Werd I/O

I recently wrote a short aside about stock options:

But in general, for regular employees, I think options are rarely worth it. They typically require an up-front investment that many employees simply can’t make, so it’s a bit of a fake benefit to begin with, and their future value is little more certain than a lottery ticket.

Hunter Walk kindly reshared it on a few networks with some of his own thoughts; a conversation with Tony Stubblebine arose in the comments that Hunter wrote up as its own post. In particular, he says it helped him articulate the ups and downs of private stock to the average person:

For much of a startup’s life new FUNDING VALUATIONS are LEADING indications of POTENTIAL. They are what someone is willing to pay for shares today based on what they believe the company CAN DO in the FUTURE.

DOWN ROUNDS and RECAPS are LAGGING indications of PERFORMANCE. They are what someone is willing to pay for shares today based upon what the company HAS DONE in the PAST.

It’s a great post, and the comments from Tony were thoughtful. Which led me to feeling a bit bad about how flippant and imprecise my original post had been.

So, on that note, I’d love to define options, make some corrections, and dive a little deeper into my core argument.

The ins and outs of options

First, let’s define options and explain why they’re so common as a factor of startup compensation.

An option is the right to buy a specified number of shares in a company at a specific price. That price is typically defined by an external auditor. It’s good practice for this to happen once a year, but it’ll also be triggered when the company raises a round of equity funding (i.e., when it sells shares to outside investors in order to raise significant capital).

If a startup were simply to grant stock directly to employees, it would be taxable as compensation. Options are almost always non-taxable at the point where they are issued, so they’re a favorite way to give employees the ability to see some of the potential upside in a venture.

Typically in a startup you’ll receive an option grant as part of your compensation package. So, for example, you might receive the right to buy (“exercise”) 40,000 shares at 50 cents a share (the “strike price”). This is almost always on what’s called a vesting schedule: you won’t be able to buy any shares in the first year, but then when you cross that threshold (the “cliff”), you’ll be able to buy 25% of your allocation (the first 10,000 shares in my example). Over the next three years, the amount of your allocation that you can exercise will increase proportionally, until you can buy them all at the end of four years.

If you leave the company, you usually only have 90 days to exercise whichever options have vested. Some particularly progressive companies extend that exercise window — sometimes to a couple of years. But for 80-90% of startups, it’s 90 days.

If the startup is excited about keeping you, you may find that they’ll grant you more options periodically, each with their own vesting schedules. This, they hope, will keep you at the company.

In my example above, you might have done the math to realize: 40,000 shares at 50 cents a share is $20,000. You would need to lay out that amount of money to acquire the shares — and you need to hope that the company’s shares increase in value in order to see any upside.

If the company’s share price has increased in the time between the options were granted and when the employee exercises them, the difference is taxable. In the above example, recall that my options are for 40,000 shares at 50 cents a share. Let’s say I choose to exercise them all at the end of my four year vesting period: as we’ve discussed, I pay $20,000. But let’s say that the real fair market value has risen to 75 cents a share. The difference between 40,000 shares at 50 cents and 40,000 shares at the market value of 75 cents is $10,000 is usually taxed as income. So I’m actually paying $20K + income tax on another $10K. (This isn’t by any means the full extent of potential tax implications; I’m not going to touch ISOs and AMT in this post, for example.)

Early employees, who join before most funding rounds have taken place, will receive options with a very low exercise price. Later employees will usually receive options with a higher price, because more growth and fundraising has taken place in the interim. (Down rounds and recaps are certainly possible, though: many startups go through tough times where their valuation decreases. Not every graph always goes up and to the right.)

In both cases, any stock they buy is largely illiquid. Because the startup is likely a private company rather than a publicly traded one, their shares are not liquid. They will need to wait for the company to go public or hope that management will allow them to trade their stock on the secondary market.

Some corrections

So the first thing to say is: no, options are not really like a lottery ticket. They are a sort of gamble, but it’s one where (depending on your position, seniority, and what size the company was when you joined) you have a say in the outcome.

The second, which I’ve already corrected in the original post is: as Hunter pointed out in his post, a recap is not the thing that actually lowers the stock price. It’s a trailing signal of what the company has already done. A change in stock price is an effect of what has already happened.

And a clarification: options don’t require an up-front investment at the time that they’re granted. You invest at the time when you exercise them, which may still be as a lump sum.

Why I think exercising options isn’t worth it for many employees

If you’re on a rocket ship startup, exercising your options is almost certainly worth it (depending on the strike price of your particular options grant). The problem is: how do you know you’re on a rocket ship? Or, given that most startup employees won’t be part of a startup with hockey-stick growth, how can you be reasonably sure that your company will grow in such a way that exercising your options is worth it?

90% of startups fail. That doesn’t mean that every startup has an equal 1 in 10 chance of success: a lot depends on a range of factors that include internal culture, management expertise, execution quality, and market conditions. Still, there is not a small amount of luck involved. Most startups won’t make it.

You should never make an investment that you can’t afford to lose. As Hunter says in his post:

Don’t behave as if they’re worth anything until they actually are

Don’t over-extend yourself to exercise [options] in scenarios which put your financial well-being at risk.

If you’re obviously, unquestionably on a rocket ship: by all means, buy the options. (Yes, sometimes it really is obvious.)

If it’s not clear that you’re on a rocket ship, but you’re feeling good about the startup, and you can definitely afford to spend the money it would take to exercise your options: knock yourself out. Honestly, I don’t really care what people with wealth do in this scenario. My worries do not relate to you.

If it’s not clear that you’re on a rocket ship and spending the money to exercise your options would be a stretch: I would suggest you think twice before doing so. I also would warn you to never take out debt (which many startup employees do!) in order to exercise your options.

And that’s really the crux of my argument.

Startup employees without significant independent spending power who work for a venture with an uncertain future and who did not join their ventures at a very early stage — which I would argue describes most startup employees — should think long and hard before exercising their options.

It’s more than a little bit unfair that the people who can most easily realize upside from the startups they work for are people who already have wealth. Granting the ability for employees to buy shares directly at their fair market value is limited, too: this would make them investors, who the SEC says mostly need to be accredited. The definition of accreditation is either being a licensed investor, earning over $200,000 a year for the last two years, or having a net worth of over a million dollars excluding the value of their home. So the door is effectively closed to people from regular backgrounds.

I wish more equitable systems were commonly in use. Some different tactics are in use, which include:

• Restricted Stock Units. Here, stock is granted directly as part of an employee’s compensation. Upside: the employee has the shares. Downside: they’re taxed on them as soon as they vest, and selling them is restricted. So the employee effectively receives an additional tax bill with no way of recouping the lost funds until much later (if they’re lucky). RSUs are common in later-stage companies but very uncommon in riskier, early-stage companies for this reason.
• Phantom stock. Really this is a bonus plan tied to stock performance, income tax and all.
• Profit sharing. Which is only useful if the startup makes a profit (most don’t).

While some have value in their own right in particular contexts, I see them as compensation strategies that might sit alongside stock options, rather than replacing them.

I would love it to be less risky for the employees who are actually doing the work of making a startup valuable to see more of the upside of that work. But, at least for now, my advice remains to take those inflated Silicon Valley salaries and bank them in more traditional investments.

It’s been a little over a month since I launched ShareOpenly, my simple tool that lets you add a “share to social media” button to your website which is compatible with the fediverse, Bluesky, Threads, and all of today’s crop of social media sites.

You might recall that I built it in order to help people move away from their “share to Twitter” buttons that they’ve been hosting for years. Those buttons made sense from 2006-2022 — but not so much in a world where engagement on Twitter/X is falling, and a new world of social media is emerging.

People have been using it, and I’ve had lots of great feedback.

So, today, I’m pleased to announce releases for two of the biggest requests people have made for the tool.

A share icon

A share button needs an icon. That was clear from the very beginning. It needs to be something distinctive — this is a different kind of social media share tool — but also immediately recognizable as a share icon.

I reached out to one of the best designers in the field: Jon Hicks, whose excellent work includes the new Thunderbird logo, Disney’s SpellStruck, Spotify’s icon set, and Truck, an excellent record store in my hometown. I was delighted when he agreed to create a share icon for ShareOpenly.

This icon works really well at small and large sizes: in sidebars, in footers, and wherever you need to help people share. Click the version embedded here to share this very post:

A WordPress plugin

Lots of people have asked me for an easy way to embed a ShareOpenly link into WordPress.

David Artiss, a support lead at Automattic’s excellent WordPress VIP service, has written a WordPress plugin that is now available in the official WordPress plugin directory. He writes more about it in an announcement blog post on his site:

Simply download the plugin, activate it and you’ll find a link added to the bottom of every WordPress post or page. A simple settings page allows you to change the sharing text, as well as whether it appears on posts and/or page content.

Boom! It couldn’t be easier.

I really hope that the new icon and the WordPress plugin make it easier to include more open sharing to your website. ShareOpenly is suitable for everything from small blogs to large publishers.

Manually creating a share link

Of course, you don’t need to use the WordPress plugin. You can embed a share icon onto any web page using this code:

<a href="#" id="shareopenly"><img src="https://shareopenly.org/images/logo.svg" alt="Share to social media"></a>
<script>
  document.querySelector('#shareopenly').addEventListener('click', (e) => {
    e.preventDefault();
    let href = 'https://' + 'shareopenly' + '.org/share/?url=';
    href += `${encodeURIComponent(window.location.href)}&text=${encodeURIComponent(document.title)}`;
    window.location.href = href;
  });
</script>

Or you can construct the URL yourself by following the instructions on this page.

Have fun, and please keep the feedback coming! You can always email me at ben@werd.io.

When our son reached nine months old, I published this UsesThis-style list of products and services we were using; I had previously published one before he was born.

He’s twenty months old now: walking around and using words. He straddles the worlds between being a baby and a little boy, but becomes more like the latter every day.

I thought this was a good time to update the list.

Hardware

Stroller: Our Uppababy Cruz V2 is still holding strong, although we use it less and less. We’re in the lucky position of being able to walk to daycare, and he quite often just wants to walk alongside us. (The stroller comes in most handy when we’re late.)

Travel Stroller: New to our mix is the Joolz Aer (now superseded in their lineup by the Aer+). It’s light as hell and folds up to easily fit in an airplane’s overhead bin, which has been useful for both short and long-haul trips. When we’re not on the move, it permanently lives in the trunk of my car.

Car Seat: We still use the Clek Foonf, which is like the tank of car seats. It’s solid and he seems to find it comfortable, although it’s beginning to be an effort to get him in and out of it. That’s more of a function of my tiny car than the seat itself; it’s more likely that I’ll upgrade the latter than the former.

Travel Car Seat: We’ve added a Cosco Scenera car seat to our mix. It’s light and cheap, and is really straightforward to install into a new car (for example a rental) or into an airplane seat. The thing we haven’t cracked yet is traveling on a plane without this kind of car seat: it’s bulky enough that it would make one-parent flights with him next to impossible. (If you’ve made this transition, please tell me how. I’m considering a CARES airplane safety harness, but how safe is, it, really?)

Bed: We’re in the final months or weeks of the Ikea Sundvik crib and Naturepedic Classic Organic Cotton Crib Mattress, which have served us incredibly well. If he wasn’t using a sleep sack, he would have easily scaled its walls and climbed out bed already. It’s time for a Real Bed (and therefore time for a Real Bedroom). Model TBC.

White Noise: We’re still using the Hatch Rest, although I’m not fully sure why. Habit at this point? He does love boffing the top of it to get it to change color and sound.

Baby Monitor: We’re still on the Nanit Pro. It’s been fairly good for us, but it definitely has shortcomings. The humidity sensor almost never works, and the device itself will fairly often disconnect from the wifi. He’s also been known to shake it like a wizard’s staff. We’re not measuring how long he’s been awake, etc, anymore, so we don’t use the recordings as much as we used to. But it’s nice to be able to get a notification when he’s stirring.

Changing Mat: Any surface will do at this point. Towels, standing up in a chair with a rubber mat to protect it — whatever. About one out of twenty times he’ll end up on the Peanut, but it was much more useful when he was a little potato.

Kitchen Stool: The Cosco Kitchen Stepper has become a mainstay: he can stand on a protected tower while watching us cook, or helping out himself.

High Chair: The Stokke Tripp Trapp has grown with us. We’ve stopped using the built-in tray, which has made it a little easier to clean: instead, we push him in to the table, and he eats alongside us. Having everyone be first-class participants around the dinner table has been lovely.

Travel Booster: We’ve been known to bring the Fisher-Price booster seat with us (it’s in the back of my car right now), although it’s happened less and less lately. Most restaurants we go to — when we eat out, which is rarely — have high chairs, and I suspect future friends and family visits will be marked by him eating on one of our laps.

Food: He’s eating what we eat more often than not. We keep Annie’s Mac and Cheese stocked just in case, and Trader Joe cottage cheese and apple sauce have become staples. But we’re mostly off the food pouches, powders, and specialized food products.

Toys

This gets its own section at this point. There are a few real standouts:

‌Uppstå toddler walker: I can’t overstate how much he loves this thing. It took him a little while to get used to it, but it’s grown with him. He’ll put his favorite things in it and walk them around the house, sometimes at speed. Just incredible value for money based on how often he plays with it.

‌Fisher-Price Little People Airplane and School Bus: I’m almost certain these didn’t play songs and noises when I was a kid. They certainly do now, but it’s easy to switch off the sounds if you don’t want them. He plays with both continuously. It’s sort of weird to see how Fisher-Price toys have evolved — I kind of miss the peg-like figures they used to come with — but he’ll have the same nostalgic feelings for these that I have for mine. Just, um, look out underfoot.

‌Plantoys Wonky Fruits & Vegetables and Assorted Vegetables: These are simple enough — wooden fruits and vegetables joined with little velcro pads — but he loves taking them apart and putting them back together again. They come with a little wooden “knife” that makes it easier to split them.

‌Melissa & Doug Pull-Back Vehicles: He thought they were cool when he was much younger (they were a much-appreciated first birthday present), but these days he knows how to pull them back and make them go. We find them all over the house.

‌Busy Bee: Apparently the best-selling toddler toy in Aotearoa New Zealand. He loves pulling it along behind him, to the extent that it can usually be used as a distraction from just about anything else.

Books

Many, many times a day, he’ll demand to be read to. Seems like a good thing to me. Our collection of books is always rotating, but I thought it would be fun to list our stalwarts.

‌Hooray for Birds!, by Lucy Cousins: I could recite this verbatim. At this point, so can he, so I’ll often stop to let him fill in the blanks with the various bird noises. It’s lyrical, offers lots of opportunities to the reader to make silly voices, and is lots of fun.

‌Little Blue Truck, by Alice Schertle and Jill McElmurry: Rhythmic and perfectly wordsmithed; almost a song. You’ll find that you quickly get your engine noises, animal sounds, and “beep beep beep!”s to a professional level. Like Hooray for Birds!, he’ll often now come in with the right noises at the right time.

‌Each Peach Pear Plum, by Janet and Allan Ahlberg: I loved this book as a kid, and now he does, too. He calls it “Each Peach” and asks for it by name. (“Each Peach! Each Peach!”)

‌Guess How Much I Love You, by Sam McBratney and Anita Jeram: I like, half-jokingly, to call this the classic tale of toxic one-upmanship. But it’s sweet, and easy to give heart and voice to. I love him to the moon and back, too.

‌Jamberry, by Bruce Degen: This book makes no sense! It’s like a commercial for berries! But that doesn’t matter - he loves it.

I’m looking forward to introducing him to books for slightly older children that we have waiting in the wings; in particular, The Story of Ferdinand, Make Way for Ducklings, and Dogger, which are my top-three favorite picture books of all time.

Screen Time

Yes, we’re a Ms Rachel household. Lately, he’s been asking for my old pal Grover by name. And there’s a channel on YouTube called Helper Cars — origin unknown — that seems to be designed to appeal to his psyche.

We’re not completely comfortable with screen time, but it’s definitely become a thing. I figure it’s fine in moderation, and all of the above have some educational content to them.

Software

I’m retiring this portion of the baby list: we don’t use any software to track or help parent him anymore, save for the ubiquitous MyChart from the pediatrician and the Procare daycare-management app that lets us know when he’s eaten and sends us photos of his day from time to time. We just, you know, listen to him, and try to figure out what he needs. We’ll look up recipes and activities from time to time, but there’s nothing special about that; we do it for ourselves, too, and you all know how Google works.

Photo by Daiga Ellaby on Unsplash