As a founder of a series C startup, I agree that common stock options in startups are grossly over-valued right now. Based on my experience, the median offer f

As a founder of a series C startup, I agree that common stock options in startups are grossly over-valued right now. Based on my experience, the median offer for 1st engineers at an early stage startup is around $100K + 1%, vested over 4 years. My guess is that the same engineer's market rate at Big Co is $150K. It is nearly impossible that 1% is worth $50K /year. Most startups will try to convince you that you should price common shares according to the company's last valuation (or more), but by my estimation, this is off by at LEAST a multiple of 2. Here is why: - Common shares are worth ~25% less than preferred shares due to liquid preference - Inflation -- earnings from common stock are paid out on average 5 years from now. you should apply a 20% discount to the company's current valuation due to this. - Risk -- startups are inherently risky. unless you are already wealthy, you should be further discounting for this. Here is a spreadsheet that models out each of these discounts: https://docs.google.com/spreadsheets/d/1fA95D0YR9RWF7JGrP1W9wkeD_vjywi0lsHm8X4f5cSI/edit?usp=sharing https://docs.google.com/spreadsheets/d/1fA95D0YR9RWF7JGrP1W9... In reality, you should be pricing common shares at closer to half the company's last valuation. Unfortunately, in my experience, employees are willing to buy into the hype and are currently valuing their shares at TWICE the company's last valuation. Don't count on companies being an agent for change in this area -- employees just need to get smarter. Companies will follow suit by raising offers. Also, although I agree that common shares are overvalued, I don't buy the undertone of your message -- that employees ought to make more BECAUSE their founders are getting rich. How much founders make and how much employees make should have little to do with each other. The former is dictated by how good of a business the founder has built, and the latter is governed by how much your peers are willing to work for.