4 ms·

I don't think this is true anymore. I think this is one of those funny vestigial things that evolved in a different era. If you think of a startup as a true "g

I don't think this is true anymore. I think this is one of those funny vestigial things that evolved in a different era. If you think of a startup as a true "garage venture" with a few people toiling away trying to ship a product, maybe that's the right model. That isn't really the model for SV entrepreneurship anymore, though, even though we kinda pretend it is. How it works today is, $8 million-dollar "seed" rounds, downtown office space, early-stage companies paying $150k or more for talent, incubators and signaling, etc. Maybe one of those cases where the game has changed, but our mythos hasn't.

mooreds 9y ago
Maybe this is true in SV. My experience in other areas of the country is that startups, especially early stage ones, don't have that kind of cash.
austenallred 9y ago
That’s simply incorrect. I founded a company that raised a mammoth seed round in Silicon Valley (not $8m but more than $3m), and we do pay some high salaries, but Apple and Facebook still pay salaries that are much, much higher. Critical employees have joined us while taking $100,000/yr pay cuts, despite. Having a salary in the six figures. To think that startups can play that game of “equity doesn’t matter” is just wrong, even in an era of $8m seed rounds. I know HN likes to say “go for cash not stock,” which is a good way to negotiate if you want to avoid downside risk, but if you eliminate stock compensation there’s no way startups can play ball with incumbents. Full stop.
- pascalxus 9y ago
  I don't think so. Why should employees make up such a large percentage of the money invested in the company? When you take a salary cut of 50K, it's like taking that money an investing it right then and there. Why should an employee be investing 50K of their own money into the company every single year? It's bad enough that someone would invest 50K in a single company: one that picked them, not the other way around, with all the information asymmetries that applies, but to add insult to injury: the risk is compounded by the fact that their investing all this money into the very same company they depend on for their paycheck. VCs are much much better equipped to do investing: both in terms of skill sets, experience and information. Employees should not be forced to become angel investors just because they work at a start up. VCs will always have enough money to invest in truely excellent opportunities. It just means, they'll need to invest more. And in this low interest rate world, I don't think the world is starving for cash is it?
  - austenallred 9y ago
    Maybe an employee believes in the company and wants to take part, deeming the risk is worth it for them? Clearly that's what's happening. It's certainly rational in some cases to take the risk of owning a portion of a company instead of taking the same amount of cash and putting it in the S&P 500. You're always investing your time and money, it's just a matter of where. And for what it's worth, if you're getting paid $250k at Apple, you can probably go back at almost any time.
    - s73ver_ 9y ago
      "Maybe an employee believes in the company and wants to take part, deeming the risk is worth it for them? Clearly that's what's happening." And that belief is abused, and the employees get fucked over when it comes time for an acquisition, as their shares get dilluted to hell and back.
      - icebraining 9y ago
        Yes, that often happens and it's clearly unethical. What's your point?
        pascalxus 9y ago
        His point is, that you have to assume that will happen quite often. We're simply not equipped to forsee all the legal and financial risks of having stock options. We've seen too many ways that employees have been taken advantage of. You can't simply "trust" that if the company does well, you'll do well.
        icebraining 9y ago
        Sure, but who said we should simply "trust" that?
        s73ver_ 9y ago
- s73ver_ 9y ago
  So why are you going after these guys that need to take such big pay cuts? I can almost guarantee you that there are plenty of people with a high enough level of talent that are in other areas.
  - austenallred 9y ago
    Find them for me, and I'll hire them and pay you a referral bonus.
    - s73ver_ 9y ago
      Go outside the Valley.
      - austenallred 9y ago
        We hire remotely. It's not the instant solution to all problems, despite what HN would have you believe. A lot of experience is still concentrated and SV and highly-compensated.
- Yizahi 9y ago
  > “go for cash not stock,” which is a good way to negotiate if you want to avoid downside risk I think significant amount of people would be fine with "just risk". They are not fine with risk plus malicious business practices - diluting stocks, delaying IPO indefinitely, creating different tiers of stocks with multipliers, preferential stocks for non-employees, etc.
optimuspaul 9y ago
Silicon Valley isn't the world. I think the reality is that a startup is often the "garage venture" or somewhere well below a well-funded startup. Most startups of the world don't have multi-million dollar seed funding, even many that do aren't paying 150k plus salaries.

mooreds 9y ago

Maybe this is true in SV. My experience in other areas of the country is that startups, especially early stage ones, don't have that kind of cash.

austenallred 9y ago

That’s simply incorrect. I founded a company that raised a mammoth seed round in Silicon Valley (not $8m but more than $3m), and we do pay some high salaries, but Apple and Facebook still pay salaries that are much, much higher. Critical employees have joined us while taking $100,000/yr pay cuts, despite. Having a salary in the six figures. To think that startups can play that game of “equity doesn’t matter” is just wrong, even in an era of $8m seed rounds. I know HN likes to say “go for cash not stock,” which is a good way to negotiate if you want to avoid downside risk, but if you eliminate stock compensation there’s no way startups can play ball with incumbents. Full stop.

pascalxus 9y ago
I don't think so. Why should employees make up such a large percentage of the money invested in the company? When you take a salary cut of 50K, it's like taking that money an investing it right then and there. Why should an employee be investing 50K of their own money into the company every single year? It's bad enough that someone would invest 50K in a single company: one that picked them, not the other way around, with all the information asymmetries that applies, but to add insult to injury: the risk is compounded by the fact that their investing all this money into the very same company they depend on for their paycheck. VCs are much much better equipped to do investing: both in terms of skill sets, experience and information. Employees should not be forced to become angel investors just because they work at a start up. VCs will always have enough money to invest in truely excellent opportunities. It just means, they'll need to invest more. And in this low interest rate world, I don't think the world is starving for cash is it?
- austenallred 9y ago
  Maybe an employee believes in the company and wants to take part, deeming the risk is worth it for them? Clearly that's what's happening. It's certainly rational in some cases to take the risk of owning a portion of a company instead of taking the same amount of cash and putting it in the S&P 500. You're always investing your time and money, it's just a matter of where. And for what it's worth, if you're getting paid $250k at Apple, you can probably go back at almost any time.
  - s73ver_ 9y ago
    "Maybe an employee believes in the company and wants to take part, deeming the risk is worth it for them? Clearly that's what's happening." And that belief is abused, and the employees get fucked over when it comes time for an acquisition, as their shares get dilluted to hell and back.
    - icebraining 9y ago
      Yes, that often happens and it's clearly unethical. What's your point?
      - pascalxus 9y ago
        His point is, that you have to assume that will happen quite often. We're simply not equipped to forsee all the legal and financial risks of having stock options. We've seen too many ways that employees have been taken advantage of. You can't simply "trust" that if the company does well, you'll do well.
        icebraining 9y ago
        Sure, but who said we should simply "trust" that?
        s73ver_ 9y ago
s73ver_ 9y ago
So why are you going after these guys that need to take such big pay cuts? I can almost guarantee you that there are plenty of people with a high enough level of talent that are in other areas.
- austenallred 9y ago
  Find them for me, and I'll hire them and pay you a referral bonus.
  - s73ver_ 9y ago
    Go outside the Valley.
    - austenallred 9y ago
      We hire remotely. It's not the instant solution to all problems, despite what HN would have you believe. A lot of experience is still concentrated and SV and highly-compensated.
Yizahi 9y ago
> “go for cash not stock,” which is a good way to negotiate if you want to avoid downside risk I think significant amount of people would be fine with "just risk". They are not fine with risk plus malicious business practices - diluting stocks, delaying IPO indefinitely, creating different tiers of stocks with multipliers, preferential stocks for non-employees, etc.

optimuspaul 9y ago

Silicon Valley isn't the world. I think the reality is that a startup is often the "garage venture" or somewhere well below a well-funded startup. Most startups of the world don't have multi-million dollar seed funding, even many that do aren't paying 150k plus salaries.