to turn you from a paper millionaire,
Speaker 1: as you're saying, into an actual millionaire, as in exchanging
Speaker 1: those certificates for actual dollars at some point, so that
Speaker 1: you can take some chips off the table and not
Speaker 1: just kind of follow the ticker wherever it takes you.
Speaker 1: What typically happens in the in the tech company specificist.
Speaker 1: But let's say just companies across the board where equities
Speaker 1: involved and they go public or they sell or otherwise,
Speaker 1: and early employees don't get a financial winfall what typically happened. Um,
Speaker 1: that's a tough one man. People get real stings you
Speaker 1: around liquidity events. Um. You know, founders start trying to
Speaker 1: renegotiate their founder shares. Uh, you have key employee that
Speaker 1: aren't satisfied with their contract the way it was initially
Speaker 1: written and where they sit on the cap table when
Speaker 1: they look at their slice versus others. Like those kind
Speaker 1: of things, it gets It gets kind of ugly, honestly
Speaker 1: at some point, Um, the short answer to your question is,
Speaker 1: if you aren't on that cap table before the liquidity
Speaker 1: event happens, you're probably not gonna get on it. Um.
Speaker 1: What does happen in some cases where you are valuable
Speaker 1: enough to the company that they're worried about like hurting
Speaker 1: your feelings and they're worried about losing you, is you
Speaker 1: can get a gross up as we call it, where
Speaker 1: they issue you a one time bonus allotment of shares
Speaker 1: to make you whole, as they say, so that you
Speaker 1: feel like you're included and you're participating, but those shares
Speaker 1: are not going to have the same Uh. Value is
Speaker 1: not the word that I wanna, I want to use it.
Speaker 1: It's not gonna have the same like sweetness to it
Speaker 1: as the folks that were there on day one, two, three, ten.
Speaker 1: Funny you know that kind of thing because even with
Speaker 1: like incentive stock options as an example, that have a
Speaker 1: bit of a look back kind of feature. They allow
Speaker 1: you to look at yesterday's price and decide if you're
Speaker 1: gonna uh sell it now and take today's price as
Speaker 1: your your exchange value. Uh. Even if I would have
Speaker 1: granted you incentive stock options at today's price, you're not
Speaker 1: gonna get that super low basis that somebody got who
Speaker 1: started with the company ten years ago when it was
Speaker 1: literally in somebody's living room. What are what would you say?
Speaker 1: I like the top three to five things a start
Speaker 1: up employee should be paying attention to in their work
Speaker 1: contracts regarding conversation. Know what happens to your shares if
Speaker 1: and when the company has a liquidit event. That's huge. Uh.
Speaker 1: To your point about people dancing around excited because they're
Speaker 1: about to be a millionaire, some people don't realize that
Speaker 1: if the company sells X happens right. There's a lot
Speaker 1: of SPACs happening right now. The word spack is flying
Speaker 1: around all over the place, and a lot of people's
Speaker 1: equity agreement doesn't include language around UM, what happens if
Speaker 1: the company changes hands, what happens if there's a change
Speaker 1: of ownership before the I P O. So that's the
Speaker 1: major one. But also like knowing the schedule of when
Speaker 1: your your shares vest right, so you don't walk away
Speaker 1: on accident and leave some chips on the table. UM.
Speaker 1: That's what we call the forfeit value. What happens if
Speaker 1: you forfeit those shares? UM also setting up plan for
Speaker 1: win and how to get out of those shares because
Speaker 1: until you actually trigger a sale, you're only a millionaire
Speaker 1: on paper. So you know, deciding how much and when
Speaker 1: to sell is a very big key component in there.
Speaker 1: UM Also understanding that just because you're inside of your
Speaker 1: vesting table, your vesting timetable, doesn't mean that other companies
Speaker 1: won't match you to make you whole right, give you
Speaker 1: some shares to match what you would stand to lose
Speaker 1: from the company you're considering leaving to entice you to
Speaker 1: move sooner. So I've seen that happen where I'm going
Speaker 1: to use two completely made up examples. Google wants to
Speaker 1: uh employee from Amazon. Google will say, instead of you
Speaker 1: waiting the extra year and a half a year shares
Speaker 1: to best, We're gonna match the shares that you would
Speaker 1: lose and give you an extra ten percent on top
Speaker 1: of that to get you to leave today instead. So
Speaker 1: don't be afraid to ask. Don't be afraid to ask
Speaker 1: questions because you'd be surprised, like what people are willing
Speaker 1: to how flexible people are willing to get, you know,
Speaker 1: to to make it happen. You asked me for five
Speaker 1: I don't know if that was five three to five
Speaker 1: three or five. You got that? You got there? Um,
Speaker 1: you know not everybody is going to be a founder,
Speaker 1: and UM, talk to me about some of the benefits
Speaker 1: that could be uniquely available to senior level people at
Speaker 1: a startup. Um, whether I'm coming on as a chief
Speaker 1: operating officer, I'm coming like, what are some things outside
Speaker 1: of equity as part of my benefits package? If I'm
Speaker 1: on the career trajectory, should I be paying attention to
Speaker 1: so one super unique thing and this is not me
Speaker 1: like to my own horn. But we have companies as
Speaker 1: clients who pay for financial planning on behalf of their
Speaker 1: senior leaders. They don't give that to everybody across the board.
Speaker 1: So you are c OO and you step into Now
Speaker 1: the company's accountant is now your accountant. The company's financial
Speaker 1: advisor is now your financial advisor. The company may even
Speaker 1: comp you a car, right because I can. I can
Speaker 1: have a corporate lease and and assign it to you. Um,
Speaker 1: your your travel budget starts to look a little bit different. Um.
Speaker 1: All those kind of things are are different and unique
Speaker 1: to not even necessarily just the C suite. I've seen
Speaker 1: it at the director level, of the senior vice president level,
Speaker 1: that sort of thing. Um. But also real quick you
Speaker 1: you said not just equity, but as far as equity
Speaker 1: is concerned, your shares look different too in the C
Speaker 1: suite or at the senior director level. So incentive stock
Speaker 1: options are usually held just for the super top of
Speaker 1: the organized organization chart. Everybody else gets what's called restricted
Speaker 1: stock units, those that have two completely different tax treatments
Speaker 1: in the way that you can actually plan around them
Speaker 1: and ultimately what how valuable they are. So that's another
Speaker 1: difference that that gets thrown in there between the two
Speaker 1: tiers of employee and UM. I want to talk about
Speaker 1: retirement accounts and how important they are too because we
Speaker 1: we we have so many conversations around funding startups, because
Speaker 1: we have this big disparity with you know, black minority owned,
Speaker 1: women owned startups being funded. How can they if they can,
Speaker 1: retirement accounts be used to put some early capital into
Speaker 1: starting my thing. I'm really glad you asked that. So
Speaker 1: I normally will see people take out a loan from
Speaker 1: the company that the four one K playing the company
Speaker 1: they work for, use that loan to to get access
Speaker 1: to capital to start the company. When you leave the company,
Speaker 1: that outstanding loan gets turned into a distribution, which means
Speaker 1: ordinary income tax treatment, right, so you're paying taxes on
Speaker 1: that distribution. Or you could just straight up say kick
Speaker 1: me the cash, I'm gonna pay the taxes on it,
Speaker 1: and it is what it is, and we use it
Speaker 1: to start the company. But there's actually UH plans out
Speaker 1: there within the tax code that allow you to convert
Speaker 1: those shares in that you know, your investment in the
Speaker 1: company into UH shares in the company are starting. So
Speaker 1: instead of being invested in the SMP five index. In
Speaker 1: your four own K plan. You now have a four
Speaker 1: own K plan that is your new company, shares of
Speaker 1: the company that you started that you're investing now back
Speaker 1: into the Company's why you probably saw the article from
Speaker 1: pro public about Peter Tile having a five billion dollar
Speaker 1: roth ira funded from PayPal stock. It's because he had
Speaker 1: really great lawyers twenty years ago when they started the
Speaker 1: company that told him, don't take that money out of
Speaker 1: your four when K plan to start, you know the shop,
Speaker 1: sell yourself shares of PayPal. Convert your four owen k
Speaker 1: uh dollars into shares of PayPal, and then as they grow,
Speaker 1: they live inside this roth ira which will never pay
Speaker 1: taxes on. So there are other ways to to to
Speaker 1: use your four one K assets other than taking a
Speaker 1: direct distribution and like paying the taxes today and you know,
Speaker 1: hoping for the best going forward. Malcolm, where can people
Speaker 1: learn more about you and your work? I'm at Malcolm
Speaker 1: on Money on all social media platforms. I encourage them
Speaker 1: to check out the tech Money podcast. Um we go
Speaker 1: into a lot more detail on these kinds of topics,
Speaker 1: you know, with with tons more times. So those are
Speaker 1: the two main places I would say that to find me.
Speaker 1: I'm also heavy on LinkedIn, so happy to spark up
Speaker 1: a conversation there too. Yeah. Black Tech Green Money to
Speaker 1: production of Blackvity, Afro Tech, The Black Effect podcast Networking
Speaker 1: I Heart Media was produced by Morgan the Bone on
Speaker 1: In Me Well Lucas, with additional production supported by Love
Speaker 1: Beach and Marissa Lewis. Special thank you to Michael Davis
Speaker 1: since the car savan ya you know, like the wine. Yes,
Speaker 1: that's his real name. Learn more about my guests and
Speaker 1: other tech disruptres and innovators at afro tech dot com.
Speaker 1: The video version of this episode will drop the Black
Speaker 1: Tech Green Money on YouTube next week, So tap in
Speaker 1: enjoying Black Tech Green Money. Leave us a five star
Speaker 1: rating on iTunes. Go get your money, Peace and love,