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I dunno about anyone else, but I pretty much ignore equity when considering a new position. Worrying about equity as an employee is like worrying about what kin

I dunno about anyone else, but I pretty much ignore equity when considering a new position. Worrying about equity as an employee is like worrying about what kind of Christmas gift you'll get from someone you know. It might be something awesome, it might be something dumb, but more than likely, it's a pat on the back and a "Happy Holidays" -- nothing you can take to the bank. I also think it doesn't really matter how much your valuation is, because the options are effectively worthless until there is a qualifying event. If you're already public, then you might have a case for it, but for most startups, it's as good as monopoly money. Salary + benefits + culture is what gets me in the door every day. Equity is just a bonus. I once interviewed with a YC company and got an offer that was significantly under my current salary. When I tried to negotiate, the founder insulted me and basically told me I was an idiot for ignoring the equity component which was "worth far more than the salary." Pretty glad I didn't take that position, but it still bothers me how misguided he was about the whole situation. I can't pay rent with equity. My landlord won't accept "I have stock options in some startup you've never heard of" as payment. There are a lot of posts about equity around here, and I just think it's overrated in general. Kinda wish we'd talk more about salary and other benefits and a little less about what basically amounts to a crapshoot. For instance, my hearing aids are very often not covered by health insurance... now that would be a nice perk for someone like me.

s73v3r 11y ago
Rich people are allowed to borrow against their equity options. Why can't we?
- woah 11y ago
  They have better judgement.
- deleted 11y ago
  [deleted]
- JonFish85 11y ago
  I'm sure you can, at a discount. You probably won't find many/any banks willing to do that, but I imagine you can find private parties who are willing to give you $0.05 on the dollar for some options. I imagine the reason that "rich people" can borrow against their options is because they aren't common share options, or they have some sort of control over the destiny of those shares. For common shares there are several ways for them to become worthless, some of which people on this thread have mentioned (dilution & preference are the two big ones). If you're holding on-paper $100k worth of stock options, you probably couldn't get $10k for them except in very rare cases. If you were an early member of Uber, you can probably find institutions that want to buy shares, so maybe you can get money from them. But remember, that on-paper $100k has tax implications along with it when you buy them/sell them, so don't forget to set aside enough money to pay that.
sskates 11y ago
Equity has no intrinsic value and I'm glad you recognize you can't pay rent with it. Founders who try to claim otherwise are being deceptive and I wouldn't work for them either. Much worse if you get insulted and called an idiot for trying to negotiate. However, equity is a significant form of compensation, not just at startups, but at large companies as well. You're missing out if you don't take some time to understand it in early stage startups.
- Jemaclus 11y ago
  I understand it. Obviously, I want more equity. But it doesn't act as a replacement for salary, like some people seem to think. It's a bonus, like free snacks and ping pong tables. It might pay out, but it probably won't, and you shouldn't base your life around it.
  - akkartik 11y ago
    This seems a clearer statement of your position. Absolutely, don't base 100% of your life on a 5% shot at an exit. That is indeed a common failure mode. But your reaction to this observation seems too extreme. It is possible to work these things out probabilistically. Treat your career as a portfolio, spend 80% say of it in relatively safe places, spend the remaining 20% in multiple places, don't stay too long if you stop believing in a place. Do all that, and the 5% probabilities add up. 5% here, 5% there can add up to real money. It seems sub-optimal to assume that probabilistic money isn't money, it'll close you off to lots of opportunities for wealth.
    - kevinskii 11y ago
      I'm not disagreeing, but you can't just look at the odds of a successful exit when it comes to figuring out the probability that your equity will someday become valuable. There are several other factors that can effectively leave common employees' equity worthless, some of which the article describes. Rarely do companies seem to be willing to provide the information needed to weigh the risks.
akkartik 11y ago
It makes sense to be conservative in valuing equity, but if you think it's never worth anything, you shouldn't be considering startups in your job search. (Your criticism still partially stands; it's common for founders to over-value the equity they offer employees. Way past the last funding round, for example. It's invariably a short-sighted decision. Used wisely, equity can be a great motivator.)
- limeyx 11y ago
  Equity paid for my house, gave me enough money to have a substantial retirement buffer and will pay for my kids to go through school. Yes, more often than not its been worth "nothing" (negative if you took a lower salary to get it), but when it's worth something, it's worth something...
- Jemaclus 11y ago
  I didn't say it's never worth anything. I said it's not worth anything until a qualifying event has occurred. It doesn't matter how much your equity is valued if I can't cash it out.
  - akkartik 11y ago
    Good luck getting equity in a 'startup' after a qualifying event like an IPO. Nothing wrong in wanting certainty. But certainty on the downside matches certainty on the upside. If you don't care about the upside then why would you join a startup?
    - dragonwriter 11y ago
      > If you don't care about the upside then why would you join a startup? For some people, money is what allows them to take a job they desire for other reasons (since, you know, you have to pay for necessities somehow), without financial considerations being the sole motivation for choosing one place of work over another.
      - akkartik 11y ago
aplusbi 11y ago
I agree with your general sentiment and I too pretty much ignore equity when considering a new position. However equity becomes very important upon leaving a company. I think extending the exercise window to 10 years is an excellent idea as it reduces the amount of gambling that a former employee needs to engage in.
- Jemaclus 11y ago
  No arguments here!
gesman 11y ago
Selling hot air (or stock options) is a big business. Of course RSU grant from publicly traded company is a sign of respect and appreciation from both sides.
rahimnathwani 11y ago
"because the options are effectively worthless until there is a qualifying event" That's like saying a lottery ticket is effectively worthless until after the draw. It's not true. The expected value (weighted average of all possible future outcomes) might be low. The chance of the long term value being non-zero might be 1% or less. But, that doesn't mean the equity has no value. Yes, people on both sides fail to do to the right calculations, or don't have access to the data or tools to do those calculations, but that just means the value is difficult to measure, not that the value doesn't exist at the time. If the equity part of your compensation is effectively worthless (to you) then I'll happily buy you a beer today, in exchange for rights to all future cash flows from those shares/options.

s73v3r 11y ago

Rich people are allowed to borrow against their equity options. Why can't we?

woah 11y ago
They have better judgement.
deleted 11y ago
[deleted]
JonFish85 11y ago
I'm sure you can, at a discount. You probably won't find many/any banks willing to do that, but I imagine you can find private parties who are willing to give you $0.05 on the dollar for some options. I imagine the reason that "rich people" can borrow against their options is because they aren't common share options, or they have some sort of control over the destiny of those shares. For common shares there are several ways for them to become worthless, some of which people on this thread have mentioned (dilution & preference are the two big ones). If you're holding on-paper $100k worth of stock options, you probably couldn't get $10k for them except in very rare cases. If you were an early member of Uber, you can probably find institutions that want to buy shares, so maybe you can get money from them. But remember, that on-paper $100k has tax implications along with it when you buy them/sell them, so don't forget to set aside enough money to pay that.

sskates 11y ago

Equity has no intrinsic value and I'm glad you recognize you can't pay rent with it. Founders who try to claim otherwise are being deceptive and I wouldn't work for them either. Much worse if you get insulted and called an idiot for trying to negotiate. However, equity is a significant form of compensation, not just at startups, but at large companies as well. You're missing out if you don't take some time to understand it in early stage startups.

Jemaclus 11y ago
I understand it. Obviously, I want more equity. But it doesn't act as a replacement for salary, like some people seem to think. It's a bonus, like free snacks and ping pong tables. It might pay out, but it probably won't, and you shouldn't base your life around it.
- akkartik 11y ago
  This seems a clearer statement of your position. Absolutely, don't base 100% of your life on a 5% shot at an exit. That is indeed a common failure mode. But your reaction to this observation seems too extreme. It is possible to work these things out probabilistically. Treat your career as a portfolio, spend 80% say of it in relatively safe places, spend the remaining 20% in multiple places, don't stay too long if you stop believing in a place. Do all that, and the 5% probabilities add up. 5% here, 5% there can add up to real money. It seems sub-optimal to assume that probabilistic money isn't money, it'll close you off to lots of opportunities for wealth.
  - kevinskii 11y ago
    I'm not disagreeing, but you can't just look at the odds of a successful exit when it comes to figuring out the probability that your equity will someday become valuable. There are several other factors that can effectively leave common employees' equity worthless, some of which the article describes. Rarely do companies seem to be willing to provide the information needed to weigh the risks.

akkartik 11y ago

It makes sense to be conservative in valuing equity, but if you think it's never worth anything, you shouldn't be considering startups in your job search. (Your criticism still partially stands; it's common for founders to over-value the equity they offer employees. Way past the last funding round, for example. It's invariably a short-sighted decision. Used wisely, equity can be a great motivator.)

limeyx 11y ago
Equity paid for my house, gave me enough money to have a substantial retirement buffer and will pay for my kids to go through school. Yes, more often than not its been worth "nothing" (negative if you took a lower salary to get it), but when it's worth something, it's worth something...
Jemaclus 11y ago
I didn't say it's never worth anything. I said it's not worth anything until a qualifying event has occurred. It doesn't matter how much your equity is valued if I can't cash it out.
- akkartik 11y ago
  Good luck getting equity in a 'startup' after a qualifying event like an IPO. Nothing wrong in wanting certainty. But certainty on the downside matches certainty on the upside. If you don't care about the upside then why would you join a startup?
  - dragonwriter 11y ago
    > If you don't care about the upside then why would you join a startup? For some people, money is what allows them to take a job they desire for other reasons (since, you know, you have to pay for necessities somehow), without financial considerations being the sole motivation for choosing one place of work over another.
    - akkartik 11y ago

aplusbi 11y ago

I agree with your general sentiment and I too pretty much ignore equity when considering a new position. However equity becomes very important upon leaving a company. I think extending the exercise window to 10 years is an excellent idea as it reduces the amount of gambling that a former employee needs to engage in.

Jemaclus 11y ago
No arguments here!

gesman 11y ago

Selling hot air (or stock options) is a big business. Of course RSU grant from publicly traded company is a sign of respect and appreciation from both sides.

rahimnathwani 11y ago

"because the options are effectively worthless until there is a qualifying event" That's like saying a lottery ticket is effectively worthless until after the draw. It's not true. The expected value (weighted average of all possible future outcomes) might be low. The chance of the long term value being non-zero might be 1% or less. But, that doesn't mean the equity has no value. Yes, people on both sides fail to do to the right calculations, or don't have access to the data or tools to do those calculations, but that just means the value is difficult to measure, not that the value doesn't exist at the time. If the equity part of your compensation is effectively worthless (to you) then I'll happily buy you a beer today, in exchange for rights to all future cash flows from those shares/options.