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22 Jul 14:47

The surprisingly complex math behind startup equity and taxes

by Kristina Chodorow

Taxes for employees at startups are weird and can vastly change the amount you make.  To illustrate why, let’s take a simple example.

Suppose we have a group of early employees at a startup, we’ll call them the Unicorn Inc. Mafia.  They’re all fresh out of college and managed to get through it without any debt, so they each have a net worth of $0. They all join the same day and are given the same equity package: $10k in stock options with a strike prices of $1 (so, 10,000 common stock). We’ll take four members of the mafia, each with a different strategy.

Name Description Net worth
Alice Exercise very early, before price changes $0
Bob Exercise somewhat early $0
Carol Wait until liquid to exercise, wait until long-term capital gains apply $0
David Wait until liquid to exercise, sell immediately $0

From here on out, keep in mind that this could be the end of the story. The company could always fold, leaving everyone with zero or, if they’ve exercised, a negative net worth.

However, suppose the company is doing well and lets the employees know that they’re going out to raise a $40M round.  Alice exercises her options before the round happens.  This means that she has to pay for them, so she’s in the hole $10k.  Now if anything goes wrong, she’s out $10,000.

Once the company raises the round, the stock is worth $5/share.  Unfortunately, Bob’s significant other got a job across the country, so he has to find a new job. He feels like the company is going places, though, so he wants to collect his equity before he goes. He exercises his options. Because he is buying his stock for $1 and it is now worth $5, the IRS says that he just “made” $4. So he has to pay normal income taxes on that $40,000. To keep things simple, let’s say everyone’s tax rate is 25%. So now he’s paid $10k for the stock and $10k for taxes:

Name Description Exercise Income taxes Net worth
Alice Exercise very early, before price changes ($10,000) 0 ($10,000)
Bob Exercise somewhat early ($10,000) 25%*$40,000 -> ($10,000) ($20,000)
Carol Wait until liquid to exercise, wait until long-term capital gains apply $0 $0 $0
David Wait until liquid to exercise, sell immediately $0 $0 $0

So Bob’s out $20k if the company goes under (ouch!).

However, luckily for Alice & Bob, over the next several years, the company continues to grow and raise money. Finally, the company goes public for $100/share. Wow! Once the lockup period expires, everyone eventually sells (somehow it’s still exactly at the IPO price) and makes $1M. Our final shakeout looks like:

Name Description Exercise Income taxes Short-term capital gains Long-term capital gains Sell price Net worth
Alice Exercise very early, before price changes ($10,000) 0 0 0 $1,000,000 $990,000
Bob Exercise somewhat early ($10,000) 25%*$40,000 -> ($10,000) 0 20%*$990,000 -> ($198,000) $1,000,000 $782,000
Carol Wait until liquid to exercise, wait until long-term capital gains apply ($10,000) 25%*$990,000 -> ($247,500) 0 20%*$990,000 -> ($198,000) $1,000,000 $544,500
David Wait until liquid to exercise, sell immediately ($10,000) 25%*$990,000 -> ($247,500) 25%*$990,000 -> ($247,500) 0 $1,000,000 $495,000

There are, uh, a couple of different outcomes. Alice obviously has an accountant in the family: she avoided paying any taxes at all! How is this possible? First, she exercised his options before the price changed, so she didn’t have to pay any taxes on exercise. Then she held them long enough to qualify for long-term capital gains. However, she didn’t even have to pay those! It turns out that, if you own stock in a startup before it has $50M in assets, long-term capital gains up to $10M are tax-free (Google “QSBS” for details). However, Alice is also taking on more risk for longer than anyone else: most startups don’t have outcomes like this and she’d have just been out $10,000 if they had gone out of business.

Obviously there are a ton of simplifying assumptions (stock prices never change! Everyone has the same tax rate, which happens to be one that make numbers easy!). However, I wish someone had told me about all this ~10 years ago, so putting this out there in the hopes that it’ll help someone else.

02 Feb 02:45

Scientists produce electricity by evaporating water from a chunk of soot

by Chris Lee

Enlarge / The authors' computer modeling didn't look like this. They're probably disappointed by that fact. (credit: Greg Stewart/SLAC)

In today's odd science news, researchers have shown that they can produce electricity by evaporating water from a chunk of soot. The research falls into the category of systems that extract electricity from waste energy around us—kind of like generating electricity from swaying buildings or powering your watch from your own movements. But this was a result that I did not expect.

The experiments that make up the new work are so simple that pretty much anyone can do them themselves. Take a hydrocarbon of choice and set it on fire so that it burns with a yellow flame. Then hold a bit of glass in the flame so that it gets covered in soot. Afterward, expose the carbon to an atmospheric plasma. Tape some electrodes to the carbon and then lower it into some water.

The porous carbon drags water into itself through capillary forces, and when the water later evaporates from the carbon surface, electricity is generated. Not much, admittedly, at 53nW per square centimeter, but still enough to raise eyebrows.

Read 12 remaining paragraphs | Comments

22 Oct 18:34

Why Do Websites Publish AMP Pages?

by John Gruber

Can someone explain to me why a website would publish AMP versions of their articles? They do load fast, which is a terrific user experience, but as far as I can see, sites that publish AMP pages are effectively ceding control over their content to Google.

Here’s an example I ran into today. I wanted to read Ron Amadeo’s review of the Google Pixel at Ars Technica. From my (new) Google Pixel, I searched for “ars pixel preview”. The first search result was the AMP version of his review. Same thing on my iPhone.

If I tap the result, I get the AMP version of the Ars article, served from Google’s domain. So far, I get it. But the kicker is that I don’t see any way to get from the AMP page Google is serving to the canonical version of the article on Ars’s website. Even if I share the article, what gets shared is the google.com URL (https://www.google.com/amp/arstechnica.com/gadgets/2016/10/google-pixel-review-bland-pricey-but-still-best-android-phone/). On desktop browsers, these URLs do get redirected to Ars’s website. But on mobile they don’t. Share from one mobile device to another and nobody ever leaves google.com. Why would any website turn their entire mobile audience — a majority share of their total audience, for many sites today — over to Google?

It makes no sense to me.

Update: “Request Desktop Site” in both Mobile Safari and Chrome will switch you to the actual website. Good to know, I still say AMP traps mobile users onto google.com.

07 May 14:26

Today's archidose #900

by John Hill
Here are some photos of the Waterliniemuseum (2015) in Bunnik, Netherlands, by Studio Anne Holtrop with Rapp+Rapp, West 8 and Jonathan Penne Architecten. (Photographs: Klaas Vermaas)





To contribute your Flickr images for consideration, just:
:: Join and add photos to the archidose pool
To contribute your Instagram images for consideration, just:
:: Tag your photos #archidose
28 Sep 22:21

If elected president, Jeb Bush will get rid of net neutrality rules

by Jon Brodkin

Jeb Bush (credit: Jeb 2016)

Republican presidential candidate Jeb Bush today pledged to "repeal or reform the most onerous Obama rules and regulations," and net neutrality would be one of the first things on his chopping block.

"The Federal Communications Commission’s Net Neutrality rule classifies all Internet Service Providers (ISPs) as 'public utilities,' subjecting them to antiquated 'common carrier' regulation," Bush's team wrote in a post titled "The Regulatory Crisis in Washington."

Bush wants to make sure that Internet service providers like Comcast, Verizon, and AT&T are allowed to charge online content providers for access to their networks and Internet subscribers. "Rather than enhancing consumer welfare, these rules prohibit one group of companies (ISPs) from charging another group of companies (content companies) the full cost for using their services," Bush's proposal wrote.

Read 7 remaining paragraphs | Comments

24 Mar 20:33

How The Copyright Industry Wants To Undermine Anonymity & Free Speech: 'True Origin' Bills

by Mike Masnick
As we've noted many times in the past, the entertainment industry likes to take a multi-pronged approach to its quixotic efforts to "stop piracy" (which could be much better dealt with by simply giving the public more of what they want). Working on federal copyright law to continually expand it is one main strategy, but there are a lot of others as well, including pressuring private companies to voluntarily censor content, getting international trade agreements to force laws to change and... getting random state laws to force through big changes quietly. This last strategy has come into focus lately, especially with the rise of so-called "true origin" bills, that are almost certainly unconstitutional, but are rapidly popping up in a variety of states. This is actually a replay of an old strategy. I remember similar "true origin" efforts being pushed about a decade ago, and I'd thought they'd completely died out... but they're back.

The way they work is pretty simple: they outlaw anonymity on the internet if your website distributes any kind of audiovisual work. The point of this is twofold: one, for those who "register" and reveal their name and address, it makes it easier for the RIAAs and MPAAs of the world to sue a site for copyright infringement. And, for those who don't reveal their names, the RIAA and MPAA can ask the states to prosecute the site owners for failing to reveal their names.

A few weeks ago, we wrote about Florida's proposed law, which would require any website that hosts audio or video to reveal their name and address. This could have disastrous consequences for whistleblowers or anonymous critics. In the US, the Supreme Court has long recognized the importance of protecting anonymity as a part of the First Amendment, but this bill does away with that completely, just because the movie and music industries think it's necessary to stop piracy (even though it won't do that). Unfortunately, it appears that despite widespread criticism, the Florida bill is expected to move forward this week. If you happen to live in Florida, the EFF has set up a tool to help you alert your elected representatives to why such a bill is a terrible and unconstitutional idea.

But... it's not just Florida. One year ago, Tennessee enacted a similar bill, called the "True Origin of Goods Act" which is nearly identical to the Florida bill. And just last month, here in California, Assemblymember Ian Calderon (who has positioned himself as friendly to technology) introduced a similar bill. The California bill is at least somewhat more limited than the others in that it appears to focus mostly on physical copies that are offered for "sale" or "rental" -- but it at least raises questions about anonymity rights, and opens the door to future adjustments to "match" this law to internet displays of content.

The efforts here are all basically the same: quietly use state laws to undermine anonymity in an effort to help the RIAAs and MPAAs of the world try to track down the owners of websites they don't like. Whether or not you agree with that idea, the fact that to accomplish that (somewhat pointless) goal would undermine basic First Amendment concepts like anonymity and the ability to speak freely, doesn't seem to be of much concern to the supporters of these bills.

It's the same old story we've seen before with SOPA and other bills: the copyright industry doesn't seem to care in the slightest about collateral damage from its quixotic effort to stop piracy, rather than to provide the public with better offerings. And, of course, copyright is supposed to be an issue for federal law, not state law, and these efforts are ways that the copyright industry is trying to backdoor in systems to undermine free speech in yet another weak attempt to accomplish a singular and pointless goal.

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25 Aug 03:36

“A Spacecraft for All”: The Journey of the ISEE-3.

25 Jan 01:37

How Silicon Valley’s Most Celebrated CEOs Conspired to Drive Down Engineer Salaries

by John Gruber
Gautam.dey77

Great article

Mark Ames, reporting for Pando Daily:

In early 2005, as demand for Silicon Valley engineers began booming, Apple’s Steve Jobs sealed a secret and illegal pact with Google’s Eric Schmidt to artificially push their workers wages lower by agreeing not to recruit each other’s employees, sharing wage scale information, and punishing violators. On February 27, 2005, Bill Campbell, a member of Apple’s board of directors and senior advisor to Google, emailed Jobs to confirm that Eric Schmidt “got directly involved and firmly stopped all efforts to recruit anyone from Apple.”

Later that year, Schmidt instructed his Sr VP for Business Operation Shona Brown to keep the pact a secret and only share information “verbally, since I don’t want to create a paper trail over which we can be sued later?”

Amazing story.

23 May 00:39

Insight

The great thing is, the sentence is really just a reminder to the listener to worry about whatever aspects of the technology they're already feeling alarmist about, which in their mind gives you credit for addressing their biggest anxieties.
17 May 13:59

perl live coding

by vividsnow
Gautam.dey77

This is awesome

Hello, Everyone!

Since I think that live coding gives more flexibility and visual feedback than conventional REPL, here is approach to simple Perl live coding environment using Emacs, AnyEvent, PadWalker, Package::Stash and eval.

Live coding basically consists in performing evaluation of code when it comes from the text editor to a running script, but I also wanted persistent lexicals between eval's. One of ways is to predefine lexicals (or make simple context hash) and/or use $::somevar / $'somevar syntax to create/modify main package vars and/or define global lexicals with use vars qw($one @two %three). Live environment should have asynchronous capability, and AnyEvent was the first option that came to my mind.

Hence, I created perl script which represents running interpreter with optional (but default) PadWalker/Package::Stash processing in order to move my's declarations to global context. And some elisp stuff to communicate with running interpreter from emacs.

That's it - load perl-live.el in emacs, create scratch cperl-mode buffer, start interpreter (C-c C-l), open "*perl live*" buffer in other window to check output and have fun - evaluate line/region (C-c C-c) or something between braces (C-M-x). + *perl live* buffer behaves like REPL (in comint-mode)

Here is short screencast (frame dropped) of a live session with random stuff featuring PDL::Graphics::Simple, OpenGL w/ shaders, sub-processes, live http server modification (AnyEvent::HTTPD, Twiggy), interconnection with SuperCollider via OSC protocol using Net::LibLO and running Gtk2 / Prima / Tk / Wx / SDL - all at the same time, just to test whether it was possible )

.

p.s. i hope someone will implement similar front-end in other perl-friendly text editors in order to spread perl live coding

github