WEBVTT - Understanding Startup Equity Compensation w/ Malcolm Etheridge 0:00:01.560 --> 0:00:11.240 Afro Tech San Francisco, California. Eric Moore, managing direct Draft 0:00:11.240 --> 0:00:14.120 based Ventures, is in an afro tech founder and investors 0:00:14.160 --> 0:00:17.279 line was taking questions about how to successfully pitch a 0:00:17.400 --> 0:00:20.640 VC and he offers some words of wisdom for new 0:00:20.680 --> 0:00:24.040 founders looking to raise an early seed round. Don't come 0:00:24.600 --> 0:00:28.680 to an investor without some sort of product. I mean, 0:00:28.720 --> 0:00:31.720 these days, it doesn't take that much money to build 0:00:31.720 --> 0:00:33.159 a product. And if you don't have the money, you 0:00:33.200 --> 0:00:35.479 can probably find or theoretically you should be able to 0:00:35.560 --> 0:00:39.120 find an engineer that can help you build a product. Uh. 0:00:39.159 --> 0:00:41.960 And then so even if it's an m v P uh, 0:00:42.000 --> 0:00:45.360 you know, a minimum viable product or the alpha version 0:00:45.400 --> 0:00:48.000 of what you're building. Uh, it's gonna be a lot 0:00:48.040 --> 0:00:50.400 more helpful and you will stand out that much more 0:00:50.440 --> 0:00:53.960 if you have that already built before approaching a potential investor. 0:00:55.600 --> 0:00:59.840 I'm well, Luke, it's Mrs Black Tech, Green Money. I 0:01:00.000 --> 0:01:01.840 wanta introduce you to some of the biggest names, some 0:01:01.880 --> 0:01:05.000 of the brightest minds and brilliant ideas. If you're black 0:01:05.040 --> 0:01:07.399 in building or simply using tech to secure your back, 0:01:07.840 --> 0:01:15.280 this podcast is for you. Malcolm meth Bridge is a 0:01:15.280 --> 0:01:18.679 certified financial planner, speaker and bloggers in these areas of 0:01:18.760 --> 0:01:22.880 expertise and glue retirement planning, investment, portfolio development, tax planning 0:01:22.880 --> 0:01:27.039 and insurance, stock options, and other executive benefense. He leverages 0:01:27.080 --> 0:01:29.920 that expertise to help senior managers and tach workers make 0:01:30.000 --> 0:01:32.760 sense of some of the most complex financial situations that 0:01:32.880 --> 0:01:36.560 working professionals tend to face. On a recent lunch table 0:01:36.600 --> 0:01:39.920 live discussion, what You're about to Hear, I asked Malcolm 0:01:39.959 --> 0:01:43.400 about what exactly equity is and if there are any 0:01:43.480 --> 0:01:47.640 unique traits of equity when you work for a tech startup. Yes. So, 0:01:47.640 --> 0:01:51.880 so equity camp used to be unique to the tech industry. 0:01:51.920 --> 0:01:57.520 I'm I'm learning as time goes on that millennial specifically, right, 0:01:57.560 --> 0:02:01.200 we got folks who are twenty eight, thirty thirty, two 0:02:01.480 --> 0:02:04.000 thirty five, let's say twenty to thirty five. I'll give 0:02:04.040 --> 0:02:06.840 us the window who are working for companies right now 0:02:07.400 --> 0:02:11.040 who maybe aren't in tech, but they have uh friends 0:02:11.040 --> 0:02:13.360 who are, and they're seeing the money that their friends 0:02:13.360 --> 0:02:16.680 are making and the fortunes that are being created from 0:02:16.680 --> 0:02:18.960 owning equity in the company that they work for, and 0:02:18.960 --> 0:02:22.040 so they're starting to demand themselves regardless of what the 0:02:22.040 --> 0:02:24.960 shop is that the company pay them in equity. So 0:02:25.040 --> 0:02:27.839 a lot of companies outside of the text Fear are 0:02:27.919 --> 0:02:30.480 also jumping on the bandwagon now and offering that, but 0:02:30.880 --> 0:02:33.280 in Silicon Valley, right, I'll use Silicon Valley as the 0:02:33.320 --> 0:02:37.320 general broad right, uh grouping, even though folks in tech 0:02:37.360 --> 0:02:39.560 are working in Texas and Florida and god knows where 0:02:39.600 --> 0:02:42.679 else at this point. But like it used to be 0:02:42.760 --> 0:02:46.359 that that was something that was reserved for those people 0:02:46.560 --> 0:02:51.120 in Silicon Valley in tech companies, and they refused to 0:02:51.160 --> 0:02:53.320 work for a company they didn't offer them a piece 0:02:53.320 --> 0:02:56.160 of the pie, right, And so I want to own 0:02:56.320 --> 0:02:58.600 a piece of the work product that I am hoping 0:02:58.639 --> 0:03:01.240 to create. I saw and all these agreements when I 0:03:01.280 --> 0:03:03.119 come in the door. Let's say I can't take any 0:03:03.120 --> 0:03:06.280 of the work product with me, right, if I create 0:03:06.400 --> 0:03:09.320 some service or some features some app. Google lets you 0:03:09.360 --> 0:03:12.040 do your ten percent time. Right, if I create Google 0:03:12.440 --> 0:03:15.080 Maps or Gmail during my ten percent time, I can't 0:03:15.080 --> 0:03:17.520 take that with me. Google owns it. But at least 0:03:17.520 --> 0:03:20.640 I get to participate in the upside and the value 0:03:20.680 --> 0:03:24.600 creation that that add on I created happens to generate 0:03:25.080 --> 0:03:28.160 over time. By owning equity in the shop, and so 0:03:28.520 --> 0:03:31.680 it's kind of you know, everybody's happy right on both sides. 0:03:32.960 --> 0:03:35.800 When when you say, let's say I created a feature 0:03:36.040 --> 0:03:38.320 in email and I work for Google, and let's not 0:03:38.480 --> 0:03:40.840 just leave its Google. Let's say any startle I create 0:03:41.040 --> 0:03:46.160 a feature that becomes a thing. How valuable could that be? 0:03:46.480 --> 0:03:48.480 You know, both to the company and to me as 0:03:48.520 --> 0:03:52.400 an individual who's on the payroll here, Like, how talk? 0:03:52.440 --> 0:03:55.000 Can you talk about some instances where that could actually 0:03:55.000 --> 0:03:58.640 provide a serious windfall? Oh my god? Yeah, So I'll 0:03:58.680 --> 0:04:01.200 give you a real specific, if example. I won't give 0:04:01.240 --> 0:04:04.280 too many details to to not tell anybody's life story 0:04:04.360 --> 0:04:07.640 for them, But I happen to have a client who 0:04:07.680 --> 0:04:10.600 worked for a coin base for a while, right we 0:04:10.680 --> 0:04:15.880 all know coin based iPod recently and uh two big 0:04:15.920 --> 0:04:18.479 acclaim right on on day one. I can't remember what 0:04:18.520 --> 0:04:21.239 the starting price was supposed to be, something like forty bucks, 0:04:21.560 --> 0:04:23.200 and it shot all the way up to like close 0:04:23.240 --> 0:04:25.400 to three hundred on on this first day of trading. 0:04:25.800 --> 0:04:28.480 So this particular person, his net worth was about a 0:04:28.560 --> 0:04:32.840 hundred thousand dollars before coin based I p O coin 0:04:32.880 --> 0:04:34.440 based I p O s and he's now an eight 0:04:34.480 --> 0:04:39.200 millionaire so like, just think about like how life changing 0:04:39.400 --> 0:04:43.240 that money is for somebody in their thirties who like, 0:04:43.720 --> 0:04:46.960 had student loans, Suddenly they don't, didn't own a home, 0:04:47.080 --> 0:04:51.280 suddenly they do. Didn't even have the word legacy anywhere 0:04:51.279 --> 0:04:53.960 close to the tip of their tongue, and now they do. Right. So, like, 0:04:54.040 --> 0:04:56.880 those kind of things are what happens from being that 0:04:56.960 --> 0:04:59.800 close to value creation. So the rule, I won't call 0:04:59.800 --> 0:05:01.440 it a rule, but one of the things I always 0:05:01.600 --> 0:05:03.279 tell people who are like, you know, I want to 0:05:03.320 --> 0:05:05.960 get rich, right, I want to work and get rich. 0:05:07.279 --> 0:05:10.600 You can save your way to about two to three 0:05:10.640 --> 0:05:13.520 million dollars over the course of a thirty five or 0:05:13.520 --> 0:05:18.039 so year career by diligently saving, not spending anything crazy. 0:05:18.160 --> 0:05:20.320 Like I've seen it happen to have clients that are 0:05:20.360 --> 0:05:23.120 in their sixties now, they've been working really hard, they 0:05:23.120 --> 0:05:25.760 command a high salary, they don't spend anything crazy, and 0:05:25.800 --> 0:05:27.960 they have about two and a half to three million 0:05:27.960 --> 0:05:30.560 dollars that they've saved over time doing it. The quote 0:05:30.640 --> 0:05:33.760 unquote right way you want to go beyond that three 0:05:33.839 --> 0:05:37.200 million dollar threshold, you're either gonna have to be attached 0:05:37.200 --> 0:05:39.480 to some sort of value creation, right. So you're one 0:05:39.480 --> 0:05:42.960 of the first employees at a company that ends up 0:05:42.960 --> 0:05:46.040 doing something big, or you're gonna have to do it 0:05:46.080 --> 0:05:49.560 in real estate by holding onto assets for a very 0:05:49.560 --> 0:05:52.480 long time and allowing them to appreciate until one day 0:05:52.480 --> 0:05:54.360 you look up and on paper you're worth a time 0:05:54.400 --> 0:05:56.800 and you start liquidating that stuff. Those are the two 0:05:56.880 --> 0:06:00.680 ways that I personally have seen where clients have like 0:06:01.880 --> 0:06:07.839 significant life changing lineage changing money that happens. And more 0:06:07.920 --> 0:06:10.000 to the point you were making when we first started, 0:06:10.360 --> 0:06:12.880 one of the ways that that that allows you to 0:06:12.920 --> 0:06:16.359 be attached to that value creation that it's happening is 0:06:16.520 --> 0:06:20.920 you own uh an interest in the company that you're 0:06:20.960 --> 0:06:24.360 working for. So if I'm at you know, Microsoft, I'll 0:06:24.400 --> 0:06:26.760 use as an example because it's a popular enough company 0:06:27.360 --> 0:06:31.400 and I own shares of Microsoft. I worked there for 0:06:31.480 --> 0:06:34.760 five years. I accumulate you know, half million dollars worth 0:06:34.760 --> 0:06:37.240 of shares in the five years that I'm there. I leave, 0:06:37.320 --> 0:06:40.000 but I don't sell them. I hang on to them. 0:06:40.080 --> 0:06:44.840 And then we all have seen what the fang stocks Facebook, Amazon, Netflix, 0:06:44.839 --> 0:06:48.159 and Google have have done. Microsoft included in that bucket. 0:06:49.560 --> 0:06:53.719 They've you know, quadrupled over like that that tenure span 0:06:54.080 --> 0:06:56.680 that the NASDAC has been on this run. That's life 0:06:56.720 --> 0:06:59.239 changing money for some people. Right, your five hundred thousand 0:06:59.279 --> 0:07:01.680 dollars worth of equity you had as part of your 0:07:01.680 --> 0:07:03.880 total comp package that came to you when you came 0:07:03.880 --> 0:07:08.480 on board is now two million dollars by you going 0:07:08.520 --> 0:07:13.160 along for the ride. That's life changing money. Versus you 0:07:13.240 --> 0:07:15.600 work as a software engineer. I pay you a hundred 0:07:15.600 --> 0:07:18.120 and eighty thousand dollars, the I r S takes half 0:07:18.160 --> 0:07:20.160 of it, depending on what state you live in. Right, 0:07:20.720 --> 0:07:23.600 and your hundred and eighty turns into ninety thousand, and 0:07:23.600 --> 0:07:25.240 it's up to you to decide how to spend that 0:07:25.360 --> 0:07:27.480 ninety thousand and make sure you keep a piece of it. 0:07:27.920 --> 0:07:31.200 But it's really not likely to continue to grow at 0:07:31.240 --> 0:07:35.760 the ridiculously outsized rate as you owning equity and something 0:07:35.760 --> 0:07:39.440 where constantly new products are being created, new ideas are 0:07:39.440 --> 0:07:42.440 being kicked around. All that is happening while you're sleep 0:07:42.560 --> 0:07:45.680 frankly like you're not contributing anymore. You left the company, 0:07:45.960 --> 0:07:49.280 but the value creation is still happening without you, but 0:07:49.360 --> 0:07:52.200 because you were tied to it at one point, you 0:07:52.240 --> 0:07:54.360 still get to reap the benefits. That's how the game 0:07:54.440 --> 0:07:59.000 is one. So who I'm gonna ask two questions and 0:07:59.040 --> 0:08:00.480 one which I hate to do but I think you 0:08:00.520 --> 0:08:04.320 can handle. This is who has leverage to ask for 0:08:04.360 --> 0:08:06.880 equity when working out a startup? And do I have 0:08:06.960 --> 0:08:11.640 to be an engineer? Awesome questions, So you don't have 0:08:11.720 --> 0:08:13.280 to be an engineer. I'm gonna ask the answer the 0:08:13.360 --> 0:08:15.320 last one first because it's easier. You don't have to 0:08:15.360 --> 0:08:22.280 be an engineer. I have seen administrative assistance who administrative 0:08:22.280 --> 0:08:24.760 assistant early enough on that they got a piece of 0:08:25.520 --> 0:08:29.280 the pie, and they even are attached to that that 0:08:29.400 --> 0:08:31.640 wealth creation at at the end of the day and 0:08:31.680 --> 0:08:34.840 are walking away with some decent cheers. So no, you 0:08:34.880 --> 0:08:37.520 can be you know, I won't say you can be 0:08:37.720 --> 0:08:41.480 the staff who works in the cafe as an example, 0:08:41.480 --> 0:08:44.320 because those people are usually contractors. But if you're one 0:08:44.360 --> 0:08:46.000 of those people and you can work your way into 0:08:46.360 --> 0:08:49.280 write a conversation about it, by all means do it. 0:08:49.679 --> 0:08:53.680 But you know, the average employee from the lower part 0:08:53.679 --> 0:08:57.200 of the totem poll to the very top can actually 0:08:57.240 --> 0:09:02.000 participate in the equity pool at almost any company at 0:09:02.040 --> 0:09:04.040 this point, So you don't have to be an engineer 0:09:04.080 --> 0:09:08.120 to participate. The second part you said, how do I 0:09:08.200 --> 0:09:13.160 get equity as part of the conversation, Um, you gotta 0:09:13.160 --> 0:09:16.120 ask for it. That's really, that's really it. So one 0:09:16.120 --> 0:09:19.520 of the things that I always encourage people to focus 0:09:19.559 --> 0:09:24.040 on when they negotiate this compensation package is not just 0:09:24.280 --> 0:09:27.000 how much can I get in salary? Right, that's important, 0:09:27.440 --> 0:09:30.480 but there comes a point when enough is enough, and 0:09:30.600 --> 0:09:34.040 every incremental dollar you have them pay you has a 0:09:34.080 --> 0:09:37.360 diminishing rate of return. Right, So you hit you know, 0:09:37.880 --> 0:09:39.920 two hundred thousand dollars, let's say, and you live in 0:09:39.960 --> 0:09:43.920 a place like you know, New York or California, where 0:09:43.960 --> 0:09:47.080 after taxes, again, fift of that's going out the out 0:09:47.120 --> 0:09:50.720 the window. Where if I were to to ask instead 0:09:51.040 --> 0:09:54.560 for shares in the company, as long as I hold 0:09:54.600 --> 0:09:58.320 onto those shares for an extra twelve months after you 0:09:58.360 --> 0:10:00.720 know they vested and been issued to me, I'm paying 0:10:00.720 --> 0:10:04.120 that long term capital gains. So long term capital gains 0:10:04.160 --> 0:10:09.120 tax rates. My ordinary income tax rate I just told 0:10:09.160 --> 0:10:12.400 you is fifty after state and federal get done with me. Right, 0:10:12.720 --> 0:10:17.480 that's at delta that you've now been able to find 0:10:18.000 --> 0:10:22.559 just by getting paid in that equity versus having them 0:10:22.559 --> 0:10:25.360 pay it to you in in actual cash money. So 0:10:25.720 --> 0:10:27.920 just having a longer vision to be able to see 0:10:27.920 --> 0:10:30.280 the way the game is played in one will help 0:10:30.360 --> 0:10:34.760 to keep you know, a few people at least from 0:10:34.800 --> 0:10:37.880 asking for the wrong thing at the wrong time. Do 0:10:38.000 --> 0:10:42.200 you find that younger folks beginning their careers working at 0:10:42.240 --> 0:10:45.839 startups and tech companies are more and more sophisticated and 0:10:45.960 --> 0:10:49.280 know to ask for equity versus the larger paycheck? And 0:10:49.800 --> 0:10:52.000 or if you find those who aren't who just said 0:10:52.040 --> 0:10:54.320 they want the bag today, how do you have that 0:10:54.400 --> 0:10:57.120 conversation with them to convince and that look, the better 0:10:57.120 --> 0:11:00.880 play here potentially is to take less up from capital 0:11:01.000 --> 0:11:03.559 and to go for equity. Yes, So one of the 0:11:04.480 --> 0:11:08.160 challenges that I have as a financial planner is helping 0:11:08.200 --> 0:11:11.600 people figure out there enough point. That's one of the 0:11:11.640 --> 0:11:13.600 things that I really like about this work is that 0:11:14.320 --> 0:11:16.400 there's a book that I read and I always recommend 0:11:16.400 --> 0:11:18.760 to people called Your Money or Your Life. It's the 0:11:18.800 --> 0:11:22.000 book that's credited with helping to to launch the fire movement, 0:11:22.080 --> 0:11:26.640 the financial independence retire early movement um. But essentially the 0:11:27.480 --> 0:11:30.960 key tenant of the book is figuring out your enough point, 0:11:31.000 --> 0:11:33.680 Like how much house is enough? How much car is enough? 0:11:34.000 --> 0:11:36.280 How much vacation is enough? How much you know? All 0:11:36.320 --> 0:11:39.320 these things, we get on the treadmill and run this 0:11:39.480 --> 0:11:43.160 race four to constantly be chasing at some point enough 0:11:43.240 --> 0:11:45.240 is enough and you have enough luxury and you have 0:11:45.400 --> 0:11:48.560 enough like whatever, figuring out what that enough point is 0:11:48.920 --> 0:11:52.000 and then planning beyond that. And so I always try 0:11:52.000 --> 0:11:54.280 and help people see the forest for the trees that yes, 0:11:54.360 --> 0:11:58.760 you could get an extra dollars by joining company X, right, 0:11:59.679 --> 0:12:01.560 but if if it means then that you're gonna be 0:12:01.640 --> 0:12:05.319 working one point two times is hard right to to 0:12:05.320 --> 0:12:08.280 to be a kind of specific what could you be 0:12:08.320 --> 0:12:11.600 doing with that extra of your time versus the twenty 0:12:12.000 --> 0:12:14.320 dollars that you're gonna earn because you already make enough 0:12:14.400 --> 0:12:17.959 money to pay your mortgage, pay your kids daycare, You're 0:12:18.000 --> 0:12:20.559 driving nice enough car, you're live in a nice enough neighborhood. 0:12:20.640 --> 0:12:23.760 Like you're not chasing safety at this point, we're just 0:12:23.840 --> 0:12:27.600 chasing access. And so helping people figure out like enough 0:12:27.679 --> 0:12:30.600 is enough and the difference now is pay me an 0:12:30.600 --> 0:12:36.360 equity instead. And one other negotiating piece that I would 0:12:36.400 --> 0:12:39.640 encourage people to consider is companies are a lot more 0:12:39.760 --> 0:12:43.600 willing to part with shares of equity than they are 0:12:43.679 --> 0:12:46.319 with additional cash. If you just think of it from 0:12:46.600 --> 0:12:49.960 the CFOs perspective, Right, if I have if I commit 0:12:50.000 --> 0:12:52.760 to a salary that I owe you, that's every day, 0:12:52.800 --> 0:12:55.240 every year, that's a line item that goes against the 0:12:55.280 --> 0:12:57.480 P and L that I got to count for. Right, 0:12:57.480 --> 0:12:59.440 I owe you two hundred thousand dollars. You're asking me 0:12:59.480 --> 0:13:02.199 for an extra twenty That twenty grand is going against 0:13:02.200 --> 0:13:04.720 the P and L. Every year you asked me for 0:13:05.840 --> 0:13:11.600 dollars worth of shares. That's a totally different equation because 0:13:11.600 --> 0:13:14.640 those shares are sitting on a spreadsheet somewhere in in 0:13:15.080 --> 0:13:17.800 you know, in in somebody's like hard drive. They're not 0:13:17.880 --> 0:13:20.560 an actual thing I've got a hand over to you. 0:13:20.800 --> 0:13:23.040 So yes, they still have to be accounted for, but 0:13:23.080 --> 0:13:25.280 we don't hold onto them and keep them as tightly 0:13:25.320 --> 0:13:28.520 guarded as we would if you're asking for cash. Also, 0:13:28.679 --> 0:13:33.920 if you're thinking from the HR person's perspective, I gotta 0:13:33.960 --> 0:13:37.199 be able to to justify why I gave you to twenty. 0:13:37.240 --> 0:13:39.319 But the software engineer who sits next to you is 0:13:39.360 --> 0:13:41.760 getting too, And then the next person who comes in 0:13:41.800 --> 0:13:44.280 the door is gonna want to know what they can 0:13:44.320 --> 0:13:46.839 actually get as far as cash comp and now I've 0:13:46.840 --> 0:13:49.080 got to do I all for that person to twenty 0:13:49.080 --> 0:13:51.280 two because I just gave it to you. Whereas with 0:13:51.320 --> 0:13:53.360 the shares, it's a little bit different than a little 0:13:53.360 --> 0:13:55.680 bit more fluid. And I'm speaking broadly right, every company 0:13:55.720 --> 0:13:57.880 is different the way they treat this. But what I've 0:13:57.920 --> 0:14:01.840 seen and and also talking to hire uh recruit technical 0:14:01.880 --> 0:14:05.320 recruiters personally, like they're way more willing to come up 0:14:05.320 --> 0:14:11.320 off of additional equity shares versus cash money. So for 0:14:11.440 --> 0:14:14.720 folks who and obviously the startup side of the table 0:14:14.760 --> 0:14:17.800 would understand this, but I want to make sure the engineer, 0:14:17.920 --> 0:14:22.280 the talent, the HR person, the legal person understands this side. 0:14:22.400 --> 0:14:26.000 Legal people might give it, but let's under let's talk 0:14:26.000 --> 0:14:28.280 about what the cliff means. So if I come in 0:14:28.320 --> 0:14:30.680 as an engineer and I say, hey, I'm gonna give 0:14:30.720 --> 0:14:33.600 you a hundred thousand shares with a three year cliff, 0:14:34.840 --> 0:14:41.000 what does that mean? Perfect perfect setup? So the cliff 0:14:41.040 --> 0:14:43.360 best that you're talking about, it's how long you have 0:14:43.480 --> 0:14:46.120 to be at the company before you actually take ownership 0:14:46.160 --> 0:14:49.200 of those shares. So to to keep from being too 0:14:49.240 --> 0:14:52.920 super nerdy er super technical, the I r S and 0:14:52.920 --> 0:14:56.760 and the company have this trade that happens, which is 0:14:56.800 --> 0:15:00.440 called constructive receipts. So you have constructively received at the 0:15:00.560 --> 0:15:03.360 end of a three year period those shares, which means 0:15:03.400 --> 0:15:07.120 with it you also have taken on the tax liability 0:15:07.240 --> 0:15:10.960 for those shares and and whatever they're worth at the time. 0:15:11.280 --> 0:15:14.000 So a hundred thousand dollars worth of shares, you wait 0:15:14.120 --> 0:15:17.000 the three years that you have to vest, right, you 0:15:17.000 --> 0:15:19.120 have to be at the company three years before those 0:15:19.120 --> 0:15:23.200 shares vest, and technically now you own them at that 0:15:23.280 --> 0:15:25.880 point the moment they get issued to you, regardless of 0:15:25.880 --> 0:15:29.440 whether they're restricted stock or non qualified stock options or 0:15:29.560 --> 0:15:33.280 performance share units or whatever. Once you take ownership of 0:15:33.360 --> 0:15:37.000 those shares, you also take ownership of the tax liability. 0:15:37.520 --> 0:15:40.720 Prior to you taking ownership of the shares, you don't 0:15:40.720 --> 0:15:44.600 own anything. You also don't own the hundred thousand dollars, right, 0:15:44.640 --> 0:15:46.840 because you don't have the shares, but you don't own 0:15:46.840 --> 0:15:51.680 the tax liability. So with that additional cash also comes 0:15:51.800 --> 0:15:55.200 the additional tax liability. So just something to be aware 0:15:55.240 --> 0:15:57.240 of at at the exact same time. But to answer 0:15:57.280 --> 0:16:01.200 your question very specifically, companies as retention tool will put 0:16:01.200 --> 0:16:03.920 a time clock on how long they have to be 0:16:03.960 --> 0:16:07.640 able to get work product out of you before they 0:16:08.080 --> 0:16:12.160 give you those shares. That that it kind of gives 0:16:12.160 --> 0:16:14.360 you your walking papers to right. If I think about 0:16:14.360 --> 0:16:17.160 it purely from the company's perspective, I know I've got 0:16:17.200 --> 0:16:19.120 you on the hook for three years. If you've got 0:16:19.120 --> 0:16:22.440 a three year vesting requirement. Beyond three years, you're a 0:16:22.480 --> 0:16:26.120 free agent. Every year. I gotta constantly be doing things 0:16:26.160 --> 0:16:28.200 and bringing things to you to make you feel good 0:16:28.240 --> 0:16:30.720 about staying with this team and want to be here. Right, 0:16:30.880 --> 0:16:32.800 But for that three year period you're on that that 0:16:32.880 --> 0:16:34.920 rookie contract, if you will. If you think about it 0:16:34.920 --> 0:16:38.720 in terms of the NFL, you're gonna play and perform 0:16:38.800 --> 0:16:41.640 regardless of of what's happening, because you've got to hit 0:16:41.680 --> 0:16:44.760 that three year that number before we can issue you, 0:16:44.760 --> 0:16:48.400 you know, the shares. That's good for me to know 0:16:48.440 --> 0:16:51.080 and playing around as the company. So that's something to 0:16:51.120 --> 0:16:54.160 also kind of think about. They'll also issue you UH 0:16:54.360 --> 0:16:59.080 shares not only as as investing based on tenure, but 0:16:59.160 --> 0:17:01.600 also as a retention and tool. So you get past 0:17:01.640 --> 0:17:04.200 that three year window. Maybe I'm worried that that somebody 0:17:04.240 --> 0:17:06.680 is gonna compote you right. Tech companies are a bit 0:17:06.720 --> 0:17:09.560 incestuous at this point about stealing talent from one place 0:17:09.600 --> 0:17:12.200 to the next, and the same people kind of moving 0:17:12.240 --> 0:17:14.439 every three years or so, and so one way that 0:17:14.480 --> 0:17:16.960 I can keep you from making that jump is to 0:17:17.040 --> 0:17:20.520 offer you additional shares as a retention bonus every single 0:17:20.600 --> 0:17:23.280 year that you stay. And maybe those shares just have 0:17:23.400 --> 0:17:25.359 to you gotta be here one year after you get 0:17:25.400 --> 0:17:27.119 them in order for them to vest, or there's no 0:17:27.160 --> 0:17:29.960 investing timetable on them. Those are all things you want 0:17:29.960 --> 0:17:33.240 to know and negotiate going in the door so that 0:17:33.440 --> 0:17:36.439 you can give yourself the most flexibility and freedom to 0:17:36.520 --> 0:17:38.879 be able to maneuver however you want to and still 0:17:38.920 --> 0:17:42.600 get you know, the majority of those shares, if not 0:17:42.640 --> 0:17:46.479 all of them, before making any other moves. I do 0:17:46.560 --> 0:17:49.080 have people watching the chat on Facebook and lunch table, 0:17:49.160 --> 0:17:50.600 so if you do have questions, I want to make 0:17:50.600 --> 0:17:53.119 sure I get to those, um so it makes sure 0:17:53.160 --> 0:17:55.399 go feel free to drop your questions in the chat 0:17:55.440 --> 0:17:58.200 and we will get as many of them as we can. 0:17:58.359 --> 0:18:02.600 And in the meantime, going down that road of investing 0:18:02.640 --> 0:18:06.520 periods and cliffs and etcetera. I wonder if let's say 0:18:06.560 --> 0:18:11.320 this remarkable opportunity happens, you know, which is doesn't happen 0:18:11.320 --> 0:18:13.879 all the time. But you give me a hundred thousand 0:18:13.960 --> 0:18:16.760 shares on day one. I have a two year let's 0:18:16.840 --> 0:18:18.680 just still just to get easy map, a two year 0:18:18.680 --> 0:18:22.240 investing period, so I can't get my full amount of 0:18:22.280 --> 0:18:25.399 shares for that two years. In that two years time, 0:18:26.160 --> 0:18:29.879 those shares go to the moon. So these are Google numbers, 0:18:29.960 --> 0:18:34.400 Apple numbers, Amazon numbers, Facebook numbers. So I'm on paper, 0:18:35.240 --> 0:18:40.040 super duper wealthy on paper, but I don't have any 0:18:40.080 --> 0:18:43.439 of that liquor cash. How does my life change in 0:18:43.480 --> 0:18:47.000 the meantime while or how could it change in the 0:18:47.080 --> 0:18:53.400 meantime or does it so? Uh? Two separate answers, because 0:18:53.440 --> 0:18:56.320 that goes to separate ways. Right, So if you're talking 0:18:56.840 --> 0:18:59.000 I work for a private company, I work for a 0:18:59.040 --> 0:19:02.439 startup and they've made an announcement that they plan to 0:19:02.440 --> 0:19:06.640 go public at some point. Right, I'm thinking about door 0:19:06.720 --> 0:19:09.399 Dash as a really good example of this. Tons of 0:19:09.400 --> 0:19:13.639 people who started at different rates COVID happens, those shares 0:19:13.680 --> 0:19:16.240 are now gonna be to the moon, like you said, 0:19:16.280 --> 0:19:18.679 because like all of a sudden, door Dash is posting 0:19:18.680 --> 0:19:22.040 the best numbers they've ever posted. Nobody in the company 0:19:22.080 --> 0:19:25.880 is doing any work anymore because everybody's imagination is flying around. 0:19:26.960 --> 0:19:30.040 I'm gonna be like super super wealthy because I'm gonna 0:19:30.080 --> 0:19:32.720 get those shares and I'm gonna go buy this beach 0:19:32.760 --> 0:19:35.080 house and I'm gonna and I mean literally like can't 0:19:35.080 --> 0:19:38.720 get anybody off Zello, can't get anybody off. Everybody is 0:19:38.760 --> 0:19:42.840 spending that money. But there's also this thing called a 0:19:42.880 --> 0:19:45.840 lock up where you've got to wait six depending on 0:19:45.880 --> 0:19:47.960 where you are in the food chain right the hierarchy, 0:19:48.000 --> 0:19:50.320 and how close you are the privileged information. There's also 0:19:50.359 --> 0:19:52.080 this thing called a lock up where you've gotta wait 0:19:52.119 --> 0:19:55.040 six months after the company goes public before you can 0:19:55.080 --> 0:19:57.560 do anything, So those shares could come crashing back down 0:19:57.640 --> 0:20:00.480 the earth in that time before you're legal allowed to 0:20:00.520 --> 0:20:02.680 sell anything, because they don't want you moving the stock 0:20:02.720 --> 0:20:07.240 price around, which I've seen happen unfortunately. But also to 0:20:07.320 --> 0:20:10.480 your point, with a publicly traded company like a Facebook 0:20:10.560 --> 0:20:12.879 or an Amazon or Google or whoever who's going on 0:20:12.920 --> 0:20:16.840 this run, the more advantageous way to work out your 0:20:17.640 --> 0:20:21.119 equity grants is to have them coming to you on 0:20:21.160 --> 0:20:25.240 a monthly basis instead of annually for that reason right there. 0:20:25.760 --> 0:20:29.560 So if I get a new uh tranches the word 0:20:29.560 --> 0:20:32.879 that we use, or slice or whatever of shares that 0:20:32.920 --> 0:20:36.600 come to me every single month, then as the price 0:20:36.680 --> 0:20:39.120 is doing what it does, I can plan my own 0:20:39.200 --> 0:20:42.560 life around what else I need to do financially and 0:20:42.600 --> 0:20:45.640 whether I'm gonna sell this month or not. If I've 0:20:45.640 --> 0:20:48.399 got to wait an entire year to make that cell 0:20:48.640 --> 0:20:51.399 or whole decision, then I'm at the mercy of wherever 0:20:51.440 --> 0:20:54.000 the company is in that moment. It may not even 0:20:54.000 --> 0:20:56.560 make a difference with a company like Amazon, like you said, 0:20:56.560 --> 0:20:59.360 who can't seem to go but in one direction. But 0:20:59.680 --> 0:21:02.520 for a company who does take a very nasty dip 0:21:02.640 --> 0:21:05.000 at some point, I'm kind of at the mercy of 0:21:05.119 --> 0:21:08.000 whatever the market does. And so developing that plan in 0:21:08.040 --> 0:21:11.320 advance of when and how to sell is going to 0:21:11.440 --> 0:21:14.200 be super helpful to turn you from a paper millionaire, 0:21:14.280 --> 0:21:19.240 as you're saying, into an actual millionaire, as in exchanging 0:21:19.240 --> 0:21:22.359 those certificates for actual dollars at some point, so that 0:21:22.440 --> 0:21:24.640 you can take some chips off the table and not 0:21:24.720 --> 0:21:27.240 just kind of follow the ticker wherever it takes you. 0:21:28.680 --> 0:21:33.320 What typically happens in the in the tech company specificist. 0:21:33.320 --> 0:21:36.480 But let's say just companies across the board where equities 0:21:36.520 --> 0:21:40.440 involved and they go public or they sell or otherwise, 0:21:40.880 --> 0:21:47.240 and early employees don't get a financial winfall what typically happened. Um, 0:21:47.359 --> 0:21:50.600 that's a tough one man. People get real stings you 0:21:50.680 --> 0:21:55.040 around liquidity events. Um. You know, founders start trying to 0:21:55.080 --> 0:22:00.320