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> Hopefully, the potential equity upside attracts employees who think their work contributions can boost the value of the company (and hence their stock options

> Hopefully, the potential equity upside attracts employees who think their work contributions can boost the value of the company (and hence their stock options) rather than mercenaries who just want a paycheck. It's hard to believe companies genuinely want this when offering 0.025% of common stock to your early engineering hires has become common practice.

jasode 10y ago
> offering 0.025% of common stock to your early engineering hires has become common practice. Well, you have to add extra information to that 0.025% figure to determine if that seemingly "low percentage" of equity became decent money. As an example, it looks like Chris Cox, an early 2005 hire of Facebook[1] and now Chief Product Officer got ~0.025% of Facebook stock. (~600k of 2.5 billion shares.) He started unloading some of them in 2014 (2 years after the IPO).[2] That 0.025% in 2016 now worth ~$77 million. Of course, not every startup will become a Facebook with a market cap of $350 billion. So instead, let's say we can work backwards from a "nice" target number such as $5 million. For 0.025% stake to be worth $5 million, the company has to grow to a $20 billion valuation. That's still a big number but building a company worth multiple billions is an aspiration for many startups. The pontential employees have to consider if the "lottery tickets" with a payout of $0 to millions is worth the lower salaries. If a startup sets aside 10% stock for employees' pool, have other companies proven that you'll get better results by granting more than 0.025%? Should they have given Chris Cox 1% so other subsequent employees get less % or none at all? Lots of potential game theory questions to ponder. [1]https://en.wikipedia.org/wiki/Chris_Cox_(Facebook) https://en.wikipedia.org/wiki/Chris_Cox_(Facebook) [2]https://www.insidermole.com/insider/cox-christopher-k/transactions/?page=3 https://www.insidermole.com/insider/cox-christopher-k/transa...

jasode 10y ago

> offering 0.025% of common stock to your early engineering hires has become common practice. Well, you have to add extra information to that 0.025% figure to determine if that seemingly "low percentage" of equity became decent money. As an example, it looks like Chris Cox, an early 2005 hire of Facebook[1] and now Chief Product Officer got ~0.025% of Facebook stock. (~600k of 2.5 billion shares.) He started unloading some of them in 2014 (2 years after the IPO).[2] That 0.025% in 2016 now worth ~$77 million. Of course, not every startup will become a Facebook with a market cap of $350 billion. So instead, let's say we can work backwards from a "nice" target number such as $5 million. For 0.025% stake to be worth $5 million, the company has to grow to a $20 billion valuation. That's still a big number but building a company worth multiple billions is an aspiration for many startups. The pontential employees have to consider if the "lottery tickets" with a payout of $0 to millions is worth the lower salaries. If a startup sets aside 10% stock for employees' pool, have other companies proven that you'll get better results by granting more than 0.025%? Should they have given Chris Cox 1% so other subsequent employees get less % or none at all? Lots of potential game theory questions to ponder. [1]https://en.wikipedia.org/wiki/Chris_Cox_(Facebook) https://en.wikipedia.org/wiki/Chris_Cox_(Facebook) [2]https://www.insidermole.com/insider/cox-christopher-k/transactions/?page=3 https://www.insidermole.com/insider/cox-christopher-k/transa...