If anything, RSU compensation is worse than options because of the tax implications. With options you have the option of paying the tax before the appreciation of the equity. With RSUs, you pay at liquidity.
As a W2 software developer, I've held options at three companies and RSUs at two. I've netted around $30K from RSUs, and netted a loss of $20K from options. Only once did my options "liquify," when a startup I had worked at was acquired. The proceeds were distributed entirely to preferred shareholders and employees were left with nothing, several of us having spent thousands to exercise.
I made my bed and slept in it, so I have no axe to grind, but going forward I will never accept options over any other form of compensation, given a choice.
Thanks for your contribution to this discussion, it's helpful to have actual numbers.
There was a mixed metaphor that popped out to me in your comment (and I hope pointing it out doesn't break HN guidelines around tangential annoyances):
> I made my bed and slept in it, so I have no axe to grind
It reminded me of something George Orwell wrote in 'Politics and the English Language':
> A newly invented metaphor assists thought by evoking a visual image, while on the other hand a metaphor which is technically ‘dead’ (e. g. iron resolution) has in effect reverted to being an ordinary word and can generally be used without loss of vividness. But in between these two classes there is a huge dump of worn-out metaphors which have lost all evocative power and are merely used because they save people the trouble of inventing phrases for themselves. Examples are: Ring the changes on, take up the cudgels for, toe the line, ride roughshod over, stand shoulder to shoulder with, play into the hands of, no axe to grind, grist to the mill, fishing in troubled waters, on the order of the day, Achilles’ heel, swan song, hotbed. Many of these are used without knowledge of their meaning (what is a ‘rift’, for instance?), and incompatible metaphors are frequently mixed, a sure sign that the writer is not interested in what he is saying...
> By using stale metaphors, similes and idioms, you save much mental effort, at the cost of leaving your meaning vague, not only for your reader but for yourself. This is the significance of mixed metaphors. The sole aim of a metaphor is to call up a visual image. When these images clash – as in The Fascist octopus has sung its swan song, the jackboot is thrown into the melting pot – it can be taken as certain that the writer is not seeing a mental image of the objects he is naming
I've had options at 2 companies and RSUs at 1, and I have a similar story (bigger earnings on RSUs, bigger "losses" on options (I technically still hold exercised stock, although I don't anticipate ever being able to sell it)).
A huge part of this is that a company won't issue RSUs unless it's already reasonably successful and the shares are liquid or nearly liquid, whereas options are issued by early stage companies that are mostly likely going to fail and are far from a liquidity event.
As an employee, options just aren't good compensation since they have too high risk and you can't work at enough companies to form a portfolio. The VCs that invest in these companies expect to win on less than 1/20th of the companies with preferred shares, so it's quite likely you will never make money on options in your entire career.
People talk about taxes a lot, but the most important factor is whether you are going to make money at all. There is no point in optimizing taxes on your gains if you are making losses instead.
You are permitted by the tax code to make an 83(b) election on RSUs.
Very few non-founders do it, because it means you could end up paying tax (with the election) on shares that will never vest for you, but you do have the option to do so.
If issued ISOs that are QSBS qualified, no federal tax on the first $10M or 10x your cost basis, whichever is more. 83(b) election is sometimes an option too. RSUs are, as you mentioned, mostly cash comp due to valuation and tax treatment.
(not tax advice, we're just talking lottery ticket mechanics)
IIRC, you only get QSBS if you (a) exercise to purchase actual shares while the company is QSBS eligible; and (b) hold the resulting stock for 5 full years.
Correct. You’ll also want a QSBS attestation letter from the finance team or whomever handles equity admin if the IRS comes knocking. Save it with your options grant documentation.
typically, the liquidity event is the trigger that takes longer, not the vesting schedule. with options, you can exercise before the liquidity event, and pay taxes on a much smaller income (or none at all in the case of QSBS as a sibling comment noted)
I made my bed and slept in it, so I have no axe to grind, but going forward I will never accept options over any other form of compensation, given a choice.