5 ms·

I guess it depends on your definition of risk. The definition I was going by is the chance of getting a decent payout after spending 4 years of your life workin

by bobp 19y ago

I guess it depends on your definition of risk. The definition I was going by is the chance of getting a decent payout after spending 4 years of your life working somewhere. If you work for someone else's startup, especially for a tiny amount of equity, you risk forgoing the opportunity to enjoy the financial benefits of a successful exit after 4 years of hard work. A founder can also get a job in 10 minutes if the startup flops. The additional sacrifice (not necessarily risk) the founders take is living a few months without salary. This sacrifice obviously merits a higher portion of the equity than an employee -- maybe even much higher -- but as an employee you have to wonder whether the tiny equity you'll get is worth it.

alaskamiller 19y ago
So I'm confused; are you looking to be a partner in the company or an employee? An employee is paid however much he is willing to take off the table.
nostrademons 19y ago
I think the chance of a "decent payout after spending 4 years of your life" is smaller than you expect, for both founders and employees. I thought/think much the same as you, which is why I'm founding my own startup after working for 3 years at 2 other ones. I had similar equity offers as you - 0.1% at one startup, none at the second (and an offer of 0.02% at a third that I turned down). I used to think that employees were insane for taking a straight salary instead of a shot at a big payout. After 5 months working full-time on my own startup with no salary, I'm not entirely sure. Obviously I think that on-balance the startup bargain is more appealing, else I'd go get a job, but I also think the scales are much more even than I'd initial thought. If you do take a job at the startup, take it to learn, not to get rich. You won't get rich. 80-90% of startups fail outright and nobody gets anything, other than whatever venture money was paid out in salaries. If it does succeed, you won't get rich with an employee's option grant, unless the startup really hits it big (like, Google or Microsoft-sized). One of my coworkers worked at a startup that was bought for $42M - he ended up with $3000. I do know someone else that ended up with a multi-million-$ payout as employee #35, but she was a VP and the company in question was Stratus, which momentarily had a billion-$ market cap. She ended up losing much of it when Stratus stock crashed anyway. If you do go the founder route, do it for meaning and not for money. It has to be something you'd want to do anyways, regardless of whether there's a huge payout attached. Because from 5 months in, that huge payout looks pretty remote. (I wish I'd paid more attention to webwright's advice on tractability, in another comment thread.) On a side note, I always wondered why some startups are so stingy with equity. If you give out big-company equity awards, you get big-company effort. And if the people who are actually doing the work are putting in big-company effort levels, how do you expect to catch the big companies? The conclusion I reached is that the startup should have product-market fit before hiring people, so that success is just a matter of crossing Ts and dotting Is, but neither of the startups I've worked at were at that point. (And sure enough, one failed outright and the other is sorta walking-dead: profitable but not growing, with a pretty narrow customer base.)

by bobp 19y ago

alaskamiller 19y ago

So I'm confused; are you looking to be a partner in the company or an employee? An employee is paid however much he is willing to take off the table.

nostrademons 19y ago

I think the chance of a "decent payout after spending 4 years of your life" is smaller than you expect, for both founders and employees. I thought/think much the same as you, which is why I'm founding my own startup after working for 3 years at 2 other ones. I had similar equity offers as you - 0.1% at one startup, none at the second (and an offer of 0.02% at a third that I turned down). I used to think that employees were insane for taking a straight salary instead of a shot at a big payout. After 5 months working full-time on my own startup with no salary, I'm not entirely sure. Obviously I think that on-balance the startup bargain is more appealing, else I'd go get a job, but I also think the scales are much more even than I'd initial thought. If you do take a job at the startup, take it to learn, not to get rich. You won't get rich. 80-90% of startups fail outright and nobody gets anything, other than whatever venture money was paid out in salaries. If it does succeed, you won't get rich with an employee's option grant, unless the startup really hits it big (like, Google or Microsoft-sized). One of my coworkers worked at a startup that was bought for $42M - he ended up with $3000. I do know someone else that ended up with a multi-million-$ payout as employee #35, but she was a VP and the company in question was Stratus, which momentarily had a billion-$ market cap. She ended up losing much of it when Stratus stock crashed anyway. If you do go the founder route, do it for meaning and not for money. It has to be something you'd want to do anyways, regardless of whether there's a huge payout attached. Because from 5 months in, that huge payout looks pretty remote. (I wish I'd paid more attention to webwright's advice on tractability, in another comment thread.) On a side note, I always wondered why some startups are so stingy with equity. If you give out big-company equity awards, you get big-company effort. And if the people who are actually doing the work are putting in big-company effort levels, how do you expect to catch the big companies? The conclusion I reached is that the startup should have product-market fit before hiring people, so that success is just a matter of crossing Ts and dotting Is, but neither of the startups I've worked at were at that point. (And sure enough, one failed outright and the other is sorta walking-dead: profitable but not growing, with a pretty narrow customer base.)