Why do billions of dollars of stock trade hands based on napkin math and vibes? Billy Gallagher, CEO of Prospect and former Rippling employee, joins Patrick McKenzie (patio11) to walk through the information asymmetry that costs less-sophisticated employees massive amounts of money. From understanding when to early exercise options to navigating 83B elections and tender offers, they discuss the critical decisions that have a shot clock ticking the day you sign your offer letter.
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Full transcript available here: www.complexsystemspodcast.com/understanding-equity-at-tech-companies/
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Links:
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Timestamps:
(00:00) Intro
(00:44) Billy's professional journey
(01:07) Equity management challenges
(02:29) The importance of equity compensation
(04:53) Equity grant structures in startups
(06:09) Understanding vesting terms
(07:09) The value of equity over time
(08:48) The myth of options as lottery tickets
(11:23) Career tailwinds from startup experience
(14:25) Breaking into the tech industry
(15:16) The role of equity in compensation
(17:49) Employee equity plans and dilution
(19:59) Sponsor: Framer
(21:06) Stock options vs. RSUs
(21:55) The decision to exercise options
(27:11) Tax implications of exercising options
(33:03) The role of HR in equity management
(36:14) Bootleg spreadsheets and vibes-based investing
(38:09) Navigating tax complexities in different scenarios
(41:31) The importance of extended exercise windows
(44:18) Challenges with tax residency and remote work
(49:43) The role of accountants in managing equity
(53:41) Understanding the 83(b) election and QSBS
(01:01:03) Tender offers and secondary sales
(01:08:38) Strategies for exercising and selling options
(01:12:28) Navigating financial decisions in startups
(01:16:59) Wrap
