SWB's path to financial independence

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SavingWithBabies
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Re: SWB's path to financial independence

Post by SavingWithBabies »

Yeah, I'm not sure how big the space is so I'm trying to not be too specific but in this case, they are working on apps that run on your phone and your data is encrypted. It's only decrypted locally on the device. So that means the company can't collect the data to sell or try to leverage it for advertising or some other purpose. There is still some trust involved with a closed source app of course but...

SavingWithBabies
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Re: SWB's path to financial independence

Post by SavingWithBabies »

IRS website finally showing something for my stimulus payment -- it's being mailed on the 22nd. I did use my bank account to pay my 2019 taxes but I guess they can't direct deposit for whatever reason (and the website doesn't let me enter any details).

SavingWithBabies
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Re: SWB's path to financial independence

Post by SavingWithBabies »

I have a problem and I've had it for a while now and it is that I don't believe in the equity model of startups. How it works is the founder keeps a big chunk (fair), the investors come in and buy a big chunk (fair to unfair -- it varies) at preferred terms (unfair, basically gives them better terms than employees) and early stage employees get somewhere between maybe 1-0.5%. So basically, if I come in as an employee, I get the option to own some very very small percentage of the company. But the typical terms are 4 years with a 1 year cliff -- so if we part ways for any reason before a year, I get nothing. At the 1 year mark, I get 1/4 of that equity. Then for the remaining 3 years, I get 1/36 (36 months) of the remaining 3/4 of the equity. Sometimes there are further equity grants on top of it that also happen -- say at the 1 year mark you negotiate another chunk of equity.

Then the company raises money and each round they create more stock and dilute everyone. Typically, the founders get a big chunk of that to keep their percentage ownership up and they sell a big chunk to investors again. Rinse and repeat and you can see how the usual result is the early stage people keep getting diluted unless they are vigilant and keep on negotiating for more equity.

And even then, what is 0.50% or 0.75% of an early stage startup? The investors expect 1 of 10 at most to take off. So you basically have a very poor chance that the company will be worth enough money that your small fractional ownership is actually worth anything.

So what's the problem?

It's that the whole startup scene always sells this equity share as "aligning the employees" in the theory that we're all working for the greater good of making ourselves rich by increasing the value of the company. But this is not what really happens in my experience. Because startups are a good way to advance fast, it attracts a variety of types that are looking to game the system. So a lot of employees are much more focused on increasing their brand value than on increasing the value of the company. So they make choices based on what is best for them not what is best for the company. And even if you're not focused on your "brand", for those who have been around the block a couple of times, it's very hard to get motivated by that tiny fractional ownership.

For me, I'm internally motivated by learning and doing a good job. And that has gotten me a long way in my career. But now due to ERE/FI focus, I find myself not having to worry as much about that monthly payment and when you step back, that tiny ownership is a joke. So the retort is now you need to figure out how to get more ownership and the way to do that is to start your own things. And I see that. I really do. However, I think venture capital doesn't work well at all. That the startup grind mostly takes advantage of more junior people by selling them on they value of equity and trying to get as much work out of them as possible. Sure, it's gotten better but I think the startup industry still relies on this.

But I got distracted. The problem is this small fractional ownership is just... Not doing it for me anymore. It hasn't for a while. So I focus on just the salary and benefits but still play the game of negotiating the options because it's expected.

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Re: SWB's path to financial independence

Post by jacob »

SavingWithBabies wrote:
Fri May 22, 2020 12:24 pm
That the startup grind mostly takes advantage of more junior people by selling them on they value of equity and trying to get as much work out of them as possible. Sure, it's gotten better but I think the startup industry still relies on this.
This holds for any industry that requires grinding (literally and figuratively). Up or out industries. Academia that dangles a professorship for the 1 in 10 grad students who make it. Law firms make people work to maybe eventually become a partner. Any kind of asymmetric reward scheme, really, the newest being competitions that only pay the winner. It works as long as everybody believes that they're the exception who makes it big.

SavingWithBabies
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Re: SWB's path to financial independence

Post by SavingWithBabies »

One way I've tried to solve this startup equity problem (described in prior post), is by contracting instead of being an employee. I got into that almost a year ago and it's been great. Health insurance is a hassle but it's doable. We self-insured for dental. This was all going very well but then COVID hit and people pulled back so there are less opportunities. When things were going well, I worked as many hours as I could and this paid off well when the contracts stopped or slowed.

But then I get pinged by recruiters for full time employment jobs. I'm not FIRE/ERE/FI yet. After taking off some time last year, it was nice to see the net worth increase with the contracting. So it is tempting to ride out COVID with income. So I pursued those opportunities.

But (and I'm writing this for future me, sorry to complain) interviewing sucks as does negotiating. Particularly if you're negotiating in a 3 way thing with you, the recruiter and the potential employer. For whatever reason, there is an emotional aspect to it for me that is not enjoyable. Due to how we tie health insurance/benefits to employment here in the USA, it also brings up some lock-in issues as once you switch to the employers health insurance, it's kind of a hassle to switch back to another option. Certainly not hard to do so it's more of a mental thing in some ways (but you also have to give up fairly good benefits at a subsidized rate for worse benefits or no benefits -- like dental -- at a higher rate unless you're income is kept low).

I guess interviewing and contemplating full time employment just sucks up too much energy and is too annoying. Contracting is easier to roll on and off. I get paid for the hours I actually work which is great.

So I should continue contracting. To do that, I need to grow my brand and talk up my achievements as recruiters and potential employers are not getting the full picture of what I can do and what I'm good at (I think I would be worth more or get more opportunities if they did although such branding/promotion efforts can take up a lot of time and be hard to get a good return on).

Or just wait until things go back to normal for the startups that are not in COVID-impacted areas and see if the contracts pick back up. In the meantime, either make no money or suck it up and be an employee.

At the root of it, I'm kicking myself because now is really the time to focus on early stage ideas and I should be doing that. Yes, it would be easier to do that when I'm FIRE/ERE/FI however I think you also loose some drive and/or your motivations change. Maybe that is okay though? Maybe I shouldn't be hard on myself?

SavingWithBabies
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Re: SWB's path to financial independence

Post by SavingWithBabies »

@jacob I was thinking about the parallels while writing that. It makes sense it's about selling a dream. Maybe a more possible dream than many other dreams (like winning the lottery) but still a dream. I suspect it's the same in other industries but the core part of selling that dream is focusing on the idea that hard work will reap the rewards. But from what I've seen so far in my own work, that can happen but more typically careful politicking and/or pre-existing connections (be it personal or to prestige-based things like ivy league schools, etc) are more important. It is starting to make sense why that is though -- the hard work crowd believes in the dream and the path but grows disillusioned when they realize/discover it's not what they think it is (but by then, for many, they did the grind for years). Those selling the dream need to be comfortable knowing it's a dream. So by having prestige, they can justify it based on being innately better than those they are selling the dream to. Maybe? I want to say those that believe in the dream are too gullible and the dream sellers need to be more conniving/less gullible/more something.

SavingWithBabies
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Re: SWB's path to financial independence

Post by SavingWithBabies »

Of course, if I turn it all around, the goal is not to hire me it's to hire someone. And if they can offer enough to hire someone, then deal done. It's on me to hold out for more if I think I'm worth it. And if they don't give it to me because others will take less that's just the nature of employment. If you want more, you have to start your own thing or do your own thing or go in with a preexisting relationship and/or have some prestige (ie make your own prestige if you missed out on earlier opportunities).

From this, I can take that negotiating is a very important part of becoming an employee and I should no longer allow the compensation aspect of the negotiation to happen between the recruiter, me and the potential company because it's too many people involved and the recruiter (like a real estate agent) does not necessarily have my own best interests at heart.

The annoying bit here though is it really assumes we're all interchangeable cogs. And maybe that is true to some degree -- the whole purpose of job titles perhaps. But the one thing I've definitely learned in startups that I do think is true is that it's all about the execution. And the right person/team makes a difference. So on the one hand employers want cogs but on the other hand they want specific cogs. But they want those cogs to take what they would give to any other cog. They kind of want it both ways?

Of course doing your own thing has risks and odds are it's not going to work out. So it's not for everyone.

So maybe that fractional ownership is fair. I still don't like the deal for myself personally. And I don't like what I perceive as the lie/dream aspect of it. And I'm getting closer and closer over time to the point where I can take more risk. But the issue is do I wait to take the risk when the risk is less risky because I'm FI? Or do I need some of the fear that comes with taking the risk sooner while not yet FI?

SavingWithBabies
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Re: SWB's path to financial independence

Post by SavingWithBabies »

Still working out about 6 out of 7 days per week with my wife. It feels really good and I'm already noticing better balance and my core muscles getting stronger. We do a mix of different exercise programs and some have a lot of jumping and I was able to annoy the nerve in the center of my left foot. I swore my sock was folded under my foot when I went for our evening walks but I realized it was internal. So I cleaned up a pair of tennis shoes and made those indoor only for exercise (we don't wear shoes inside normally). After about a week or two with shoes, foot is almost back to normal and if there is a ton of jumping, I switch to crunches (or sometimes pushups -- will likely do more as my arms get stronger). I'm listening more to my body this time around and I think it's good. Not wanting to slack but also not wanting to get hurt -- goal is to stay in the "race"!

Weight-wise, hovering around 235 pounds but I expect some fat pounds are going to muscle. I've been back on the keto diet for a while (6-8 weeks) with some cheat days. I think this time around I want to figure out how to eat some carbs some of the time so I can increase things like beans eventually. And splurge by having non-keto tortillas sometimes. We have tried making them out of almond flour and almond + coconut flour and they are not bad but kind of pricey and it's hard to beat real tortillas. Flour tortillas were also made but I didn't try them yet but it's amazing how the regular flour is so elastic. The keto ones I roll out between two halves of a gallon zip lock bag with the edges cut off so I can separate the two plastic sides and then peel the tortilla off. These are not pliable/stretchy at all but they are foldable after cooking if careful not to overcook.

SavingWithBabies
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Re: SWB's path to financial independence

Post by SavingWithBabies »

Progress: 63% ($756,000/$1,200,000) although probably owe around $12-20k in 1099 taxes (figuring out this month)
Weight: 234 pounds

Still mostly in cash on my investment accounts (didn't do anything with them after selling). Missed some gains lately but I'm fine with sitting on the sidelines for a bit even if it ends up costing me a bit in the long run. Still waiting on the full time employment offer to land but will most likely take it if it does. This month, need to get the sailboat repaired and back in the water. Then do a some maintenance on the camper.

SavingWithBabies
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Re: SWB's path to financial independence

Post by SavingWithBabies »

Contract from the potential full time employer has a "no outside activities" clause which basically means they want me to ask permission before I work on anything outside of the company. That's a no go. Looks like I'm going to walk on it as this on top of other warning signs point to a poor fit/alignment.

I was thinking about this in the context of careerism and why this kind of negotiation is so stressful for me. I'm trying to figure out if I have given up the idea of a career and it is just stressful because of other reasons or if I'm deluding myself and I'm still career-focused at my core and that is why it is so stressful. I mulled that over and I think it is not the later because I'm willing to walk. I've had fellow (younger) employees tell me after conversations that they didn't realize I was so cynical and perhaps I am quite cynical. But I can't understand not being cynical about businesses and employment. Perhaps it's a very different point of view partly influenced by ERE/FI and partly by core ideals I hold (that aren't necessarily related to FI/ERE but certainly push me in that direction).

Once again I'm thankful for having started down this path and continuing on it because it lets me be true to myself.

SavingWithBabies
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Re: SWB's path to financial independence

Post by SavingWithBabies »

I ended up walking away from the job offer due to the clause mentioned in last post. I think it was a good call as the whole issue pointed to underlying concerns with a solo non-technical founder not necessarily trusting his team (which may or may not be a good thing or have basis in reality but ultimately is not something I really wanted to walk into).

Supposedly, the contracting company is seeing work/opportunities pick back up. I think my ideal is going back to that.

Chase contacted me about PPP loan and I'm back to waffling if I should just fill out the paperwork. Friend of mine that also contracts had his 3rd attempt go through with another bank. Hrm...

Lastly, I'm getting recruiter contacts for a FAANG (Facebook/Apple/Amazon/Netflix/Google) position that is finally a remote one. I don't know that I want to work for them. Well, I don't really. However I am pragmatic and want to get to FI (I'm assuming the compensation will be very good) and being challenged/pushed in new ways might be good. Plus there is cachet to having a FANG on your resume/past experience so it wouldn't be a bad thing in that regard.

SavingWithBabies
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Re: SWB's path to financial independence

Post by SavingWithBabies »

Progress: 63.5% ($762,500/$1,200,000) but bunch of 1099 taxes need to be paid still (have to get that done by the 15th so time to learn quarterly taxes
Weight: 239

Switched up the diet to be less meat intensive. Eating more beans/tofu/etc. So far so good. Weight up 5 pounds but I did just pig out on some frozen deserts and it's late in the evening (usually weigh myself mid day). So probably just noise but I should start paying more attention to it in the short term to see if diet change impacts it.

Haven't followed up on any of the recruiter contacts yet (have 3 at the moment) but probably should do so. However, we're going camping for a couple of weeks so probably will ping to talk to them later. I should really mull over if I want to interview with a FAANG as it would require a lot of interview prep (I did so once before mostly on a lark with practically no prep and it was interesting but definitely see how prep is required).

Fixed one pair of shorts on the repaired sewing machine (fixit thread). I was impressed just how strong I was able to make the area that failed with heavy duty stitches. I bought two pairs of inexpensive shorts with no flex in the crotch and they tend to ride down, then I squat and they rip in the crotch. In the meantime, I broke down and bought two pairs of shorts on clearance that do have flex in the crotch and are a little less casual (not intentional, just what the deal was on).

We've been watching the local real estate market but so far still disappointing. Our lease comes up soon and it doesn't go month to month unfortunately so we'll have to decide if we renew another year, move to another rental or buy. For some reason, I have a hard time plunking down the money to buy right now. Maybe it's not being employed nor having any contracts going (technically have one but it's no hours right now). But I have the cash in post-tax investment accounts. I'd have to sell some holdings which would incur taxes. Hrm... Everything just feels so overpriced though (investments, real estate, etc).

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