The Pavilion Podcast
The Pavilion Podcast

Episode · 1 year ago

RC Extra: Equity Straight Talk

ABOUT THIS EPISODE

RC Extra: Equity Straight Talk

To everybody at Sam Jacobs, welcomed tothe revenue collective podcast today, we're bringing you aspecial episode acouple of weeks ago, myself, Scott lease who runs Thursday night sales isan incredible guy. Richard Harris of the Harris Consultant Group, anotherincredible person and Colin Cadamas, his Revan Olectiv member used to behead of sales at air call, and it's now a consultant. The four of us had aconversation about. I I think we calle at Equity Strait talk for stockoxtionstraight talk, but the point is an authentic and open and honestconversation about how individual employees and people that are not theCEO and not the board and not investors. How you should think about your equityand there's a lot of different perspectives. I think I sort of servedas like the the dictionary person. You know the person that was defining theterms, but then Scott, Richard and and Colin all had really interestingperspectives to share, particularly Scott who's, been through so manydifferent startups. So we wanted to take that recording and turn it into apodcast episode for you to listen to and that's what this is. So we help youenjoyed. I think it's it's a longer one as I'm recording this I'm recordingthis intr weeks afterwards, but I think it's a longer one, but but we m thinkit's a great conversation, so save this one for a long, walk or for a longdrive, but we hope you enjoy it and Um if you haven't applied to revenuecollective, yet Revenan, Colective, dotcom, clic Uppli. Now, if you alreadyremember thanks for listening and I hope Ejoy the conversation. Thank you, hello. Everybody welcome to stockoptions straight talk. I am your host Colin Cadmis, a lifelong salesperson,two times B, ps sales and recent founder of my own, consulting anadvisory firm where I'm helping startups skill and build world classsales organizations. Tonight we have prepared for you an exciting first ofits kind live event, whether you are an individual contributor or an executiveleader tonight, we're going to teach you all of the details that you need toknow to fully understand your equity. We've got a pack. Ninety minute agenda,some jumping straight into things, we'll be taking questions throughout sodrop them in the Q. An A and without further ado, allow me to introduce toyou our three subject matter: Experts, Scott Lease Richard Harris and SamJacobs. Scotles is a six times start up sales leader, an author of addicted tothe process, Richard or sorry, Scott is the founder of both Scotly's consultingand the surfant sales summit, Scott, as a consultant and strategic advisor tocompanies around the world and was recently named top twenty five salesleaders by crunch base. Richard Harris is a sales leader in Trainor, with overtwenty years of experience, helping start ups, build their salesinfrastructure and train their sales teams. To get there faster. Richard isthe founder of the Harris Consultant Group and the CO founder of the serfantsales summit and, last but certainly not least, Sam Jacobs is the founder ofrevenue, collective, a community of over two thousand global revenueexecutives and top performers at high growth companies all over the world.Scott Richard Sam. Thank you guy. So much for agreeing to come talk aboutthis important topic. I think employees and executives are often oversold ormisled when it comes to equity, so I'm excited to dive in with you guys, thanks for our thanks for Elpmness, putthis together hom for sure for sure so give the audience of sense of what theagenda looks like I've broken it down into five parts and we're going tospend roughly thirty minutes on the first four parts and then the fifthpart is going to be about an hour. So in part one we're doing the high levelintroduction we're just going to define what stock options are. What they'refor why they'rewhy they're out there partoo will go into expectations basedon your role. Are you an AE and SDR or you AF VP of sales? What should youexpect and will try to break that down by stage of your company as well park?Three will go into some key definitions in terms that that will make sure youunderstand and part for is stuff. You usually don't know, but should sowie'll start to get into the interesting things there and then partfive is where we're going to go through each of our panolist they'll have abouttwenty minutes each to talk about hot topics for them and different ideasthat they think are exciting. That should be looked at and considered tochange for the future, so without further Adieu. Sam, do you want to kickit off? What are stock options? Why are they issued? Why are they a thing? Okay,so lme? Thank you, Callin honor, to be here honored to be with this estimablegroup, including Scotton, Richard Um, so first cou Acavia, you know like afinancial advisor past performance, noindication of future results and I'mnot Macountnand, I'm not a lawyer. So please I will not be liable if Imisspeak- and there are so many different variations of some of theseideas in some of these terms- that what I'm going to focus on is the mostcommon, so the most common wh N, when we say stock options, what do we mean?We mean the option to purchase a share...

...of common stock from the company thatyou're, referring to typically that you're working for and that option isit's not it's not a security unto itself. What it is is the right to buya security, the security being a share of stock. So when you're grantedequityte options when you join a company, what you're typically grantedis an amount of options that vest over a period of time, typically four yearsas they vest what is best man. It means it triggers your ability to actuallyexercise that right and purchase the stock, meaning unvested equity. You donot actually have the right to buy the stock. You are granted that right at acertain price, the prices typically the most recent valuation that the companyhas gone through either because they price to funding around or becausethere's been an inipenent audit. That's called a foreig nine evaluation thatputs a price on the security. So what am I missing? I mean there. Thereare different types right, there's NSOS and ISOS, while related to whetheryou're contractor or whether you're an employee of the company. But the mostimportant thing to just understand is it's not a share of stock? It is theright to purchase a Shar of stock, which some people get confused on. Theother thing that well talk about you know later on is that it's the right topurchase the most junior security and the preference stack right. So the waythat people should think about you know financing a company is that wo put inmoney and you have rights associated with it, and the most senior securityis going to be debt right. I lend you money before any of the equityshareholders, who are the investors before they get their money back? Thedebt gets paid back and then the equity gets paid back after the DA, and thereare different types of equity. There are different pront securities, eachwith different preferences and different rights, and when investorsfrom ventar capital firms or other people typically put in money, they aretypically granted common Stocka, typically granted preferred stock orsome other type of security that has more senior rights. So what you need tounderstand is when you're granted options, you're granted the right topurchase stock at a specific price common stock which sits beneath it, itsat the bottom of the preference tat relative to the rest of the investorsand the capital providers in the company awesome. Thank you so much Sam, so guys,if I'm, if I'm joining a company, there's different roles right, let'ssay we'll use three examples: I'm joining as an SDR or an AE orm joiningas a VPF sales or or a cro. What should I expect? How much money am I going tomake off of my options? How many options should I get? How do I look atthat I'll tackle this one? First, maybe let me start with the role, so yourexpectations as an SDR quite frankly, should probably be that you don't getany equity in a in an early sage organization. I know that that is not apopular opinion necessarily and I'm I'm not in saying that it's the right wayto do it. I just think that that is very common, still nd, and ifyou want to set yourself up for realistic offers, you're probably notgoing to get that in the original offer of your employment. You might be ableto earn Otice and grants along the way through performance and tenure, andthings like that, but I think it'd be a mistake, for you have an expectationthat has an SR you're immediately entitled in Your First Opera of you,know five options or a thousand options, or ten thousand options, or somethinglike that. So I think your expectation should be should be none, and I thinkyou should view getting options in an initial offer as a really favorableoffer in him its gin, a a signal that you know the company that you're goingto work. For. U Essentially, really believes in in sharing. You knowownership in the organization. So if I Scott so what? If I am an R and and Ido get stock options, what can I expect that to amount to in? In your typicalscenario, I mean in a best case scenario, like you might end up withfive figures: Low low kind of five figures realistically, because, as an FR Y E you're going to get you know, maybe five hundred options or you know,maybe a couple thousand. You know at the most and if you do, then, if you doit as on like a billion dollar exit which we would all love to have, whichwas like a best case kind of situation, it doesn't shake out much more than youknow a down payment. Maybe at best you know, maybe you buy a new car orsomething like that. It's not going to be any kind of life, changing moneywhatsoever, Wellso C, take your family, O pretation or get a car o fend to tendto ouch. So it's saves to say no matter how cool to start up if I'm joining asan SDR, I'm probably not becoming a millionaire and I'm definitely notretiring. Regardless of the exit scenario. Hun I mean F, do new te Manerbe of a thousand shares at ten Buk share. That's ten thousand dollarsright! AWYNO! Not Every organization...

...ends up getting the ten bucks to sharewhat APOWTS AE is it. Is it drastic an jump in there for a second Callin? Sothe other thing I think particularly corast RS in Aes, an anyone articularlyask to youours your goal of the exit. You know if you can get some otions insome cash S. it's great. Like that's awesome. It's literally icing on a verysmall piece of cake, but what your real expectation is. You know how asuccessful exit you've got. Something on your resume. That says: Hey I'vebeen part of this growth start up a help, get it o hear. I understand whatthat's like and so where your income will become affected by that willactually be in your career and jumps. You ahead of the next person who hasn'thad an exit right, and so that's there're different. You know, there'sthis tangible money thing of options and then there's this other thing ofwait a minute. This can also help me make money in a whole other way right.If you can start getting higher salaries at the age of twenty five,then you know two or three other people, then, by the time they're third of yoursalary should still be getting higher and for so t it has sort of this. Thiscompounding interest effect on the exit yeah. I was talking about near termkind of value, richards, absolutely correct, talking about the more longterm value over the course of your career yeah, and I saw that I saw thatplay out at my first company single platform after they had a cuge egxid.Many many many of those folks who had less than a year, maybe a little over ayear of sales experience straight out of school because they woul livedthrough that exiite, even though they In't get rich off a it right. Theymaybe got a a little bit of cash, but they went on to be directors of sales.They went on to be v PS of sales, and now I know multiple them have secondexits under their belt at like the age of twenty four twenty five. So I'm gladyou stopped me there, I jump in o there just useghporponbasic stuff that we just got to make sure we cover that I've seen questionsaround. So the first is that you know I saw some questions in the in the bottomthing. Ask a question, and people are saying: like is a thousand options.Good is five hundred options. Good, let me just give you some basic terminologyand some some understanding so that you we t at at that question, actuallydoesn't. Unfortunately, I'm not trying to be a dick. It just doesn't make alot of sense. The first thing you understand is what of the total sharesoutstanding right, so the company has a right to issue a certain number ofshares. How many shares have they issued? Typically so for my companyReven Eglecto, its a million shares right. We wishe, we have a total of amillion shares outstanding many companies that might be two million tenmillion right so and ow you don't understand the Menans when you sayoutstanding, it means that how many shares exist that can be issued right,oryour ways to talk about outstanding. Actually there is how many have beenissued and how many can they issue, because one of the things that happenwhen you go through a financing round, is you create an option pool for theemployees? Specifically that's typically twenty percent of the entirecompany PRI, so it could be ten to pent fifteen percent or twenty percent, butthose options may not have been issued if the people have not yet joined thecompany. So there is total shares outstanding now, which is all of thepeople that you've issued shares to. But you still might have you know a bigtrunk of of equity that hasn't been istsued, B'cause you're, waiting tohire scotleast to be our CRRO or Calincabmis to be Orsiro or Richard oret Cetera. That case, you want to ask what's to total possible riht. What isthe total available shars to the IC, so outstandit hasn't been issued, butthere's a total number, so you could have ten million shares you've onlyissued five million exactly exactly so. That's kind of one thing. So whenyou take a work at your five thousand or one thousand options, you need todivide that number over the total shares outstanding to understand whatis the implicit value now? There's another question which is wel: Whatdoes it mean to have a value because if so again like there's a price per sharean and it wouldn't be a mistake that the value of those options is not thevfthe number of options times that price per share just to be extremely directright, because that's that's the size of the check that you will have towrite to buy the stock. That's not so I'E had an offer letter from twocompanies ago, where they're, like the market. Value of these options is ninehundred and F fifty thousand dollars, not really that's tesize. The checkthat I have to write Y eneed. We need an outcome that is greater than that toequal a return write. So if the prier shares two bocks and there's a millionshares outstanding with the value of the company to value the equities, twomillion dollars right and then I need an outcome that it's four dollars orfour million an enterprise alue of four million dollars to equal some gain andthen my gain is the you know: the real ized price, lest the strike Christitesois four minus two times my number of shares, that's my gain! So justagain a lot of folks, someone say: What's H, what's the first question, Ishould ask how many shares are outstanding? What's the price fer share,what was the most recent valuation? What is the company value that thoseare the basic questtions? If you don't know that, then talking about thenumber of options just doesn't make a...

...lot of sense. Yeah, that's a greatpoint: some companies. It can be drastically different because I've seenpeople who are like I got five hundred options. Is that a lot and some peoplesay well- I've got ten thousand and they're like Oh. How do I get rippedoff like no? No, no, you ten thousand could be equal to less than the fivehundred. So you have to follow the math that that SAMs, describing and askdthose questions and by the way, if the hiring manager hesitates to give youthat information, maybe they don't know it and they need to go, get it and comeback to you, but if someone is hesitant or doesn't or unwilling to share thatinformation with you, that's a major red flag, in my opinion, in the hiringprocess, especially if fo ready employed there cool thanks for that Sam.Let's, let's jump back now we're talking about the expectations by rolewe we set. We set the records straight for SDR wha about an account executive.How different is it for that role? I mean, in my opinion, it's a little bitdifferent, but not lot different, the biggest differentiator. I think is: Isthe stage of the company now, because, if you're an a at an early stage,company part of the lure of of you taking on that role and responsibilityto help prove out product market fit and get the organization going, is adecently significant chunk of ecuity that might turn into something? So Ithink in the early stage you know I think ten thousand plus chairs,depending on all the stuff Sam, was talking about I've, seen five thousandshares so anywhere home, like midfour figures to kind of low end fie figures.I think it is a realistic expectation to to look for or ask for in a in anoffer letter from an organization if it's an early stage company, I thinkthe bigger the organization gets and grows. Your expectations should go waydown and start to fall closer to that of what I was saying before, a R whichis you shouldn't, expect equity necessarily at all yep an it's notuncommon. I think in those earlier days, creck me if I'm wrong, but from whatI've seen when you are one of those as that you're joining very early andyou're, getting a nice trunk of options, you're, probably not getting your yourmarket rate, O t you're, probably not getting the highest base that you couldget you're, probably not getting the best commission plan and you'resacrificing a little bit in exchange for that. Is that what you guys haveseen in most scenarios as well yeah w? What I see is o w. So there there'sthis sort of the first day he hired right now, they're going to go out andget that person, there's some challenges and strengths to being thatfirst person oftentimes. It doesn't workout probly about fifty fiftypercent of the time. But you know when you're in a EG R N str keep one thingin mind: in most cases, right you're there to make other people millionairesand billionaires and starups. That's it. I tuet's just the way it's tuts the way.Now I don't like it and wewill probably get into this later Scot, and I've beenranting about this for a while, but that's just the way it works as youmove higher in your career right as you become sor it. This t tenure, AE fieldrap those kind of things you don't necessarily give more options right.You get an opportunity for it, but you're not all of a sudden Goin to youstrike it rich, like it's. Just it's not there. So, depending on where youare in your career, an where that company is from a growth perspective ispart of your decision equation Right. You know I want to win. I You kN Wtwenty something, thirty something single otmary I'll, take the risk I'llgo after it and then I'll use that an part lay that into my next Gig and thenmy next fa Mexcig you w. If I'm forever a WHO doesn't want to manage people andjust wants to be a field drap at a great company, will then those oxionsbecome a bonus and y? U You learn how to negotiate whell yea the options arethey're interesting, but that's not what's going? No, that's not sexy to meas if I'm twenty something Gret like assist. A totally different thing wasgoing Ta, make sure people have understand some of those things yeah MsGdtheay Ijo othere, some questions about like how do you avoid delucionand and what you're not going to avoid delution? That's not a thing. There maybe some exetives anti delution protection and what wouldantidelition protection ould mean? It would mean that, as you raised money,you ere issued new grants that maintain your percentage ownership of thecompany, but I can tell you it's extremely rare, even for executives toget that, and certainly nobody below the executive level is typically goingto get at the shre the investors themselves, who they view themselves assuperior humans to all of us right and they new themselves as the money theysa. You know you can get an east sack whaty you want, but it's my money andthe money sometimes is doesn't have antidelution protection. The only wayto theyare in Goral percentage is why Fred Wilson Talks about like side carfunds, because they need an amount of money so that, as the valuation rises,they can put in more money to maintain their ownership percentage, but asemployees you're not going to be able to avoid the Lutian cool, there's an athat are going to happen as which we will talk about later. All of which youknow somebody asks like. Are you going to tell my moter Wat, my Mo One? That tuck is probablyto try and till your bus...

...all right so SDR's as if you're superearly, maybe you're, going to get some decent options? You're, not retiringoff a bit, it'll potentially be a nice pay day, but if you're coming in laterstage and and you're getting paid a normal salary, it's going to be small,an in many cases to Scott's point it. It may be nothing and and you're therefor the experience you're there for the commission you're there for thebenefits and you're there to learn and to Richard's point. You have the chanceto be a part of a great journey that can be the springboard to the rest ofyour career. I've seen it happen, and I see a lot of the folks who come intothose early ae roles, they're very entrepreneurial. They want to starttheir own company someday and that's why they want to take those risks. Theywant to see it right on someone else's dime, and so those are good scenarioswhere you would go into a roll like that, and the expectations is moreabout learning and growing than it is about money. Don't look at the don'trely on that paycheck! Look at it as as it's cool. If it happens right it'sgreat. If it happens, it's trat. If I get something, but it's not, why I'mtaking this job? What about the VP? The CRO Right, I've been of VP twice Scot,has been a VP. What was six or five or however many times Sam's been a CROmultiple times. Richards run multiple sales orgs. What's the rightexpectation for a VP OF SAILS? And let's start by just talking about thefirst VPA, a company hires? Maybe they're they're past their seedstage.They raised some their first round of of intututional capital and they'reready to hire their first. You know real vp of sales, who has someexperience. Maybe they've done it a bit before it's not a stretch, hire it'snot a manager who's going to become a pit someone with a bit of experience toto do the role. What's the right expectation there, I think, with thosequalifiers anywhere between one and two and a half percent ownership in the organization would bea reasonable expectation. Now, there's so much nuance involved in that andI'll tell a quick story to illustrate that one of my most recent BP of sales gageabout ten years ago, I had two percent ownership in the organization. The last company that I was at. I had alittle bit less than that, but I took less than that on purposebecause the potential upside of this most recent organization, in my to makethem an and and others is about tenx what the first company was. If thatmakes sense. So it's not to say that you know you Yo, you could get one anda half in a company. That's going to do a billion dollars. You could get twoand a half in a company. That's going to exit for a hundred million you'regoing to come out better in the company that exits for the larger amount, sothere'sthere's newants there and there's this dance that you're going todo with a bounder in in the negotiation, and I I encourage everybody not to getlike too emotionally attached to what you had last time right, because if Iwould have gone to my negotiation and said book this last Gig, I had two anda half percent which so I went two two and a half one point: Seven Buck. I went up and then bigger companieswith higher upside HIGERI Cick a haircut on the points, because I Ithink that the upside would be significantly larger and if I tried toyou know, hold my ground a be like. I was two and a half last time. I wantthree percent of this time. I probably wouldn't av, wouldn't havegot the GIG but t to answer your question. Somebody who's been a B Pbefore you you've got experience. I think one percent is is kind of thebaseline or e floor and two and a half percent is, is probably the higher end.I've seen as much as three three and a half percent floted brown for cro kindof roles, depending on the size and stage of the of the ORB ut. That'sthat', IETER Ety, Richard and San an band upon there. Have you guy seendifferent or do those numbers sound right to you does sound about right.You kN W the last Gig I had as a as a VPM sales was two thousand and twelve.So as the bunding ROMs have gotten bigger, the grants have gotten bigger,so I had to fight hard core to get to one percent. They wanted me to do likea quarter of the percent, an Watton te company seed, priested, okay Whil I wasearly yeah and- and so I was like- has got to be kidding like I walked awayfrom it like four times but whoug. It was seedstage and you struggled to getthem to one percent. I would think that's where you're GOINGTA hirepercentage now, so so that had to do with who the founder was- and I won'tmention the name and sort of how things were beingpromised and not delivered. Not Actually it was I e great technologythat does work 'cause, their competitor came and just ate their luck, so Ididn't make it through the end, but I want to come back to a question. That'sin there for Scot 'cause. You you experienced this, which is you know.When do you start to exercise your...

...options right? Which means you've gotto pay for them right and just so people understand you still have you have the a Sam said?You have the right to buy them, and then you have to decide to bythem whichcounts Awhich, SCO loks, my necks. I know the story, but the other thingthat happens is the amount of taxes. You've got ta pay on it and whether ornot you're able to hold them for a year or not for them to be shortof, longterm capital gates. So, Scott, you know in one of your scenarios where you'veexited and had to buy your options. What was that, like three quick situations that I wantedderail coln agenda too much, but the first time I exercised what amounted tobe hundreds of thousands of cars hit cost me like ninety bucks, true story because he share was valuedat like t zero, Zeroli one since so it was like unbelievably Che Ionani. Youmade you made hundreds of dollars. WELLI ended up making a law more thanthat. That's very out of positive outcome.The second story is, I had to come up with almost two hundred thousand dollars incash to exercise right and I'm now years later, still sitting o tat andand waiting for some miraculous thing to happen said differently, I'm out twohundred thousand dollars for something that may never come to froition at allir sorry. I spenl. I also had to pay taxes on that too, though didntyylikwere going to get into later later on the first for sure, but in the thirdstory spent about a hundred and fifty hundred and sixty grand exercise againand that outcome is as yet to be Yo hat to be determined. So one situation that came up with youknow dinner for two and the other situations, an extreme amount of moneythat, if I didn't have that kind of mline around I'd be hose, I wouldn'tyou know I wouldn't I wouldn't be in the running for Someh, some ecit of anykind have any of you guys ever m before I I jump back to to the agenda, haveany of he guys ever experienced or or know someone who has just a quick,quick answer. An example of you had the options they vested. You left thecompany in the DEC and you decided, or they decided not to exercise them,because they just didn't think it was going to be worth it. You know wh,where do you? Where do you draw the line on that decision? N Am you' have to make you make Abetton what you think about the company, and I have a terrible story here,because one company, I I've, been there long enough that I just felt thisemotional attachment. One of the things I would say is when you're thinkingabout exercising your equity and to the point, rhige you're, writing a checkand then you're. Typically, unless you're writing, he check op the mostrecent valuation and then you don't have to pay income tax, 'cause, there'sno game, but if, if there has been a recent valuation that puts that meansthat, like you're exercising for five bucks and the company's valued at tenbucks, you actually pay income tax on the DESTK, the difference between tenand five eilediately right immediately, which sucks, and so I did that oncebecause so the point that I would make is that just every time you write avery large check just make sure you take a stepback and you stay toyourself. What else could I do with one hundred and seventy five thousanddollars riht? I could put it into the stock market and guess what no matterwhat you think about the ups and downs in the stock market. You can get it outany time you want right. I could put a downpayment on an apartment and I so Ithink we get really really attached and we faild to remember that, like thereare risker war profiles- and this is just one choice that you could makeamong many, so one company- I worked there almost five years, I wrote achack because I just couldn't bear to think of the idea of an exit without meparticipating in it, and I paid a shit loat of money in taxes. Iwrote a very large check for me at the time and the company you know up to theend down round. Ninety percent. You know thowhove been cut in ninety in Rby ninety percent. You know it's around bu nothing's happening. So I learnedfrom that. I thought and I went to another company and I was leaving- andI said, Nol what, if I'm not there, that's me voating with my feet. If I'mchoosing to read the company, I'm not going to exercise- and that wasunfortunately livestream and last ream was acquired about three months after Ileft like right after the ninety day by Byvimio IISTATE, and I was getting allthese texts from people. I E congratulations ha five. This must bealso Awfu, so I got wrong both times, which sucked, but I wink that's my life all right. Well at least we're learningfrom someone who's been through it. So Real, quick, quick answer, vpcro. Wesaid one to two and a half percent like a series, a how different is itgus? If this is series C series d companies raised, you know nplusdollars, te crenkand revenue. Am I...

...going to expect five percent then, oram I going to expect much less much less much less yes wanted to Ma Sur. That was Clarer. Youknow, as the company gets bigger. What you need to you need to stop thinkingabout like Percentag donorship and what you need to start thinking about iswhat is the outcome that would feel acceptable to me. You know in a varietyof scenarios, and so you know like the Perest Dero Person, if Youre Scott ormy age ray and so we're probably not going to go work for somebody unless wethink there's at least a stepen figure, anlikely likely seven figure outcomeright. I need to at least make a million dollars and probably much moreif I'm going to commit the next. You know two three four years of my lifeand so then you look the value. You look at what you think about the theability for the company to preach a value, and you say: Does that makesense? Do I feel, like this company has an ability to become worth two milliondollars? 'cause, that's what it would take to make me. You know two millionbucks or whatever, and how important is it on that note to take into accountthat the average tenure of these roles is about a year and a half, maybe two OMassiv massively important preuch got gicert's got ar go. I just lit the Fire Bouta ramp, coming tamasically important, so folks whatwhat that means is for the VP of sales, the CRO roll, the average tenure rightnow, even for excellent VPS and Cros is quite short. It's about a year and ahalf, maybe eighteen months, nineteen months, maybe two years, if you make itover three years, a you're really good and you're, also really lucky, and so,if your options are vesting over four years and and you're asking thequestion that Sam the soldier asked yourself in an exit scenario. Is thisworth it for me? You should not be thinking about those options, investingone hundred percent. You should be thinking about what amount of them willrobably vest in the time that IAM going to be here and don't just assume thatyou're going to be the one who who beats the average I've done that beforeand as we know from recent announcements, I'd beat the average bylike fifteen days so ithink. That's. I even think that'slinked in like rounding up to to t to the next month or something so the mattr that you do amatic you're. Nolonger doing math on two percent yeah, you own two percent, you Ma di Mat thatyou own point, seven five basis points and then to sandspoint. Now you have todo the math and figure out what exit, what liquidity has to happen in orderfor me, T to you know, get a windfall an acceptable number for me. So if I'mlooking for a seven figure, xtray semten figure liquidity orwindfall from this on point seven five basis points: that's got to be amassive multibillion dollar exit. So don't don't nea the math of yoursituation, based on a four full year of best, if you're in a VP, F sales or orin my opinion, if you're an cabal, be itis very, very rare for any of usright now to go work someplace for four years or longer for a variety ofdifferent reasons and what happens to the rest of those options when youdon't make it the full four years. Well, me add on to to Scott's plint 'cause. Ithink it's a bertain and combantyor question. You know- and I think it'sgin the chat, but typically your right to exercise those options expires afterninety days, unless you negotiate some kind of extension and that's becomingmore common bu to the re. What is an exit? Look like one thing I would sayis just understand if you're going in as a series, a or a very early stageexecutive, that there's going to be a tremendous amount of dolution betweenprobably between you and whatever the outcome is so it's not one percent,it's one percent times point eight five times point six, five, etcetera,etcetera and so w you actually end up with his much less clus. We'll talkabout preferencesn L. raising a e hundred million dollars is probably ata very high valuation, and you have to understand that, especially if you justjoined, but even if you didn't just join right t the investors need to makereturn on that investment, and that means the company has to exit at amultiple of whatever the valuation was. So if you raise a hundred milliondollars at a six hundred million dollar valuation, the company needs to beworth. One point five at least, but probably north of two billion dollars.Oras. You have to understand the climate, because it's not easy to makea company worth two billion dollars and in the previou not the world may bechanged and Madbe valuations are coming into. You know more realisticboundaries Bu. You should actually look for companies that have raised lessmoney, even if they're not on the front page of TEC crunch, because they havemore upside optionality right. If I've only raised ten million dollars, I cansell to business for geordre million dollars and everybody's happy singleplatform right single clockrooms Li ot e example. Yeah million dollar accentright now, some most of the companies we've all worked for the last couple ofyears. They raised their series B at a post money. That was a hundred milliondollars. They couldn't have sold for...

...eighty million so that in to think ofall all right Sam, I want to give you some rapid fire here where we'refalling a little bit behind my my o CD schedule. I've got just some some basicterms and we've used a bunch of them already, but can you give us just quick,ten fifteen second definitions of each of these and what they mean pertainingto looking at a a stock option agreement that gets presented to youquantity of shares? We we talked about this, but how would you define thatreally quick te number ofters that you get are y the number T os outstanding,or I that just that, what's on your on your offer, yeahstring price richrist is the price of the option that you would have to payto purchase the stock cliff period. The cliff is before the cliff. You don'thave any vesting at the cliff. A lumpsom vest all at once. Typicallywe're talking about before your rest, with a onor cliff. That means, ifyou're there under a year, you don't get anything at the one yearanniversary. Twenty five percent of your invest of your options, best,which means twenty. You have the right to purchase twenty five percent rimevesting period. That's the length the total length of the vest, so tat, tentyor years right. EANDWHY is it for years, it's four years because in the oldendays, that's how long it took for company to PA lot long ope. Now we weactually asked H, SCO had marcoberrs on the pocast and weasked him- and he even said he didn't know, but I don't even know Whyao fouryears, there's a bill. FERLY onpost about it, somwhere that that you knowin the olden days their regular t constraints were less, and so it waseasier to go public, so smaller companies would go public anyway, yeah.My understanding of that was that it actually comes from companies that thestock was already worth money right. If you go work at Merrill, Lynch they'regiving you generally a one year, a cliff and a four year vest, but youdon't care because when you leave they're worth money and Y, U you makemoney off of it right away. So I don't know if there's truth to that, but whatI've always been told is that that model which just sort of recycled andbrought into the start up world and makes no sense. But it's it's. Whatwe've got okay exercise period is the periodafter you leave how much time you have to exercise traditionally it's about.As you said ninety days, but it's becoming more common to negotiate forlonger periods. I will tell you is very important for you to try very hard todo that and you're going to have more leverage when you are accepting the job.Now, if your an str a forget about it, don't even ask you you're going to becrazy to try Tao, negotiate that, but if you're coming in as a VP or a Cro,you should absolutely ask for a ten year exercise period before you acceptthe job and you should push for it, because otherwise, what they're tellingyou is that they essentially don't really want you to have your stockoptions. At least that's that's my opinion. Well, they there's a verystrong incentive not to give you that that benefit, and that's because if youdon't exercise the Companyor, the equity n, to the extent that thecompany thinks the ecuitis worth something I n rather ee etcetera andthey get to regifted, YEP GP at no n and they plan that way. I think I Ithink I asked you that earlier is is what happens to those options right andso when they, when a company, decides a we're going to put h two million shares or whatever twentypercent as an employee stock option pool- and they know mean they're goingto issue. They also know, statistically how much of what they issue is comingright back to them, which just goes to show you that you should never expectto get everything. That's H, it's being issued all right couple, more things to define reallyquick, and I I think we touched on this a little bit, but just so, we have aquick definition for everyone. The difference between preferred and commonstock, who wants to take it San Grat, ish definition, fams arendictionarypreferred stock is, is just a different security and it comes with betterrights and it's got more preferences and it's it's. It's got easier, quickeraccess to an outcome than common stock, and it's what investors negotiate forwhen they invest 'cause, they don't want to be in the same Bot as us. Theywant to be in a better book it also. We are not getting preferred stock ighbut.It also means to get control on making the major decisions right. They youdon't get to go and have the same weight. If you own one share ofperchure half theway your boat will not matter right. It does not matter as acommon stockhold, while aenlike preferred there's all kinds ofdifferent prefer share. Some of them have voting rights and supervotingrights, and some of them don't some of them, don't even have any boding rightsat all. They just get better access to the money, so SAM, if I'm a V, P andand you're the C E O and I'm negotiating with you for my job. Is itfair for me to ask who has preferred stocking and what the terms are it's fair for Yo to ask anything. Youwant absolutely one hundred percent. Is it important for me to know that youwant to know what the preferences are you w dont know how much money you eraised, what a the preferencees, because you're trying to understandwhat is what sits on top of my ability to get money out of the common? So ifthere's and typically they're going to get at least one time participatingright, typically, investors are going to say I need to at least get my moneyout before we distribute any money to...

...the common sharholders. So that's whyraising a lot of money is a very bad thiy right. So if you got a middlingcompany typically, what happens is like companies hot series a they raise. Thishuge bee right at the moment that they stall in their growth they've nowraised fifty million dollars, but the company's only doing eight million anhour O or with high turn they're going to go into a sea, and no one understandthat there needs to be a lot of money. distribut ing fifty million dollars eesed to go out the door at a minimum before you' get anything so t a hundredmillion dollar exit. It's a fifty million dollar exit, not a hundredmillion dollar CE yeah, okay, blast question, and I think somebody askdseme some questions about this as well. Do you have an opportunity to sell yourstock to someone else referr to selling secondary, who wants to define it andand give us a sense of who typically gets to sell secondary and who do youthink should get to sell secondary? Well? First of all, yes, it's possible.I've actually done this before I've sold stock back to one of the BTS whowas dumping money into into the company. So this means just to make sure we havea definition. We are at a at some sort of an event where we are are raisingmore capital or we're issuing more shares, and there is an opportunity forpeople who have vested shares or exercised shares to selldem to a new orexisting investor, not just at that part also in in myparticular case. It was upon departing the company OAND this. This was a wayfor me to raise the capital necessary to exercise the rest of my options. Isee so sell off some of them and use that capital to exercise the rest.That's one particular example that that I've been apart of that I did Yeh. IMard it teaches an reven in collective about ashless exercise, exactly heScottspoyt, which is essentially a way of keeping less than the actual grantwithout coming cash out of pocket, because you basically sell thedifference between the strike crice and the new valuation and use that toexercise the rest of your options, and you can do that all in one transaction.You don't have to put up the CASIF. They, let you but yes, its et you butyo, know a lot of this stuff. It's not these aren't public companies and it'sthere's. No, the S E C doesn't regulate private companies in the same way. Alot of this stuff yo're like what are the reporting requirements of a startuthere aren't any back to the CONGURL. They don't have to tell you shed yetostand to sands point on this. I initiated this process and I was likeis that something t that you know we can do and they're like? Why don't know?Let me get back to you. They had N, they didn't know. There was no hard andfast rule. I pressed the issue, and so you know they they accommodated andquiesced eventually, and I think they acquiesced, because there was aninvestor who wanted this batch of of options that I hav. But you know I Iasked it ul never would have happened. If I didn't ask and didn't push for itand there was no rules about it to sandpoint. That's a great point yeah. II mean in my career I've seen two different scenarios. One was just I e I.I was very fortunate where something was offered to me at the time I wasparting away from the company, but and I would say, ninety nine percent ofEscenarios, it's what' Scott saying, if you don't ask you won't get, and so,when they're asking you to sign that separation agreement and they're askingyou to not disparage the company to not reveal trade secrets to not hire theiremployees when you go to your next job. That is your moment to ask for thesethings. That is your moment to make your case, for why it's fair for whyyou deserve it. Of course, if you join revenue collected and now I've learnedall the things I've learned from Sam the real moment ask for that is whenyou're before you sign your offer letter, then, especially when, when youknow strike while the iron's hot right T ey, they want to hire you at thatpoint. But you do have a second chance to ask for things at the time ofleaving the company ECAUSE. They are going to ask you to sign a separationagreement and they generally really really want you to sign that and theywant to to come to an agreement. So that's your chance, your second chanceto ask for these things. Let's Moi mean I know, yesine no e Bud. Yo askd. Doeseverybody get a chance? Typically, most people do not get a chance to sellsecondary, and you should ask before you join the company. Has Anybody soldsecondary right, because what one understand is particulary ifour anexecutive, the founder will give you a pitch about how we need to go on thisjourney. We need missionaries, it's going to be ten years, but we're goingto change the world. This piece of marketing technology is, you know, coinTi help the poor, and you know change world piece et Cetera, etcetera, butyou wont understand: Have they already taken money off the table because theythey are not obligated in terms like reporting requirements there aren'tenyso oftentimes they will sell secondary at an early stage. Back in the day youK, w. We don't know post Covit in this recession, I'm sure the terms aretougher, but back in the dead now six months ago, they would raise a twentymillion dollar series. Ay Twenty nillone dollars is not going to thebalance you to the company right, so eighteen million dollars might go intothe vallancy of the company and two million dollars might go to earlyinvestors, including the founders. You...

...want to understand that before you join,it's not that t s they're not doing anything nefarious in my opinion likegood for them they had an opportunity to so they took it, but you won'tunderstand what's their incentive system, because if I just bourt twomillion dollars in my bank account I'm good for a couple of years right andyou mightsto be hungry, you might not havd thap two million dollars, so youjust want to understand. What's happened before I got here so that I Iknow what I'm walking into now. They might not tell you- and I talk to alawyer- T WILLSINC Incini a couple of months ago, and they said we just did aseries a and the founder expressly said. Do Not Tell anybody else that I'm doingthis, so they may choose not to tell you, but I think you should ask agreedagreed so so for the folks in the audience of Sam is essentially sayinghere, and you see these stories in the news of these massive companies. BigValuations companies never strike a profit. They end up tanking. Somehowthe founders walk away m millionaires. The ten times over this is how ithappens right because they are, they are taking money off the table whenthey're raising a round of capital- right, let's say they're, raisingtwenty million and they are going to sell five million worth of their stockout of that twenty million, so that five millions going in their personalbank accounts. It's not going onto the company balance sheet, but they aregoing to shore as hell right on crunch base that they just raised twentymillion dollars. Even though five million of it went to their ownpersonal net worth and they're going to continue to to expect you to take thatcompany, you know to the finishe line that you need it to go to in order foryou to have something, but I think to Sam's point: if Ri'm readingbetween the lines, it's just nice to understand how comfortable are they andand how badly do they need to get it to the same place that you need it to goto for you to get what you are owed e Uo questions coming in: Let's, let's take somewhere we're a bitbehind schedule, but it's okay! Let's go with it. Let's take a few questionsye I can't remember, did we discuss the differ between a trigger and a doubletrigger? We did not, so I don't think so. At least Ronin Minturn it over toSamasar as our encyclopedia pevii Sam. That is that'sa book. I'm I'm not xhert on all things, but so I trigger what we're talkingabout as acceleration right. So what we want to understand is I've been there ayear, I'm on a four year best the company gets acquired. Does that meanthat all of a sudden, the three years of unvested options immediately becomebested and I get to realize the full potential? The answer of that questionis no, unless there's acceleration provisions in our in the equity stockoption agreement or the EPPY stock option plan. So what is acceleration?It just means something happens and my unvested equity ECCELERATES, so there'sa single trigger and a double tricker single trigger is very rare. What itmeans is, there's an acquisition and all of a sudden only invested actuoryaccelerates. Why is that rare? That's not in the interest of the acquirerrhight. It makes the company less attractive. I don't want everybodygoing out the door of the minute that I make the acquisition Ri, so I wantthere to. I want them to stick around, but the acquirer wants you to stickaround double trigger is not in on scenario, though right Sam. In somescenarios you get acquired and your your role is obsolete. Right and andyou're got immediately. Get fired was the oorer that determination. I don'twant what ofo happens. 'cause I was a big CACER. My company was gettingacquired and I was you know: let go. They hugged me out the door inin a good way, but within you know, ninety days they got acquire. What washappening. Is they laid me off before the acquisition right bought by a hugepublic company that you would all know, and that was because the acquiringcompany will look through the spreadsheet if we don't want thisperson, this person, this person, this person R, and so I was a part backroued. Now my company, I think, protected me. Theycame in and gave me a ton of of cash and health insurance because they huggme out the doors I say so it can happen that way. An I've seen what I've seenin sock option agreements is, it's usually it defines what would happen inthose scenarios, at least in in the ones that I've had it defines. You knowwhat would happen to your options if you were terminated in the first. Youknow X, DAS because of a liquidity event and and also what would be thesenario if, at that liquided event you by default, lost your job because theydon't need dy piece of Seles erthing I wan becure people understand is thesethings are triggers and double triggers that you negotiate. I don't think I'veever seen it as something to negotiate at an SDR R, a level no notn mnageer.Maybe a director level. You could negotiate that stuff, so I thn run offand tell everybody coul o this like be mindful of what you're trying toaccomplish yer right, like you're, trying to understand. You know ifyou're, an str nd a you're Gois, to understand this as it's going to parleyandto other rules in your life. Hopefully E. ask he: If Federa, theydon't have to give you any triggor whatsoever, O RSO. If you'R YOU'RE A BP of sales, you should a hundred percent ASPERA single trigger. You knowwhy, because ther the founder is going to assume O shit. This guy knows whathe's talking about and they're going to...

...tell you? No, you don't get a singletrigger for all the reasons Sam was talking about so then you now have abetter chance to get double trigger. So now you start figuring out what aresome of the triggers. So, yes, obviously, like an acquisition might beone, but what if you get topped off meaning there's somebody who comes inAbutton you that could be a second trigger? What if they change the natureof your role, so you're no longer managing, let's say an inside salesteam and nowyou're managing a field sales team that coul be a trigger thathelps you if they move your office outside of thirty miles to meetingfllychange your commute that can be a trigger. There's all these things thatyou can negotiate up front that become double triggers, so this is a way for abpsls to protect themselves as best they can there's no perfect kind of scenario, but I bakedall these brandom things in so I have like a dozen potential spicnberytriggers that you know I felt would be meaningfuly Inimpacton for me. If youlower my compensation, both based Pan or total, you know Variale colpabilityin Whana, so all that motiobl pleasure underscore what Scott just said. 'causehe's making a really important point: Foran executives out there thatit'snolike, you know, plus oneon or plus a hundred which is, if you ask,for a double trigger their their default response, will be to give you aclasetet says if you're fired and then you also have to make sore. Sometimesthey say with that acceleration. Not a hundred percent of your unvested equatea its only fifty percent might accelerate. So you want to make sure athat you're asking for a e hundred percent 'cause acceleration is just awar that could mean any percentage and then again exactly at is Cot's point. Iasked for a double trigger that company that I worked at. They came back andthey said if you're fired- and I didn't at the time think to say more materialchange in job responsibility or geography, which is exactly what hejust said, because they can just say: Listen your jobs intoluth! You know Iknow you live in Austin, I'm not saying you're, F, you're not fired you'rechoosing to quit. I'm just telling you you job five hundred miles away, so allothe things should be tha. I contrerer at a great point. I would have neverthought of that O questionman and no disrespect to delut by the way he as you're progressing through yourcompany right other ways to Apfire more options. Scot you may be good atanswering this. What happens if you get to your four years right, you make itto four years as a sales drop. Your options are there. I can I go ast formore right. So how do you negotiate new options and then can you negotiate themback to your original start dat several years ago, at that price righ, you usedto be able to do that. I'm not sure if you can anymore Ias Aso Arasting in thefirst bubble. If I recall Y, AH, you CA'Tyou can't negotiate back. You can'tdate it to the original price. 've, never seen that that fly before atall. You absolutely can negotiate constantly for more auctions. You justneed to know that your besting clock is going to start over keep not going tobackade to your original start day. So, if you've been there for two years andyou get another grant now you have two clocks,you have one clock that you're half way through and another one that you're onday. One of that has a brand new cliff so that that's very importanttermiyou've been somewhere for four years and you're fully vested from anequity only standpoint. There is no reason for you to stay quict in thatparticular job. In my opinion, that's why I'll say from the employer justfrom equity. Only right, you might be happy with the job right like the roleyou might be able to get a different title. Eventually you might like thecash whatever, but unless they're giving you more equity, why? What areyou sticking around for so you absolutely should be negotiating for it. I from the employer's standpoint therescot that's a that's a reason that you should have a program in place to keepthose folks around to issue more stocks. I know we've done that at one of mystartups. It was common practice that when they were approaching their fouryears, we we proactively wanted to talk to them about another grant. It'sprobably not going to be anywhere near the size of their initial one,especially if they were early, but it's enough to to to continue for them tohave that upside. To stick around what D it depends also if you're gettingpromoted so so, for example, Yo have one clock that is as an eighty, butyou've been in that role for two years and now the company has grown you'vedone well and you're moving into leadership. So now you have a new clockthat starts as a sales manager and the number of options that you've beengiven might be lawyer, but thy're they're different they're differentclocks, but in some cases I've seen it be smaller. If you have an a who joinedreally early got a really nice grant better than later executives might get,because they were so so early and then that person becomes a manager. Fouryears later and they're like wait a minute this, this crant is doesn'tcompare to when I first got MT ther along I most important to takeaway for forever. Toplly and all this is like you, don't get what you don'task for you know all of this stuff is...

...negotiable. Sam made a point earlierabout getting a second grant. That kind of keeps you at a percentage level rihtand how rare that is. I've had that happen to me a couple of times, becauseIAV pushed for it and lobbied for it bu before I accepted with my job there andthen when it was happening. So I had it in writing that they would have to dothis. If if we raised a particular round- and I got diluted- and I stillhad to ask them and just make sure and hold their hand on T- they actually didit, so you absolutely should, and but you should only be doing it if youintend to stay there, because if somebody gives you an extra grant tokeep you employed there right, but you're you're, looking around you' e,like you know, I didn't get any extra salary. I've got no upward mobility.That grant is meaningless for you if you're not going to stay there for atleast a year or you don't believe in the successful future of thisparticular company. You made a really good point there, Scott of making sure it actually gets done right.Even if you trust people, you need to read these documents very carefully.You need to log into whatever system that they're using and make sure thatthings are put in there properly make sure that it's executed right. I'veseen just clerical errors. I've seen things just get forgotten. I like tothink that thit's, not intentional, but if you're not checking whatever's onrecord is, is really what what matters? It's not what you talked about. Youknow in a conference room so always check on that stuff and own that n, tothe extent that you need to hire a tax attorney or or or a lawyer to to reviewthings because ill, tell you, those team, they're very, very hard tounderstand th the legal jargon n in these things ar guys, I think we Ithink we somehow covered. Almost everything in part, for we were goingto talk here about exercise period, cost to exercise the risk involved,preferential treatment and the impact thit could have on you. So t s juststop me if we didn't cover this stuff inability to sell secondary whilefounders are getting rich tax implications and what happens if acompany exits before you vest? I think we actually hit on all of those alreadyyeah. Okay, all right, then then, let's move into let's move into part fivepart five is where we're going to give R and give some time. I think we've gotwe're going to have less time now than we originally Plann guys, but it's okay,whe're di you give some time to each speaker to go through some. Sometalking points that that they see as hot topics some ideas and and thingsthat they think needs to change. So, let's Ka get off Scott. We've got youhere. An you've got a handful of things so so take it away. Youre on Mutescott.One of the things I wantd to talk about is the expected burnings from aparticular exit, and this is going to be real, loose Napkin math of, ofcourse, so take it with a little bit of a grain of salt. But let's say you haveone percent and you have a hundred million dollar exit right, so therethere's your one million, but to sand'spoint there's all the delution.That's occurred depending on how many rounds you raise and whatnot. So let'ssay ye got diluted by thirty percent now you're at Sev hundred K. Now yougot to pay taxes, let's say the taxes and and whatnot amount to like fortypercent now you're ad four hundred and twenty k right. So if you have onepercent, a hundred million exit, a good case scenario for you is to make fourhundred K less than less than half a million andterel again Napkin math, it'sprobably a very inflated optimistic kind of number to even make that muchout of hundred and seventy five million dollar exit, and I had a couple ofpercentage points and I ended up with just a little bit older. The fourhundred K amount. So if you're thinking about a five hundred million dollarexit or a one billion dollar exit, just to do some Napkin math for yourselfjust bultiply those by you know five times that hundred million number andten times and so forth. That's one of the things I kind of wanted to talkabout the time frame, its a complete fallacy that you are going to makenumber on any kind of time frame that you'd expect that exit. I was justtelling you about. I got paid on that six years. After I left six years wheremy money was out, there f from exercising and I'm sitting there, youknow periodically every day every week going when the fluck is Tis actuallygoing to happen, and I'm esking people who are there what's going on whatnot.It is a extremely long waiting game now, Catyoto that I always go into Beryverearly stage companies. So I bring this upon myself. Somebody mentioned beforeis like a seven to ten year horizon nowadays, instead of a four yeararrivin in order to have an exit. So if I go in- and I spend two to three yearsout- an organization by nature of when I started there- I'm teaing myself upfor a long waiting C. But that's that's got to be part of your mentality whenyou go to exercise like Mi O K, without laying this cash for noexpected returnfor years down the line sky, while...

...you're on that topic, there's aquestion that relates to it in in regards to how soon you should exercisesomething and how that can can differentiate the tax implication. Canyou touch on that? Why my opinion is? It depends completely on your financialsituation, Ho Ou uld exercise as as soon as you possibly can. While yourstrike pricis as low as possible, you might have a strike price of ten centsright now. If that company raises another roundand the strike price goes to a dollar, your tax implications now will bebigger. 'cause you'll get taxed on the game from prior strike price to newstrike price. If that makes that makes sense, calling you and I talked aboutthis yeah yeah, I fuck that one up myself far as things you can do is ifyou've got a significant chunk of equity, and you know the company isgetting ready to raise or is just about to raise exercise who ens there MorTayo, let's say you're staying at the company or or or whatnot. I don't knowif this is true or not, but if you're, if you exercise the options and youhold them for a certain amount of time before you sell them or before there'saiquidity event, are there ways that you end up paying less in taxes? Whenyou do that, I think I heard that if you hold them, you own them for a yearor something that you're paying different taxes, and I just put in the chat or there'sShor trimpaprovansyhold. I mean thit's like any stock. If you sell it before ayear, I think it's thirty five percent and or whatever I don't even know andever long term. I think it's twenty percent, so yeah there's majordifference and then the other thing I put in there is the QSB S, exemptionand you're gon to have to read it 'cause. I don't I'm not a lawyer, soyou gotta understand it, but I think the basics of it are that if you ownthe stock, not the option fot the stock, four or five years in the company isbelow a certain threshold, and I think it's fifty million dollars in assetswhen you originally purchased the stock. I don't think you have to pay taxes onit at all, so that is a very special situation and another good reason, butread the article tat'll tell you all about it, but that came into play withh. You know with Girson Lerman Group, where that was a company that yeah theypaid a lot of money out to to shareholders over the years and and alot of folks had a gret tax benefit because they had purchased the stockwell in advance, and so, if you believe in the company, I think Scott makes theright point POL exercise before the evaluation goes up, so that you don'thave to pay taxes. Thank you. The next thing I come I want to touch on is andten act. This question before is like had dawyou optimized for cash person'sequity, again dependent upon everybody's financial situation, maybeas well as risk profile, but what I typically tell people is optimized forcash earliyr in your career, optimized for equity. Later an de tre, so at Y,in my stage of life, be ABPF ls a number of times at this. At this pointlike, if I go, get a BPF sales job, the cash am going to make in terms ofsalary and commissions, Isroughly, the the saying, probably in each of thosethose orks, and it's not going to do much to change my life and I'm at asituation in a place in my life, where I'm looking for Bakyupny, I'm lookingfor something that will generationally change the game. FROR my family and mykids, and I I and so I will probably be more stewed to optimizing poor equity.But early in my career, I didn't optimize directly at all. I was tryingto get experience. I was trying to move up the ladder in sorms of job title. Iwas trying to optimize for a higher based outo Wi figre, O te moreresponsibility that type of thing, and so that's kind of how I how I thinkabout that. If you're earlier ind your career, you might want to optimize forcash an later in your career, you can change that that dynamic and optomizedfor foretity at's a that's a big piece of advice. I'm curious to ask if, ifRichard and Sam agree or if you see that differently, so I go, I'm a littlebit different than Scott I've been doing stocks and options. My entirelife, like my very first stock, that I bought at age of fifteen a long timeago, was n TV right, and this long time ago I mean in the in the mid eightiesscholars, maybe four on time ago, yeah so scote optimizingfor cash yeah, so I I've always been like ywith focus on the stock and andthat I think, that's a naive approach. You know that's a traditional approachin in a different mindset and I was probably a challenge for me. I probablythought I knew more about this stuff than I do or did at that point becauseI had been doing stuff and I still play traditional stock market games on aregular basis. So I didn't do that. I just sort of wasvery aggressive about salary anyway, so whether you call it optimizing, I thisis e differtine Scot and I I'm sort of like no do this. Do this dudist Scottnegotiates his way through everything and then he makes them feel good abouthaving them do that for him as me, I'm...

...a little bit more direct, and so I havenot done it probably the way that I should ov SM. I yeah, I agree with Scott. I mean Iwould even put it differently. I don't even think you should optimize BorCasialyncu. I think you stopped Ha mice for experience. I think, as you get youknow, into your mid thirties, then you'e got ta start thinking about g.You know building wealth. I think before that. It's really just about tothe point someone I think. Maybe Richard Zon, you know it's like lookfor. ECENTS. Look for great experiences like to learn as much as possible.That's what's going to generate weld for you overtime and that's that's whatI think I think m I do see and I advise you know a lot of people in revenuecollecthave come to me and they want to talk about cash comp, a a you know atthe VP level and above and I typically tell them t that they're thinking aboutit wrong, because I remember having that call with you exactly people aiht and it's oftenbecause they have them watch something like this. They haven't thought aboutit or they're scared, they're, intimidated by this concept of equity,and they think it's mysterious so that, like I got to make two twenty five,they offer me two hundred. What should I do? And you know my personal opinionis like we who gives a shit like the difference. Twenty five thousanddollars in a year is two thousand dollars a month is a thousand dollars.A paycheck is five hundred bucks after taxes solike that who cares T, I don'tmean that I'm sure it's meaningful to a lot of people, but a Alema where you'rea VP like I really don't give issot about five hundred bucks, a paycheck.What I care about as exactly what's gotsit like at a certain point, as youget into your thirties and in your forties, you need to start if your notring to you need to start getting rich like at some point need to startgenerating weld. So how do you? How do you generate lat- and I know thatthere's like Roge Dad Pord ad and he millionaire next door and, like youknow, you could live like a monk and never spend any money, and I get it andthat's that's one way to save and that's one way to General 'cause, I'mgoing for lump some cash opportunities and equity is one of those lormsomecash opportunities. Let me put out there one thing, though: I think thatthere are other things you can ask for. Instead of t equity that function likeequity, like mildestone payments, right because the reality is that oftentimesyou're not going to value the equity of the same way, I hat the same way thatthe founder of the company will the convers of company con Ik Te Equity isincredibly valuable and you might think it's just a lottery ticket and you'renot sure how to feel about it. So one of the things you might do in anegotiation to say I want two and a half percent, they come back and theysay no fucking way. If we never give hen that we can give you one person asay know what how about this? How about give me three quarters of a pointinstead of one percent, but when we get the ten million hairr. I want you towrite me a check for three hundred and fifty thousand dollars or at the nextfinancing round. I want Yo rite me a Checku for two hundred and fiftythousand dollars and if you structured it that way, I as if founder, I wouldprefer that I would prefer that I don't mind paying people cash. A as referthat, too, is the VP. I don't I don't want. I don't like that table. I Eequities forever, once once cot or Richard, or you exercise you'Reyou'reyou're on my cap table forever for twenty years. I don't want to dobusiness with you for twenty years, so I think, like we should look foropportunities to trade equity which really isn't going to be worth as muchas they tell us and look for opportunities to get those lung sumpayments in other ways and and ad the sales leater to those those air armilestones that Aotakin about is, is the cleanest, simplest easiest way todo that, especially if you're going in early stage miles tone at two millionmiles ton at five million mile tone at ten million Mile Stone at twentymillion. I think I would take that over thecomplication, an and probably that's financially stupid, but that motivatesme more, I think, to seeing the it's not necessarily fiantor stupid.One could argue that it's actually smarter because you're one hundredpercent in control- yes, yes, reoperator and as the builder and asthe executor right to exactly tie to your performance, you can make it anexecute on Mat right, yeah yeah, the only a Teo IEE, the only th thingthat gointo bring up. In my my section of the the RANC is the antiquated fouryear vesting schedule as San iluted to ear's why it exists. You know what itexists and you ket all of us fucking! Let it exist because none of lo act andsay no and I'm telling you if all the sales be fees out there for me to callin to everybody else, who's on this call who's in a director or a BP Fsales level roll. If all of us were like no way four years, give me a breakthat doesn't make any sense, then the game would start to change, becausefounders would have a hardee time finding salesme peace to go lead theirorganizations. What makes sense is stage appropriate, best thing schedules:If you're not going to do the mildstone stuff that Sam talking about stageappropriate besting schedules matter at Tim, we've got an eighteen month,average, you know lifespan. If you will well I'm an early stage B P. I go inI'll, get you to twenty twenty five million airars going to take me two tothree years period. That's what I do! I've done it six times. I've helped goknow how many companies now do that exact thing? How are you going to fuckand tell me that I don't deserve my...

...full best just because I did it in twoand a half to three years instead of four years wat, you did it better andI'm giving you less. That's not fair yeah exactly so ininstead. Instead, whynot just say: Look you're the early stage B pet, we're probably going totop you off anyways when you get to twenty five million 'cause we're goingto disrespect you and tell you that you've never taken a company to ahundred million before so you're, going to end up getting topped off and firedor or I've never seen that happen SCO go rightwould! I just give me my fulone and a half or two percent or whatever it is. If I achieve what Iwent there to do, and my goal is to sort of start this revolution, if youwill, for all the sales leaders out there to stop accepting this, for yourbest start, pushing back and go for either these milestones or this stageappropriate besting schedule. And I I think I really do think that if we pushhard enougt, things will start to ingl start to change, but it won't change ifthere's B, ps out there, who don't know any better right and just acceptwhatever they're. Given it's one of the reasons why I really love forums likethis is because, hopefully, the nine hundred and sixty seven people are onthis call right now, paused for a moment, and they thinkabout these things and they're, like you know what I remember: whatsScottsaider, I remember boy Richard Said, and it pushed back a little bitmore an we negotiate a little bit better or would you say if, if there,if they won't budge on the four year, then you just need more options. Youneed to be OK with only getting seventy five percent or fifty percent of them.Teyou coul ask for more options. You could do the milestone thing like snstalking about. I mean there's a lot of different ways to kind of go about itright. What we need to do is take the power back away from the bounders andtake control. We are the engine that makes these companies go everydepartment. I'm sure probably thinks that OK, but unless you have anycommercesyhe that makes money without a sales organization. We are the enginethat makes this company go and as a sales leader you're. The one steeringthe ship and you're the one guiding it don't tell me that I deserve to makefour hundred k when this mother Parker is about to make four hundred millionoff of everything that Ih've done and built that doesn't Makas to me, and youneed to go into the room when you have that conversation with your fuckingbattleface on, because if you think that they aren't really good and reallyprepared for that conversation you're out of your mind, you need to be tentimes more prepared. They are good at it they're great at making the everyeverything they're offering you sound, generous, they're good at almost making.You feel guilty for asking for more. If you're at a successful start up,they've raised money, those c Os know how to negotiate. You need to be ableto want up them and they will play on your emotions and they'll make you feelbad they'll do all of those things and don't think for a second that theydon't know exactly what they're doing they're fucking you and they know itstol call it out. It's Oky. Sorry, I had to add my my little rant. INER HAE,Ymor I'v done my topics. I see the conch to those two all right, Richardmy man. I see her four kinds of fuck yow options. Is that what we're goingto get to hear about? We hear a couple of things around thet, a D of course,I'm sure my kids ave here rfantastic Scott bring Hala beand brading in theroom, so I can teach them to so. So the thing I like folks tounderstand is that, based on where you are in your career stage, those are thekind of options you're going to get right. You're going ta get either you K,O fuck or Tu few options right. Fuck you options to in the real world areseven figures that, as Scott said, change the existence of not just yourlifestyle, but generation is right. If you can get amillion dollars and do something with that and parley that into somethingelse right for Somein, it could be five hundred thousand. That's fine. Itdepends on whe e, where you're coming from and where o you live, but you're.Also then, there's the six hundred figure, you know th the six figure andthen there's the five figure options right like. I think the key is that Iwant people to know the SDRs, the AES who are listening to this call andlearning o. We take a ton of notes, but there are other things you couldnegotiate that are not just options right and I at least want to givepeople some of that right, because part of this is learning how to ask forthese. Things is about learning how to ask for these other things later, likeyou should be asking for. Well now, it's kind of easy work from home rightth that used to be hard. I used to coach Scott on that one like he got twoyears two weeks off every summer to go to lake albanor right built it into hisplan right, that's easy, Nowm, but negotiating that negotiating yourcellphone. Think about the food stuff that they're giving you right like ifthey're bringing food in or they were bringing a tood in you know that's apiece of compensation right. You know all of you who are now working fromhome and Datfood's, not coming in whats as now costing you pomote thats such agood point Richar, and I did not think of that as a VP and when we went remoteI was shocked at how many people that have really impacted their life th.They did not have access. They were now spending more money to work from homes,you're spending a hundred and fifty two hundred dollars a month. I mean a Weehehas right and granted you know I don't...

...want Ta going out getting happy mealseither. Like that's unhealthy, like so think about those things think aboutyou, know your health care. It is going to sound weird, like wow, I'm Gon T. doI sound like an idiot asking for them to pay for my cellphone well now Carleythat into when you want to ask for ten thousand more shares. This is yourrunway to practice that to ask for those other things that matter so rpeople were earlier in their career. I try to make sure you understand. Atthese. There are tones of other things to negotiate for that are really reallyimportant, so I alsothi would. I would add, to that real quick. I think agreat thing to ask for is for them to invest more in you in in putting youthrough certain training sessions or certain programs. That's a very hardthing for them to say no too. There's one thing on that, so there's two parksof that one is: How are you going to help me keep learning, so I can bebetter for you. That's what you're son you're investingin me Sli and go help, make us more money, so I can make you thatmillionaire billionaire the other thing, they c n that I think people should beasking more particularly earlier generations, although I think it candhappen in your thirties and forties is Hep me pay off. My student Loa like Iwant some kind of stipe in some kind of way where this is going, and you knowit's going to my student Wo 'cause that move tha lot to. That is a differentway to invest in your education, so to speak. So anwaysell pause there Le me. I want to add a quick point onthat, Richard just from from the V P's point of view be very cautious aroundwhen and how you ask for things. There is definitely a time in a place, that'soptimal for asking, and there are times and places that are very much not ifyou are coming off of the worst quarter of your career and I've seen thishappen, and I just walk out of those meetings like what were you thinking?That's not the time t to go. Make that ask if you're coming out of a quarterroom, maybe you did really well with the company is struggling. It'sprobably also not the best time to ask to keep oth of those things in mind. Ithink a really good time to ask is that your one year review or at some sort ofa scheduled review, where you did really really well, that's a good time, you're. Okay, to ask so I disagree ifthe company's doing really doing well, I think you can politely find a way tosay look. I need these things and then Yo et creative about the hous e a I teCom i's running out of cash and they just failed to raise the R it depends.I guess the scenario but point is be conscious of that. Don't be tone deafto that. There is more going on than just you 'cause. If you walk in at thewrong time to make an ask, you can blow it when, whereas, if you waited a monthor dud I a month earlier, it would have gone well point being the timing is, isimportant. Sam T at you have something to ad. I S, you put your hand ut beforecit up at Tam Calai. That might be Kelly Snyder, but then she just put itin there, which is one of the things you should ask for- is the cost ofyourrevenue elective membership that I as t to make sure to pay annually. Soafter they shitcan you, it's it's prepaid am Dandrake all right Richard you got more er you good hor te go all right samethe man you're up, I covered a lot of it. I think Um we overvalue to the point of thisconversational O of the comments I've made. I think that there are veryspecific situations where equity is going to be worth something, and Ithink that we should just be mindful of other things that you can ask for thatfunction like equity. I think that you know I personally and this ascontroversial like. I don't believe that I don't believe the AES or SDRshould get equity kind of discass point. Why? Because you're not going to make,because I want Ivem, that equity to people where can really change theirlife. I'd rather give another two points to Scott than give point: onepercent to twenty other people or to forty other people where the outcomefor them is not meaningful, but to the company. It is meaningful becausethat's two points and it would be meaningful if I could reallocate thattwo executives or more senior people o that's a different rant, but the pointI would make is just there'sthere's things like milestone payments. Theother thing that is, you know honestly 'cause, I get fired all the time.Severance is another thing that functions like equity, and you know mylast company before I started working on Revenu cord to full time andnegotiated for twelve months of severance paid in one lum sum. That isthe same. That was very very similar if not exactly the same amount of money.That's got made on that on that hundred and seventy five million dollar exit,and so there are other things that we can ask for that are cleaner and easierto understand, as opposed to just assuming that we should get equitybecause it's like a lottery ticket. Well, you know you gottothink aboutwhether it's going to be worth anything thatthat's Um. That would be the pointthat I would make. We've got a little bit of time. Let'stake some questions. Somebody just asked: Who would you recommend tappingfor advice during negotiations? I recommend that you're in revenuecollective, it's been the greatest resource for me personally wish thatthat I was in there before I negotiated my my last job but h during mydeparture. It was super helpful and I've. I've seen them help lots ofpeople. Do you want to involve a lawyer...

Sam crack me Bu' wrong? I think alawyer's probably going to be best to help you review the documents, makesure they actually say what they're supposed to say an. Maybe they canidentify some things that could be changed, but are they the right personto go to to help negotiate? They could be. I mean it just dependshow senior you are when is it a bad time to have have a lawyer? I Guess YeQuestion N do an be able to afford one. That's the batter e Ye ready for athousand dollars an hour for for a good one right, so seenigo on the complaintabout revenue, collective REVENU, flectim is eighty bucks a month and youget two thousand plus people who, presumably at least half of them mightbe able to help you with this kind of negotiation or you can talk to Thi strlawyer is going to cost a thousand bucks an hour in New York City or forwhatever right yeah, and it's going to take them ten hours equivalent toactual thirty five minutes. Owork my best piece of edvice there is build arelationship with somebody who's been there and done that a few times, andthen it cost nothing yeah. I I've been working on and it's just really hardbun. I got a lot of good nuggets from this. I'm working ont, putting togetheranybook about all of this stuff, compiling everything I don't know whenI'll feel confident enough to to actually release it. 'cause everythingchanges so fast, but UH. Hopefully that will be a resource tosome of you some day. What else do we have in here Richard from a question perspective y ive gotmost of them. There was. There was one question aboutyou know: What do you do if you know you're based in one company, Wolasususe this? It's an American company. You have employees in other countries,writing any advice about if I'm the Emvloye in the other country right.What can I do? What should I do and I suppose I could go reverse hey, I'mworking for a company's Bace, oither, U K or or somewhere else. What kind ofthing should I look for and in terms of their stock options like like? Shouldthey expect something different? So I worked for a a Paris founded company.The only thing that I noticed it was different. I mean Ey. I shouldn'texpect something to be different, just because they're based in anothercountry, if they're hiring people here in New York, should be getting. Youknow what what is the market standard in New York? If that's what thequestion is, I did notice that you will see some things when you startreviewing the documentation that culturally just may be different, whichis something that maybe is a norm in that country. That here is not verymuch the norm and some of those things weren't necessarily fair or unfair.They were just different and they were like well. I've never seen that beforesome of them were actually good, one of them not so good, but yeah, that's theonly thing I notice is that there could be some cultural differences, wheremaybe we say, there's a one year cliff, and these are just examples by the way,maybe in in the? U S the one year cliff is is normal, maybe in another country,it's normal that it's a year and a half or that it's less and there could besome different terminology in there that might be favorable to you orunfavorable, but yeah it's worth looking through. That's I mean I'm notsure if that's exactly what the question's asking but culturaldifferences other than that, I think you should be treated the way that Outranreadem different countries have different legal and tax implications.Of the biggest issue like the UK is far more cunitive actually on foreignstributions, and so the options are worsh less in the U K, if coming froman American company for a bunch of tax reason. So that's just what you got toknow is, and this is not weren't, not none of us or lawyers or accounts, not understand the tax law and thesecurities law in your country and how because windfalls are taxed reallydifferently. That's a good point! Yeah! The company I joined was found in Paris,but they they incorporated in the U s. So I didn't. I didn't see much of ofthat. In my experience and- and I will just double down on on- I meant to dothis in the beginning on Sam's disclaimer, we are not lawyers, we haveexperience in this area, but don't hold US legally responsible. I recommendthat you consult a lawyer, a tax attorney on anything before you make abig financial decision or career decision based on it. We have advisedyou to the best of our knowledge. I don't know if that's legal jargon wellwritten, but it sounded good any more questions, or are we ready to to closeout here now thereas, a couple more one was no is how valuable is the story.I've been a part of an IPO right, as he aro career, verypretty, Ni, veryvaluable at any stage of your career, that's extremely valuable. Like I saidearlier, I watched a catapult people's careers. Not It wasn't, it wasn't anIPO, but it was a large acquisition and those folks would not have been able toscore the jobs that they scored in. I will tell you that when I left singleplatform, I actually joined there the month after the acquisition they gotacquired for a hundred million. I think it was eighty million a cash, somethinglike that they acquired for a hundred million dollar exit. They were doing avery small amount of revenue. The company was only two years old and Ijoined t e month after so I wasn't even there through that phase, but then Igot to grow with the company and I got to hire hundreds of salespeople and bea part of rapid scale. I then...

...completely skipped over the directorrole and went straight into a v P role, and what was the number one reason thatthey wanted to talk to me and to interview me no question everythingthat I experienced hit single platform. That was the reason they met me. Thatwas the reason they wanted to talk to me. It was every question they asked meand the interview was: how did TI SINGLE PLA EM? Do this this this th sthis and this and the fact that I lived to that was a hundred percent. Thereason that I got the job well Ma- maybe I had a little something to dowith it too, but without that I would on apoint counterpoint to all thisColin and others like him being a action. tital. Inflation is very real.So if you're, if you're looking at folks tha have been through, you knowan IPO or a big acquisition or whatever and you're thinking about hiring themyeah it it's a signal that they've been successful and whatnot, but thatdoesn't mean they're suddenly ready to like be in charge of everything.'rright there's a lot of people, I'm sure that call an knows, and we don'thave to talk about them at single platform that moved into rolls thatthey were not ready for and those folks struggled and or failed, and some ofthem. I, when Intho leadership, Rolls Thad work just ready. So if yorerinterviewing people who've been through some of these events, don't let thatblind, you to you know real real talent, that's in front of you, Collins theexception, but there's plenty of people who got ruler. They weren't IETE OCOits agrepoint, like one TA or sales force and they'vegot some VP title, and then they go to a start up and they don't theyve, neveractually built anything, don't know what it mean right: the how to follow a playbookthat was R for t e and there's nothing wrong with that, like you know, Kudasfor them for being in those great places, but asure that, if you'reinterviewing people based on their dest that you ask them about thedawn indirty. Where have you done this? Where have you got en your hands dirty makingthis kind of sausage like? Did you really get in there n? Do It 'cause ifthey haven't theyre, not R, buying an overinplated title? Yes, yes, GreatPoint, um R, guys, I think we're just about up on time here want to say thank you once again to toScott Richard and Sam. If you are in sales, you and you are not a member ofrevenue, collective and you want to be go to revenue, collectives website andfill out the application. If you are in sales or not in sales, and have neverread addicted to the process, you need to go on Amazon right now. It's thebest value. I think what is like ten Bucks Scot a bit ten bucks yeah, it'sIT'S MY! It is my favorite salesbook, particularly for people just gettinginto the career. I actually bought a copy of that for every salesperson I'veever hired in my last roll. Ever since I read it highly recommend it check outsurfing sales whenever quorantine's over I'm sure those guys are going tobe getting back out to Costa Rica or somewhere cool. What else I recentlygot to to sit in on a free training that Richard's been doing for theHarris Consulting Group, and I got to tell you I was blowing away. I meanI've been in sales, I've trained hundreds of sales, people hiredhundreds of sales people. I learned a lot hen. I immediately startedrecommending its other people. I think Richard's doing that for free againRichard. When is that? HOW CAN PEOPLE G Sign Up June, twenty third and twenty fourththis month? So yes, we'll be doing it, and you can find her on my website orhit me up on Lington I'll. Send you a link or find it here, ro quick, ansiderit in the chat, Awon, O por Os, O thanks. Everyone. If you enjoyed today,plea, share the recording with people, spread it around. Well, we'll besharing it Sam, I believe, through through emailor. They just use the samelink right and link. The same link will work in ten minutes. You can watch therecording and well, you know peopll send out a thank you email, but thesame linworps awesome, and so, if you guys are not already following all ofus on Lincon we're all putting out green content all the time a bunch ofus are ontwitter instogram all that sort of stuff so follow along stay intouch with us, and I hope that you enjoyed tonight R eratingthankseveryone. Everybody hope you enjoyed that conversation at was. That was agreat one and a long one. With myself, Richard Harr, Scotle and Colin CADMIS.We've got a lot of bonus. Episodes coming up for you at revenue collectedpodcast because we've creating so much content and ye you're going to behearing someone. That's we've got a lot of great stuff. Coming up. We've got anawkward conversation. The convers UNHONEST dialogue about race incorporate America that we had with myself brand and Myers do Vante LizJackson, a Rober, Daniel Wi at the town hall that I presented and we've got alot of the sessons from a most recent virtual off site and Um we're excitedabout it. So if you want to reach me, can you can email me Samor,ronecelectiv com? You can also find me on Linon Lingcoln got confor last Eword,inforce last name of Jacob's. Of course, if Youre reonflected member, you canfind a sumslack wo'll talk to you next time than.

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