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The allocation of profits in startups, at least, feels... problematic. I was the #2 engineer hire when I was hired five years ago. Since then, we haven't becom

The allocation of profits in startups, at least, feels... problematic. I was the #2 engineer hire when I was hired five years ago. Since then, we haven't become super successful -- yet -- but we're at least at breakeven. We have three engineers and we're working on a huge new project that hopefully will really grow the company. I have 1.8% equity. Sometimes when I'm working late or working on the weekend, which is often, I wonder: Is this really worth it? I'm totally fine with taking a pay cut to build something new, in order to have the chance at making life changing money. But at the equity I have, we'd need to be quite successful in order to get that. The VCs who funded our seed and series A (the only funds we've raised) will see the lion's share of the profits. Emotionally, that feels odd. We've thrown a significant percentage of our lives, and they've only thrown in money -- and a pretty small amount of it, really. I know it's supposed to make sense from a financial perspective or whatever, but emotionally it doesn't feel fair. But hey I guess it worked, I have what feels like a small percentage and yet I'm throwing everything I have at this company. I'm likely an outlier, though. I suspect that if VCs and founders gave employees a bigger piece of the pie, they'd have a much more motivated workforce.

pembrook 8y ago
That's not what the Fed chair is talking about. Nobody is concerned about wages in tech. Tech is one of the few industries that has the opposite of a stagnant wage growth problem.
- tdb7893 8y ago
  We are paid a lot but I heard somewhere that even though we should have crazy bargaining power we still are capturing less of the profits than would be expected so tech isn't fully immune to it (especially if you aren't working at one of the more famous tech companies)
  - jsoc815 8y ago
    >We are paid a lot... even though we should have crazy bargaining power... While you are likely correct, what pembrook says is mostly true. The tech scene is often used by economists and the like as a cudgel against any talk that U.S. wages and the general economy are lackluster. (To be clear, I am basing this on actual discussions I have had, not theory and/or scholarly papers.)
- inetknght 8y ago
  > Nobody is concerned about wages in tech. Speak for yourself. Wages in tech is highly consolidated into tech owners, tech engineers, and then tech support. Anyone on the periphery is not getting their fair share whatsoever.
  - marme 8y ago
    how to define fair?
    - inetknght 8y ago
      That's the crux of the problem, isn't it? If the company has millions of dollars in not just revenue but profits and a significant number of its employees are below poverty level and/or on welfare, is that fair? No, definitely not. If the company's profit per employee is more than a certain percentage of a given employee's salary, is that fair? No, probably not. If the company were to distribute a 10% salary bonus to all employees, would that bonus eliminate profits? If the company were to distribute 10% of profits to all employees equally, how much difference against their salary would that change be?
- methodover 8y ago
  Yeah, I mean you're absolutely right. I'm in an incredible position, and yet, it still feels unfair. I'm 90% sure that it's just that I'm petty and greedy. And yet, like, at the end of the day the engine that drives the economy forward -- and humanity forward -- isn't cash. It's individual human beings sitting down and putting in the hard work in creating something new and nurturing it for years. It feels like our economy gives most of the rewards to the people who put in money, and not enough to the people who put in the actual hard work. Even here, where things are amazing for employees.
  - pembrook 8y ago
    I can understand the feeling. In certain cases--like compensation--the economy trends towards inefficiency due to an imbalance of power between capital and labor. However overall, the economy is a mechanism for rewarding risk, not hours spent in front of a keyboard. "Hard work" in general is a meaningless concept. What drives humanity forward is risk taking. The system is designed to encourage holders of capital to risk losing it for the potential reward of even greater wealth. Without incentives for owners of capital to take risk, our society and technology doesn't progress.
  - dunpeal 8y ago
    > I'm in an incredible position Why? Because the founders gave you 1.8% pre-dillution equity, vesting over 8 years, and told you that's "very generous"? You're an engineer in a market where engineers are in high demand and short supply. Being one of 3 engineers developing a product and getting just 1.8% of the equity - coupled with high demands and (I would bet) under-market pay isn't such a great deal. You're shouldering quite a bit of risk spending your best working years in a place that likely will never be able to promote or pay you fairly. Your potential reward for that is very limited. Yet after all this time, you still think you're getting an "incredible" deal...
    - ladon86 8y ago
      He basically agreed with your skepticism in his first comment, but he also believes that his situation is comparatively very fortunate, when looking at many other people in this country. Both things can be true - your comment is comparing up, as he did in his first comment, while his second comment compares down.
colordrops 8y ago
This is a common discussion item here at HN. Really it only makes sense to work at a startup in the following scenarios: you are founder, you are new and need experience, you are getting paid very well, or you don't care about money and love the work. Trying to get rich as a non founder is a fools game.
- 3pt14159 8y ago
  Well, this isn't completely true. Founders are much more likely to make ten or a hundred million than first hires, but first hires are at least as likely to make $500k to $3m as founders, especially in net present value accounting terms, and not even adjusting for risk adjusted returns or opportunity cost differences. Most startups don't get to first hire. Most startups have founders that don't just make nothing, they lose money. First hires don't lose money.
  - Itaxpica 8y ago
    This is true, but there's opportunity cost as well: those same first hires would be significantly more likely to make that 500k-3mil over a few years at a FAAMG-type company, anyway.
  - dunpeal 8y ago
    I'm seeing a lot of these irrelevant moral arguments thrown around. The fact that the founder is taking as much or more risk than you does not mean you should forgo better opportunities to work for him. You should work for him if the combination of salary and equity is competitive, and nowadays it often isn't, even for early hires. Which makes the argument that being an early hire at a startup doesn't make sense at the current low equity and salary commonly offered. > first hires are at least as likely to make $500k to $3m as founders I know too many startups where early hires failed to make anything close to $500k, and in fact didn't cover the difference between their salary and market rate even for a single year. Exits in which early hires make even just $500k are very rare nowadays. > First hires don't lose money. But of course they do! They lose the difference between what they could make elsewhere, and what the startup is paying them. Non-technical founders have far lower opportunity cost.
tramGG 8y ago
Have you tried asking for more equity? Negotiating new terms is fine if you feel you deserve it and are passionate about your work.
- methodover 8y ago
  I'm pretty sure the equity I have is already incredibly generous for an employee. But yes, I did bring up the issue a couple weeks ago. He doesn't believe we're in a position to go to the board and make any changes to stock compensation at this time. He thinks we should first figure out how to accelerate (with this new project) and then we'd be in a better position to ask for more stock for employees from the board.
  - gricardo99 8y ago
    That's an interesting excuse... If the founders control the company, then they can dictate the terms of employee compensation. To a degree at least... I guess they cannot unilaterally make decisions that completely piss-off and alienate their investors, or good luck with series B. If the VCs control the company, then I'm sure their response would be "we offer industry standard x% of equity, so there's no reason to offer more". Chicken and egg problem. It won't change until someone changes it. Another thought: Where would the increase in employee equity come from? Would the founders dilute their share, or expect all shareholders to dilute? If it's just the founders deciding to be more generous, then why should the board have a problem? The board should be absolutely in favor of founder-only dilution, since it costs other investors nothing, and ostensibly results in a more motivated workforce.
  - DenisM 8y ago
    At 5 years you're fully vested. You should get a stock/options refresh if they want you to stay.
    - methodover 8y ago
      That 1.8% figure I gave includes shares that have not vested yet. My original stock compensation was significantly smaller. I've received small stock option bumps over the years, including a significant one last year. I have about half of my total shares vested today, and I won't be fully vested until 2021.
acchow 8y ago
But you're also part of the problem. Startups offer very little equity because they're able to find someone they want that will take it. Were you coerced into this agreement?
- padobson 8y ago
  I agree with this. Every offer I've gotten from an early-stage startup was market salary and <1% equity, often when I was engineering hire 1-5. I had conversations with founders and told them that if they couldn't meet my market rate, they had to give me 3-5% of the company. They all said no, so I did to. Then I'd get my market rate from a bank or a security company or went back to contracting for multiple clients.
  - kamaal 8y ago
    Unless the company is going to be the next Google, those kind of deals don't make sense at all. But thats' generally lottery so you can keep that aside. The other part is I have seen people fall for titles. 'Senior VP of X', while in reality you neither good exposure into org management, and let your tech skills go down the drain at the same time. Often because of these things people lose their prime years. In most cases working for a big company, and then having a good savings and investment driven lifestyle will put you ahead of most of this kind of work opportunities.
Johnny555 8y ago
If you don't need the money, then don't take it. Problem solved. If it's such a small amount of money, then self-fund. The VC is thinking "I'm paying this guy's salary to work on something that may or may not ever pay for itself", and he's got dozens of companies that he's funding and they won't all hit it big... or even survive. Or, another option, don't throw everything you have at a company -- join a later stage startup where the work-life balance is better, but you can still expect a decent payout if it succeeds.
- walshemj 8y ago
  1.8 is non trivial (assuming no shenanigans) back in 2000 I had .5% in a uk vc backed company if we had been taken out I would have been a millionaire IRL not just on paper :-(
  - sk5t 8y ago
    It's not enough for five years after little dilution.
    - walshemj 8y ago
      Well there is all that sketchy stuff that seems endemic in the USA - I was in the UK and had we only had one share class
  - spookthesunset 8y ago
    The "if we had been taken out" is the key in your statement. Odds are very good your startup won't ever "be taken out" in a way that results in you getting the money you lost by not working for a big tech company. The risk adjusted returns on startup stock options are so close to zero you might as well classify them as "winning the lotto". Personally, I'm done with startups. They simply don't pay nearly what you'll get from working at the big boys.
    - walshemj 8y ago
      Well it was a worker coop so there are some stronger laws governing that sort of company ie the employees directly owned the controlling interest. Re being taken out if the coop movement was not stuck in the 19th century and embraced .coop properly it could have played out - and if ICANT weren't a bunch of xxxxx :-(
karmelapple 8y ago
If it does not feel fair emotionally, get out. It sounds like you are unhappy with the amount of late nights and weekends you’re spending. If you’re still spending backbreaking hours even after the product has been going for awhile, or simply used to like the idea but are not liking it anymore, it might be time to have a heart to heart with your boss. Different companies have different expectations, but at my own company, we’ve always had a strong desire to avoid that sort of intense and demanding work schedule. We’ve thankfully not needed to ask people to come in on a weekend... ever, I believe. We’ve had to fight a fire or two here or there, but it was typically a pretty quick troubleshooting session, and then taking a thoughtful approach during the workweek to figuring out a way to avoid that emergency scenario in the future. Life is more than work, and it sounds like you’re feeling resentful of your employment situation. Life is short, so do something about it, whether better work life balance, requesting money that will make you happy (if that amount exists and the company is willing to pay it), or something else.
gbacon 8y ago
We've thrown a significant percentage of our lives, and they've only thrown in money Money saved, borrowed, or inherited represents a significant percentage of someone’s life. Even if you deny this, the money in someone’s pocket in the present represents an enormous percentage of that person’s future life. Put yourself in the shoes of the owner who took risk up front. Yes, you took some as well, but at any time you could have walked away and accepted another job. If the owner put on chains of debt, walking away means losing a house, other significant assets, or payments for years into the future. If the company is at breakeven and debt was involved up front, not much of it has been retired. The debt may be gone, but memory of the burden and stress is not. Everyone wants equity. Lots if not all employees feel like the deserve it, even the person who answers the phone and could be most easily replaced. The owner presumably took the risk up front with the objective of making money. To make sense, giving away equity should come with an expectation of adding to the owner’s wealth, not subtracting. Employees and consultants who clock out at the end of the day do not fit this criterion and are already being paid in exchange for their time and effort. The people who will add to the owner’s wealth are the people who will bring in new customers, sell more to existing customers, and generally work on the business — not just in it — to make it more valuable.
- dunpeal 8y ago
  > Everyone wants equity. Lots if not all employees feel like the deserve it, even the person who answers the phone and could be most easily replaced. This is not a moral question of who deserves what. Compensation is a business issue, not a moral one. The question is whether OP is getting as much as he could get elsewhere, and the answer is likely "no". If startups could compete fair and square with non-startup comp, employees like OP wouldn't be discovering that their equity stake is tiny and they are therefore underpaid after 5 years of working for the same startups every day. > Put yourself in the shoes of the owner who took risk up front. Why should he? Is this "would-be millionaires sympathy hour"? You're saying the founder took more risk. Maybe he did. That's actually not always the case, when you factor in opportunity cost for a non-technical founder vs an engineer - I've seen founders earn as much as they would elsewhere in base salary, without factoring their enormous equity at all. But even if the founder took more risk, how does that compel OP to work hard to make him a millionaire, while foregoing fair market compensation for himself? You are implying it's OP's moral duty to compensate the founder for the supposed risk he may (or may not) have taken. OP's only duty is to do what's best for himself. The founder and investors are certainly doing that by making OP work weekends for what is likely below-market comp.
ww520 8y ago
Early employees really got the worst deal. The amount of risks is similar to founders but the equity share is much less.
- spookthesunset 8y ago
  Honestly, the risks for early employees are closer to the investors risks. Early employees are just as subject to the whims of the founders as investors are. It would be much more balanced if early employee options were from the same class of preferred stock that investors are granted. That way they at least get something out of a low-value buy-out they had no control over.
dv_dt 8y ago
Here's an idea. Expect some differential vs the biggest cashflow established companies vs a middle/small company, but don't take a paycut vs a reference of an established company. The equity should be an bonus attractor, but odds are it will be worth nothing. So the opportunity cost is the cut x number of years, and for that you're buying 1.8% equity with pays out in a 1/10 instance (and maybe not in any significant amount even if it does pay off). If the non-financial aspects appeal, then fine, but realize you're paying for that difference.
dunpeal 8y ago
> Sometimes when I'm working late or working on the weekend, which is often, I wonder: Is this really worth it? The key problem in your (all too common) story is that you're only waking up to reality now. I'm guessing that like most startup employees, you were swayed by initial aggressive courtship by the founders / chief-execs, with lots of vague handwaving and hyperboles telling you that you'll definitely become a zillionaire with your "generous" equity. After 5 years (!) of hard work you finally crunched the hard numbers, and realized your best-case exit might cover a bit of what you lose in one year of overworking yourself for a below-market salary. Your founders and managers forgot to tell you this, and probably stuck to hyperboles without divulging much real info about your equity. Far from making it easy for you to understand your equity value, they probably made it hard or impossible. I wish your story was some dysfunctional exception, but unfortunately it seems to be the rule nowadays. In fact, I know all too many engineers who faced this sad music only after the exit, for which they got shockingly modest returns. I can also tell you to forget about your equity being 1.8%. It's incredibly unlikely you'll actually get 1.8% of whatever monetary value your startup exits for - if any. Like most startups, certainly in your position, you are looking at more funding rounds. The investors will get additional shares, you will get diluted. Of course, the founders will tell you nothing about this, you'll just see it in your bottom line - if there ever is any. In fact, in your place I wouldn't be so sure you actually have that 1.8% right now. You should do one of two things: 1. Ask for a lot more equity, with transparency into the amount and valuation. 2. Start quietly looking for an employer that will pay you better, and work you less. From your perspective, you are already fully vested. There's no reward for you taking additional risk. No sense in staying to be underpaid and overworked. Even you want to stay in startup-land, find a new startup to diversify your equity portfolio, which currently consists of one tiny slice of a risky startup. Your current startup likely won't collapse if you leave, so you're not risking your existing equity. If your departure would be so devastating, they should give you a lot more equity. Either way, do a clear cost-benefit analysis, and do what is right for you. Your founders are doing what's right for them, and so are the investors. Follow suite.
- edoloughlin 8y ago
  From your perspective, you are already fully vested. [...] No sense in staying to be underpaid and overworked. [...] Your current startup likely won't collapse if you leave, so you're not risking your existing equity. Employees usually have to buy their vested options if they leave or lose them. That means you have to raise the cash for the options there and then and you might incur a tax liability for the capital gain (in some jurisdictions it's actually taxed as income!). This doesn't usually make sense if the company isn't near being acquired or IPO'ing (and who does that any more?).
clairity 8y ago
the ingenuity and curse of capitalism is boiling all of human value down to a number. when someone uses the phrase "business decision", that's shorthand for "let's use monetary value in place of the messiness of the human condition". this generally isn't a malicious act--meant to make the task more manageable--but it does set up the board to be advantageous to the capital holder (in this case VCs, and to a somewhat lesser extent, founders). the capital holders aren't bad people per se, just that the emergent property of the system is tilted toward capital and away from labor. this is the version of capitalism as we have it now. you've implicitly accepted that game when you took a salary and an equity stake. capital holders are exceedingly motivated and practiced at squeezing value out of a transaction--that is why they got into the game in the first place. within this game, you'll need to either find leverage points (like a unique skill or asset) to get what you think you deserve, accept what you've got and appreciate your relative comfort, or find another opportunity (which is a potential leverage point in itself). (part of) the medium-term solution is to bend the regulatory environment toward fairness. things like making the capital gains tax rate the same as ordinary income, and holding corporations and executives responsible for their actions, just like regular persons. in the long-term, is there another system of figuring out who deerves what and how much? how do we allocate resources fairly so that no one feels shafted? it's the ultimate (dynamic systems) optimization problem. capitalism is attractive because it's decentralized, but is there a system better at solving this optimization problem without losing this attractive property?

pembrook 8y ago

That's not what the Fed chair is talking about. Nobody is concerned about wages in tech. Tech is one of the few industries that has the opposite of a stagnant wage growth problem.

tdb7893 8y ago
We are paid a lot but I heard somewhere that even though we should have crazy bargaining power we still are capturing less of the profits than would be expected so tech isn't fully immune to it (especially if you aren't working at one of the more famous tech companies)
- jsoc815 8y ago
  >We are paid a lot... even though we should have crazy bargaining power... While you are likely correct, what pembrook says is mostly true. The tech scene is often used by economists and the like as a cudgel against any talk that U.S. wages and the general economy are lackluster. (To be clear, I am basing this on actual discussions I have had, not theory and/or scholarly papers.)
inetknght 8y ago
> Nobody is concerned about wages in tech. Speak for yourself. Wages in tech is highly consolidated into tech owners, tech engineers, and then tech support. Anyone on the periphery is not getting their fair share whatsoever.
- marme 8y ago
  how to define fair?
  - inetknght 8y ago
    That's the crux of the problem, isn't it? If the company has millions of dollars in not just revenue but profits and a significant number of its employees are below poverty level and/or on welfare, is that fair? No, definitely not. If the company's profit per employee is more than a certain percentage of a given employee's salary, is that fair? No, probably not. If the company were to distribute a 10% salary bonus to all employees, would that bonus eliminate profits? If the company were to distribute 10% of profits to all employees equally, how much difference against their salary would that change be?
methodover 8y ago
Yeah, I mean you're absolutely right. I'm in an incredible position, and yet, it still feels unfair. I'm 90% sure that it's just that I'm petty and greedy. And yet, like, at the end of the day the engine that drives the economy forward -- and humanity forward -- isn't cash. It's individual human beings sitting down and putting in the hard work in creating something new and nurturing it for years. It feels like our economy gives most of the rewards to the people who put in money, and not enough to the people who put in the actual hard work. Even here, where things are amazing for employees.
- pembrook 8y ago
  I can understand the feeling. In certain cases--like compensation--the economy trends towards inefficiency due to an imbalance of power between capital and labor. However overall, the economy is a mechanism for rewarding risk, not hours spent in front of a keyboard. "Hard work" in general is a meaningless concept. What drives humanity forward is risk taking. The system is designed to encourage holders of capital to risk losing it for the potential reward of even greater wealth. Without incentives for owners of capital to take risk, our society and technology doesn't progress.
- dunpeal 8y ago
  > I'm in an incredible position Why? Because the founders gave you 1.8% pre-dillution equity, vesting over 8 years, and told you that's "very generous"? You're an engineer in a market where engineers are in high demand and short supply. Being one of 3 engineers developing a product and getting just 1.8% of the equity - coupled with high demands and (I would bet) under-market pay isn't such a great deal. You're shouldering quite a bit of risk spending your best working years in a place that likely will never be able to promote or pay you fairly. Your potential reward for that is very limited. Yet after all this time, you still think you're getting an "incredible" deal...
  - ladon86 8y ago
    He basically agreed with your skepticism in his first comment, but he also believes that his situation is comparatively very fortunate, when looking at many other people in this country. Both things can be true - your comment is comparing up, as he did in his first comment, while his second comment compares down.

colordrops 8y ago

This is a common discussion item here at HN. Really it only makes sense to work at a startup in the following scenarios: you are founder, you are new and need experience, you are getting paid very well, or you don't care about money and love the work. Trying to get rich as a non founder is a fools game.

3pt14159 8y ago
Well, this isn't completely true. Founders are much more likely to make ten or a hundred million than first hires, but first hires are at least as likely to make $500k to $3m as founders, especially in net present value accounting terms, and not even adjusting for risk adjusted returns or opportunity cost differences. Most startups don't get to first hire. Most startups have founders that don't just make nothing, they lose money. First hires don't lose money.
- Itaxpica 8y ago
  This is true, but there's opportunity cost as well: those same first hires would be significantly more likely to make that 500k-3mil over a few years at a FAAMG-type company, anyway.
- dunpeal 8y ago
  I'm seeing a lot of these irrelevant moral arguments thrown around. The fact that the founder is taking as much or more risk than you does not mean you should forgo better opportunities to work for him. You should work for him if the combination of salary and equity is competitive, and nowadays it often isn't, even for early hires. Which makes the argument that being an early hire at a startup doesn't make sense at the current low equity and salary commonly offered. > first hires are at least as likely to make $500k to $3m as founders I know too many startups where early hires failed to make anything close to $500k, and in fact didn't cover the difference between their salary and market rate even for a single year. Exits in which early hires make even just $500k are very rare nowadays. > First hires don't lose money. But of course they do! They lose the difference between what they could make elsewhere, and what the startup is paying them. Non-technical founders have far lower opportunity cost.

tramGG 8y ago

Have you tried asking for more equity? Negotiating new terms is fine if you feel you deserve it and are passionate about your work.

methodover 8y ago
I'm pretty sure the equity I have is already incredibly generous for an employee. But yes, I did bring up the issue a couple weeks ago. He doesn't believe we're in a position to go to the board and make any changes to stock compensation at this time. He thinks we should first figure out how to accelerate (with this new project) and then we'd be in a better position to ask for more stock for employees from the board.
- gricardo99 8y ago
  That's an interesting excuse... If the founders control the company, then they can dictate the terms of employee compensation. To a degree at least... I guess they cannot unilaterally make decisions that completely piss-off and alienate their investors, or good luck with series B. If the VCs control the company, then I'm sure their response would be "we offer industry standard x% of equity, so there's no reason to offer more". Chicken and egg problem. It won't change until someone changes it. Another thought: Where would the increase in employee equity come from? Would the founders dilute their share, or expect all shareholders to dilute? If it's just the founders deciding to be more generous, then why should the board have a problem? The board should be absolutely in favor of founder-only dilution, since it costs other investors nothing, and ostensibly results in a more motivated workforce.
- DenisM 8y ago
  At 5 years you're fully vested. You should get a stock/options refresh if they want you to stay.
  - methodover 8y ago
    That 1.8% figure I gave includes shares that have not vested yet. My original stock compensation was significantly smaller. I've received small stock option bumps over the years, including a significant one last year. I have about half of my total shares vested today, and I won't be fully vested until 2021.

acchow 8y ago

But you're also part of the problem. Startups offer very little equity because they're able to find someone they want that will take it. Were you coerced into this agreement?

padobson 8y ago
I agree with this. Every offer I've gotten from an early-stage startup was market salary and <1% equity, often when I was engineering hire 1-5. I had conversations with founders and told them that if they couldn't meet my market rate, they had to give me 3-5% of the company. They all said no, so I did to. Then I'd get my market rate from a bank or a security company or went back to contracting for multiple clients.
- kamaal 8y ago
  Unless the company is going to be the next Google, those kind of deals don't make sense at all. But thats' generally lottery so you can keep that aside. The other part is I have seen people fall for titles. 'Senior VP of X', while in reality you neither good exposure into org management, and let your tech skills go down the drain at the same time. Often because of these things people lose their prime years. In most cases working for a big company, and then having a good savings and investment driven lifestyle will put you ahead of most of this kind of work opportunities.

Johnny555 8y ago

If you don't need the money, then don't take it. Problem solved. If it's such a small amount of money, then self-fund. The VC is thinking "I'm paying this guy's salary to work on something that may or may not ever pay for itself", and he's got dozens of companies that he's funding and they won't all hit it big... or even survive. Or, another option, don't throw everything you have at a company -- join a later stage startup where the work-life balance is better, but you can still expect a decent payout if it succeeds.

walshemj 8y ago
1.8 is non trivial (assuming no shenanigans) back in 2000 I had .5% in a uk vc backed company if we had been taken out I would have been a millionaire IRL not just on paper :-(
- sk5t 8y ago
  It's not enough for five years after little dilution.
  - walshemj 8y ago
    Well there is all that sketchy stuff that seems endemic in the USA - I was in the UK and had we only had one share class
- spookthesunset 8y ago
  The "if we had been taken out" is the key in your statement. Odds are very good your startup won't ever "be taken out" in a way that results in you getting the money you lost by not working for a big tech company. The risk adjusted returns on startup stock options are so close to zero you might as well classify them as "winning the lotto". Personally, I'm done with startups. They simply don't pay nearly what you'll get from working at the big boys.
  - walshemj 8y ago
    Well it was a worker coop so there are some stronger laws governing that sort of company ie the employees directly owned the controlling interest. Re being taken out if the coop movement was not stuck in the 19th century and embraced .coop properly it could have played out - and if ICANT weren't a bunch of xxxxx :-(

karmelapple 8y ago

If it does not feel fair emotionally, get out. It sounds like you are unhappy with the amount of late nights and weekends you’re spending. If you’re still spending backbreaking hours even after the product has been going for awhile, or simply used to like the idea but are not liking it anymore, it might be time to have a heart to heart with your boss. Different companies have different expectations, but at my own company, we’ve always had a strong desire to avoid that sort of intense and demanding work schedule. We’ve thankfully not needed to ask people to come in on a weekend... ever, I believe. We’ve had to fight a fire or two here or there, but it was typically a pretty quick troubleshooting session, and then taking a thoughtful approach during the workweek to figuring out a way to avoid that emergency scenario in the future. Life is more than work, and it sounds like you’re feeling resentful of your employment situation. Life is short, so do something about it, whether better work life balance, requesting money that will make you happy (if that amount exists and the company is willing to pay it), or something else.

gbacon 8y ago

We've thrown a significant percentage of our lives, and they've only thrown in money Money saved, borrowed, or inherited represents a significant percentage of someone’s life. Even if you deny this, the money in someone’s pocket in the present represents an enormous percentage of that person’s future life. Put yourself in the shoes of the owner who took risk up front. Yes, you took some as well, but at any time you could have walked away and accepted another job. If the owner put on chains of debt, walking away means losing a house, other significant assets, or payments for years into the future. If the company is at breakeven and debt was involved up front, not much of it has been retired. The debt may be gone, but memory of the burden and stress is not. Everyone wants equity. Lots if not all employees feel like the deserve it, even the person who answers the phone and could be most easily replaced. The owner presumably took the risk up front with the objective of making money. To make sense, giving away equity should come with an expectation of adding to the owner’s wealth, not subtracting. Employees and consultants who clock out at the end of the day do not fit this criterion and are already being paid in exchange for their time and effort. The people who will add to the owner’s wealth are the people who will bring in new customers, sell more to existing customers, and generally work on the business — not just in it — to make it more valuable.

dunpeal 8y ago
> Everyone wants equity. Lots if not all employees feel like the deserve it, even the person who answers the phone and could be most easily replaced. This is not a moral question of who deserves what. Compensation is a business issue, not a moral one. The question is whether OP is getting as much as he could get elsewhere, and the answer is likely "no". If startups could compete fair and square with non-startup comp, employees like OP wouldn't be discovering that their equity stake is tiny and they are therefore underpaid after 5 years of working for the same startups every day. > Put yourself in the shoes of the owner who took risk up front. Why should he? Is this "would-be millionaires sympathy hour"? You're saying the founder took more risk. Maybe he did. That's actually not always the case, when you factor in opportunity cost for a non-technical founder vs an engineer - I've seen founders earn as much as they would elsewhere in base salary, without factoring their enormous equity at all. But even if the founder took more risk, how does that compel OP to work hard to make him a millionaire, while foregoing fair market compensation for himself? You are implying it's OP's moral duty to compensate the founder for the supposed risk he may (or may not) have taken. OP's only duty is to do what's best for himself. The founder and investors are certainly doing that by making OP work weekends for what is likely below-market comp.

ww520 8y ago

Early employees really got the worst deal. The amount of risks is similar to founders but the equity share is much less.

spookthesunset 8y ago
Honestly, the risks for early employees are closer to the investors risks. Early employees are just as subject to the whims of the founders as investors are. It would be much more balanced if early employee options were from the same class of preferred stock that investors are granted. That way they at least get something out of a low-value buy-out they had no control over.

dv_dt 8y ago

Here's an idea. Expect some differential vs the biggest cashflow established companies vs a middle/small company, but don't take a paycut vs a reference of an established company. The equity should be an bonus attractor, but odds are it will be worth nothing. So the opportunity cost is the cut x number of years, and for that you're buying 1.8% equity with pays out in a 1/10 instance (and maybe not in any significant amount even if it does pay off). If the non-financial aspects appeal, then fine, but realize you're paying for that difference.

dunpeal 8y ago

> Sometimes when I'm working late or working on the weekend, which is often, I wonder: Is this really worth it? The key problem in your (all too common) story is that you're only waking up to reality now. I'm guessing that like most startup employees, you were swayed by initial aggressive courtship by the founders / chief-execs, with lots of vague handwaving and hyperboles telling you that you'll definitely become a zillionaire with your "generous" equity. After 5 years (!) of hard work you finally crunched the hard numbers, and realized your best-case exit might cover a bit of what you lose in one year of overworking yourself for a below-market salary. Your founders and managers forgot to tell you this, and probably stuck to hyperboles without divulging much real info about your equity. Far from making it easy for you to understand your equity value, they probably made it hard or impossible. I wish your story was some dysfunctional exception, but unfortunately it seems to be the rule nowadays. In fact, I know all too many engineers who faced this sad music only after the exit, for which they got shockingly modest returns. I can also tell you to forget about your equity being 1.8%. It's incredibly unlikely you'll actually get 1.8% of whatever monetary value your startup exits for - if any. Like most startups, certainly in your position, you are looking at more funding rounds. The investors will get additional shares, you will get diluted. Of course, the founders will tell you nothing about this, you'll just see it in your bottom line - if there ever is any. In fact, in your place I wouldn't be so sure you actually have that 1.8% right now. You should do one of two things: 1. Ask for a lot more equity, with transparency into the amount and valuation. 2. Start quietly looking for an employer that will pay you better, and work you less. From your perspective, you are already fully vested. There's no reward for you taking additional risk. No sense in staying to be underpaid and overworked. Even you want to stay in startup-land, find a new startup to diversify your equity portfolio, which currently consists of one tiny slice of a risky startup. Your current startup likely won't collapse if you leave, so you're not risking your existing equity. If your departure would be so devastating, they should give you a lot more equity. Either way, do a clear cost-benefit analysis, and do what is right for you. Your founders are doing what's right for them, and so are the investors. Follow suite.

edoloughlin 8y ago
From your perspective, you are already fully vested. [...] No sense in staying to be underpaid and overworked. [...] Your current startup likely won't collapse if you leave, so you're not risking your existing equity. Employees usually have to buy their vested options if they leave or lose them. That means you have to raise the cash for the options there and then and you might incur a tax liability for the capital gain (in some jurisdictions it's actually taxed as income!). This doesn't usually make sense if the company isn't near being acquired or IPO'ing (and who does that any more?).

clairity 8y ago

the ingenuity and curse of capitalism is boiling all of human value down to a number. when someone uses the phrase "business decision", that's shorthand for "let's use monetary value in place of the messiness of the human condition". this generally isn't a malicious act--meant to make the task more manageable--but it does set up the board to be advantageous to the capital holder (in this case VCs, and to a somewhat lesser extent, founders). the capital holders aren't bad people per se, just that the emergent property of the system is tilted toward capital and away from labor. this is the version of capitalism as we have it now. you've implicitly accepted that game when you took a salary and an equity stake. capital holders are exceedingly motivated and practiced at squeezing value out of a transaction--that is why they got into the game in the first place. within this game, you'll need to either find leverage points (like a unique skill or asset) to get what you think you deserve, accept what you've got and appreciate your relative comfort, or find another opportunity (which is a potential leverage point in itself). (part of) the medium-term solution is to bend the regulatory environment toward fairness. things like making the capital gains tax rate the same as ordinary income, and holding corporations and executives responsible for their actions, just like regular persons. in the long-term, is there another system of figuring out who deerves what and how much? how do we allocate resources fairly so that no one feels shafted? it's the ultimate (dynamic systems) optimization problem. capitalism is attractive because it's decentralized, but is there a system better at solving this optimization problem without losing this attractive property?