6 ms·

I don't quite understand. On the one hand you're saying that early employees should "demand market comp" and on the other you're saying that equity basically do

I don't quite understand. On the one hand you're saying that early employees should "demand market comp" and on the other you're saying that equity basically doesn't matter (and if you feel this way, it doesn't really make any sense to be joining a startup anyway). Are you conflating "compensation" with "salary"? "Market comp" for a good engineer with several years of experience in the Bay Area is something like 250k - 350k at a Google or Facebook (with some variation in both directions here). It's not realistic, nor consistent with the market, for an early-stage startup to pay people this much in cash. Early-stage companies should offer sufficient equity such that their employees should in expectation earn at least the same as they would at a public company. If their expected earnings are less than this, then more equity is absolutely a good solution.

tim_sw 8y ago
250-350k is low for Google and FB. It's more like 400-500k if you are senior, 500-700k if you are staff. This is including RSUs
- dunpeal 8y ago
  Indeed, and even well-funded startups can't afford to burn $400k on a single engineer. They basically have to give out generous equity to compete, but they and the VCs would rather be greedy and dole out fractions of percents under the cynical misleading pitch that these scraps will be worth millions when the startup exits for billions. To their credit, This scam did work for a while, shortly after a whole lot of early employees really did make millions on generous equity grants at early startups like Google. Being an "early employee" means nothing now. You get the token 0.01% bottom-preference shares that will net you 0 in almost every imaginable scenario, and somehow this is supposed to cover the 200-300k/yr difference you'd get at a profitable established company.
- gregcrv 8y ago
  How do you explain these numbers? http://www.h1bdata.info/index.php?em=&job=Senior+Software+Engineer&city=&year=2018 http://www.h1bdata.info/index.php?em=&job=Senior+Software+En...
  - kentonv 8y ago
    Those are not Google and not Silicon Valley. Try: http://www.h1bdata.info/index.php?em=Google&job=Staff+Software+Engineer&city=MOUNTAIN+VIEW&year=2018 http://www.h1bdata.info/index.php?em=Google&job=Staff+Softwa... And keep in mind that base salary (what's reported on that page) is usually about half of total compensation. (Bonus and stock being the other half.) Also this appears to be the H1B database. I'm not sure how H1B salaries compare to the overall average.
    - dunpeal 8y ago
      > I'm not sure how H1B salaries compare to the overall average. H1B salaries are typically lower than average. Why do you think companies spend millions lobbying for more H1Bs? To pay them more than average? :-) Also, keep in mind Google only has to disclose base salaries for these H1Bs. For a staff engineer, most of the total comp would be in bonus pay and especially RSUs. They can easily be making $400k or more through those means.
      - methyl 8y ago
        > To pay them more than average? No, to get a bigger talent pool.
      - delroth 8y ago
        Do you have evidence that people coming on an H1B visa get paid less than their non-H1B coworkers (at same level / same seniority / same office) at Google?
        alehul 8y ago
        https://news.ycombinator.com/item?id=13579226 https://news.ycombinator.com/item?id=13579226 is one example. In addition to the article, HN is in near-unanimous agreement on this issue from the contribution of many H1B visa holders. I've seen it pop up many times.
        phamilton 8y ago
- pikma 8y ago
  I work there and I'm surprised by the numbers you propose, they seem too high to me.
- deleted 8y ago
  [deleted]
- rgossiaux 8y ago
  I'm not really interested in arguing about these numbers, it's not really relevant to my point. I was basing this off of https://www.teamblind.com/article/google-engineer---total-compensation-in-us---ultimate-post-jYcrij5X https://www.teamblind.com/article/google-engineer---total-co... where 250-350 includes the majority of L4 and L5 engineers. Based on this your numbers look off by one level or so, at least for Google. But again, I don't think this is very important for my point.
- zuhayeer 8y ago
  rough numbers on http://levels.fyi http://levels.fyi
- danvoell 8y ago
  I always feel like every developer on HN is making like $200k-$400K without blinking, maybe that's true. Just for a perspective on these numbers, the top 1% of income in CA is $450K - https://www.reddit.com/r/dataisbeautiful/comments/8qhh3x/annual_income_of_top_1_of_earners_by_state_oc/ https://www.reddit.com/r/dataisbeautiful/comments/8qhh3x/ann...
kentonv 8y ago
> Early-stage companies should offer sufficient equity such that their employees should in expectation earn at least the same as they would at a public company. That's the joke! Nobody comes remotely close to offering enough equity that their total comp is equivalent! Imagine a company that just raised a $1M seed round on convertibles at a $6M valuation cap. Now say they offer an "extremely generous" 2% equity package to their first employee. What is that 2% worth? Well, the investors think that preferred shares in that quantity would be worth $120k. Of course, equity vests over four years. So your equity comp is... $30k/year. If it were preferred shares. But it's not, it's common shares. So it's worth even less. You'd need to offer more like 10% to claim you are matching the RSUs people are getting at Google or Facebook. But at that point, you might as well call the person a co-founder. And maybe that's in fact the answer: add co-founders, not employees. But this isn't what people are doing today. Instead they're convincing employees to take sub-market pay and sub-market equity to take a stressful job with almost no benefits.
- rgossiaux 8y ago
  Yes, I mostly agree. There's one nuance that I've been thinking about lately that I haven't seen anyone ever point out before, which is that high volatility will make options worth more than they are on paper. Here's a thought experiment: imagine that there are two employers on the market. One will always pay 200k/yr guaranteed and you can choose to work for them at any time for this wage. The other pays 100k/yr plus one Coconut per year, and Coconuts are currently worth 100k each. So far these are equivalent monetarily. But now let's add the stipulation that after one year, the price of coconuts has a 50% chance of going to 0 and a 50% chance of going to 200k each. Which would you choose? The expected value of each of these job offers is still equivalent (after 4 years of working at each, you'll have 800k in expectation). But you should definitely take the second one. Why? Because after one year, if coconuts drop to 0, you can just quit and join the first company. Then you have a 50% chance of 100 + 200 + 200 + 200 (coconuts to 0) and a 50% chance of 300 + 300 + 300 + 300 (coconuts to 200) which comes out to 950k, which is better than sticking with either company alone. This thought experiment fascinates me because it clearly shows the extra value that up-front stock grants have. The point is that you have some protection from downsides in the form of switching jobs, but no similar cap on the upsides, and the higher the volatility of the stock the more value this provides. I'm not sure what the numbers look like when you view them through this lens, but it does mean that an equity grant of 2% of a 6M company should trade off for more than 30k/yr.
Eridrus 8y ago
> Early-stage companies should offer sufficient equity such that their employees should in expectation earn at least the same as they would at a public company. This would still be underpaying people for a few reasons: expectations are not risk-adjusted, it also doesn't take into account the timeline you get paid on, i.e. the ROI you would get investing your Google salary in an index fund and taxes make getting paid a regular amount over time more valuable than getting a large startup check. Maybe you were taking these factors into account, but most startup equity offers are massive low balls.
s2g 8y ago
> in expectation earn at least the same as they would at a public company No, it should be multiples. Otherwise why is the employee taking on that risk?
- rgossiaux 8y ago
  I don't see why this follows. I said "in expectation". So some % of the time it's going to be 0 or thereabouts and some % of the time will be much higher. The best case scenario needs to be multiples in order to make the average work out, but I don't see any reason the average case needs to be.

tim_sw 8y ago

250-350k is low for Google and FB. It's more like 400-500k if you are senior, 500-700k if you are staff. This is including RSUs

dunpeal 8y ago
Indeed, and even well-funded startups can't afford to burn $400k on a single engineer. They basically have to give out generous equity to compete, but they and the VCs would rather be greedy and dole out fractions of percents under the cynical misleading pitch that these scraps will be worth millions when the startup exits for billions. To their credit, This scam did work for a while, shortly after a whole lot of early employees really did make millions on generous equity grants at early startups like Google. Being an "early employee" means nothing now. You get the token 0.01% bottom-preference shares that will net you 0 in almost every imaginable scenario, and somehow this is supposed to cover the 200-300k/yr difference you'd get at a profitable established company.
gregcrv 8y ago
How do you explain these numbers? http://www.h1bdata.info/index.php?em=&job=Senior+Software+Engineer&city=&year=2018 http://www.h1bdata.info/index.php?em=&job=Senior+Software+En...
- kentonv 8y ago
  Those are not Google and not Silicon Valley. Try: http://www.h1bdata.info/index.php?em=Google&job=Staff+Software+Engineer&city=MOUNTAIN+VIEW&year=2018 http://www.h1bdata.info/index.php?em=Google&job=Staff+Softwa... And keep in mind that base salary (what's reported on that page) is usually about half of total compensation. (Bonus and stock being the other half.) Also this appears to be the H1B database. I'm not sure how H1B salaries compare to the overall average.
  - dunpeal 8y ago
    > I'm not sure how H1B salaries compare to the overall average. H1B salaries are typically lower than average. Why do you think companies spend millions lobbying for more H1Bs? To pay them more than average? :-) Also, keep in mind Google only has to disclose base salaries for these H1Bs. For a staff engineer, most of the total comp would be in bonus pay and especially RSUs. They can easily be making $400k or more through those means.
    - methyl 8y ago
      > To pay them more than average? No, to get a bigger talent pool.
    - delroth 8y ago
      Do you have evidence that people coming on an H1B visa get paid less than their non-H1B coworkers (at same level / same seniority / same office) at Google?
      - alehul 8y ago
        https://news.ycombinator.com/item?id=13579226 https://news.ycombinator.com/item?id=13579226 is one example. In addition to the article, HN is in near-unanimous agreement on this issue from the contribution of many H1B visa holders. I've seen it pop up many times.
      - phamilton 8y ago
pikma 8y ago
I work there and I'm surprised by the numbers you propose, they seem too high to me.
deleted 8y ago
[deleted]
rgossiaux 8y ago
I'm not really interested in arguing about these numbers, it's not really relevant to my point. I was basing this off of https://www.teamblind.com/article/google-engineer---total-compensation-in-us---ultimate-post-jYcrij5X https://www.teamblind.com/article/google-engineer---total-co... where 250-350 includes the majority of L4 and L5 engineers. Based on this your numbers look off by one level or so, at least for Google. But again, I don't think this is very important for my point.
zuhayeer 8y ago
rough numbers on http://levels.fyi http://levels.fyi
danvoell 8y ago
I always feel like every developer on HN is making like $200k-$400K without blinking, maybe that's true. Just for a perspective on these numbers, the top 1% of income in CA is $450K - https://www.reddit.com/r/dataisbeautiful/comments/8qhh3x/annual_income_of_top_1_of_earners_by_state_oc/ https://www.reddit.com/r/dataisbeautiful/comments/8qhh3x/ann...

kentonv 8y ago

> Early-stage companies should offer sufficient equity such that their employees should in expectation earn at least the same as they would at a public company. That's the joke! Nobody comes remotely close to offering enough equity that their total comp is equivalent! Imagine a company that just raised a $1M seed round on convertibles at a $6M valuation cap. Now say they offer an "extremely generous" 2% equity package to their first employee. What is that 2% worth? Well, the investors think that preferred shares in that quantity would be worth $120k. Of course, equity vests over four years. So your equity comp is... $30k/year. If it were preferred shares. But it's not, it's common shares. So it's worth even less. You'd need to offer more like 10% to claim you are matching the RSUs people are getting at Google or Facebook. But at that point, you might as well call the person a co-founder. And maybe that's in fact the answer: add co-founders, not employees. But this isn't what people are doing today. Instead they're convincing employees to take sub-market pay and sub-market equity to take a stressful job with almost no benefits.

rgossiaux 8y ago
Yes, I mostly agree. There's one nuance that I've been thinking about lately that I haven't seen anyone ever point out before, which is that high volatility will make options worth more than they are on paper. Here's a thought experiment: imagine that there are two employers on the market. One will always pay 200k/yr guaranteed and you can choose to work for them at any time for this wage. The other pays 100k/yr plus one Coconut per year, and Coconuts are currently worth 100k each. So far these are equivalent monetarily. But now let's add the stipulation that after one year, the price of coconuts has a 50% chance of going to 0 and a 50% chance of going to 200k each. Which would you choose? The expected value of each of these job offers is still equivalent (after 4 years of working at each, you'll have 800k in expectation). But you should definitely take the second one. Why? Because after one year, if coconuts drop to 0, you can just quit and join the first company. Then you have a 50% chance of 100 + 200 + 200 + 200 (coconuts to 0) and a 50% chance of 300 + 300 + 300 + 300 (coconuts to 200) which comes out to 950k, which is better than sticking with either company alone. This thought experiment fascinates me because it clearly shows the extra value that up-front stock grants have. The point is that you have some protection from downsides in the form of switching jobs, but no similar cap on the upsides, and the higher the volatility of the stock the more value this provides. I'm not sure what the numbers look like when you view them through this lens, but it does mean that an equity grant of 2% of a 6M company should trade off for more than 30k/yr.

Eridrus 8y ago

> Early-stage companies should offer sufficient equity such that their employees should in expectation earn at least the same as they would at a public company. This would still be underpaying people for a few reasons: expectations are not risk-adjusted, it also doesn't take into account the timeline you get paid on, i.e. the ROI you would get investing your Google salary in an index fund and taxes make getting paid a regular amount over time more valuable than getting a large startup check. Maybe you were taking these factors into account, but most startup equity offers are massive low balls.

s2g 8y ago

> in expectation earn at least the same as they would at a public company No, it should be multiples. Otherwise why is the employee taking on that risk?

rgossiaux 8y ago
I don't see why this follows. I said "in expectation". So some % of the time it's going to be 0 or thereabouts and some % of the time will be much higher. The best case scenario needs to be multiples in order to make the average work out, but I don't see any reason the average case needs to be.