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> You need to put yourself in a position where being deceived is fraud. > > How much the employer hypes the position doesn't even come into the equation. I don'

> You need to put yourself in a position where being deceived is fraud. > > How much the employer hypes the position doesn't even come into the equation. I don't really understand why you think it's an important thing. Hype is not part of the deal. The numbers and the structure of the agreement are. Again, what you're arguing here is like "The used car industry isn't shady at all. All you have to do is spend a couple of months learning to evaluate used cars, maybe a couple more to learn the relevant law and know what the salesperson can't legally lie about, then you'll probably be almost as good at detecting the real value of the used car as the people whose full time job is to hide and inflate it!". Yes, in theory if all fresh grads took a full semester of financial literacy, startup equity models, and US securities law, they'd stand a chance against the savvy business folk greeting them at the door. In practice, it's not happening, so it's simply unrealistic to expect that, level of knowledge from a fresh grad. What's actually happening is that they do get manipulated (yes, not illegally so, typically) and then a few years later, they find out, and become bitter and come to post at HN about it. > Again, why are you letting these engineers off the hook for not reading or understanding documents they signed that said in really big letters SIGN HERE IF YOU UNDERSTAND THIS. I'm judging them by realistic standards, you're judging them by unrealistic standards. From what I recall of reading that clause at the time, it was near incomprehensible unless you knew both legalese and exactly how equity works. If they got a decent lawyer to review the contract for them, he'd probably catch it, but how many fresh grads spend the time and money to find a good lawyer for their first job? I think you're being too demanding of naive fresh grads, and surprisingly forgiving of savvy businesses that are out to manipulate them with fine print in what would normally be a standard contract. > I dunno man these aren't huge things for early stage employees to ask for, I think most people just usually don't. Right, that's the reality I'm talking about, in which most employees are naive fresh grads. They hear some really attractive numbers from the founders, and they don't know anything about equity and how it works, legally or financially. That's the reality we're dealing with here. Yes, I agree, these engineers could do more to protect themselves. Reality is, though, they don't. It's not completely crazy that they don't - learning all this stuff takes time and effort, and engineers aren't primarily interested in finance or US security law. This general lack of knowledge also creates an environment in which more savvy people are at a disadvantage. For example, I obviously know to ask for the necessary data to evaluate my equity. Typical scenario I encountered, including in the last time I interviewed with startups: They don't tell you anything you need to know. "You'll get X shares, which we estimate to be worth roughly a gazillion dollars when we exit, since we'll be taking over a bajillion dollar market." That really is all you'll typically hear in the pitch talks. Seems like the vast majority of engineers never ask. So now when I ask for more information, I'm the odd one out. I got weird stares just for asking about the total size of the equity pool (!). It's not pretty, and theoretically wrong, yet that's how the industry operates. It's been over a decade now, and these practices have become standard: giving employees no information, systematically hyping them with unrealistic valuations, and when it all blows up, their inflated fantasies collapse, but by then, they've served their purpose, so nobody cares.

wdewind 8y ago
I think your analogy is 100% spot on. I'm not arguing that the startup industry isn't shady, I'm arguing that it is and, much like the shady used car industry, and much like you said, you can totally find good deals if you know what you're doing. Yes, like any way of making a lot of money, it is hard to know what you're doing and founders promising you millions in 2 years, like all get rich quick schemes, don't work out, it turns out. Let's not throw out the baby with the bath water though. > They don't tell you anything you need to know. "You'll get X shares, which we estimate to be worth roughly a gazillion dollars when we exit, since we'll be taking over a bajillion dollar market." I have literally only once been told what shares would be worth on an exit and it was the first, worst company I ever worked for. Every other time I have been told total # shares and current FMV. You're correct this is a sign for dogshit founders though. > That really is all you'll typically hear in the pitch talks. Seems like the vast majority of engineers never ask. So now when I ask for more information, I'm the odd one out. I got weird stares just for asking about the total size of the equity pool (!). My experience with this has only been positive. I have always found that founders respect you for asking these kinds of questions, even if they don't want to give you the information. If a founder reacts poorly, again, that's your free sign to leave. But look: yes, most people aren't good at starting startups and so most equity is worthless. Some of them are trying to screw you, but most of them just don't understand themselves. Don't buy most used cars. Don't join most startups. Don't live your life through simplistic stereotypes like sleazy used car salesman and misleading startup founder. Anyway all I can really do is offer my assistance in helping others figure this stuff out, as I did in a previous post. This can be a frustrating industry but it can be rewarding as well.
- dunpeal 8y ago
  > I'm not arguing that the startup industry isn't shady, I'm arguing that it is and, much like the shady used car industry, and much like you said, you can totally find good deals if you know what you're doing. Are you familiar with the term Lemon Market?: https://en.wikipedia.org/wiki/The_Market_for_Lemons https://en.wikipedia.org/wiki/The_Market_for_Lemons I suspect this is what's happening in the startup industry. At least back when I was involved, there were a handful of startups that were really good, and a vast majority that were really bad. As time goes by, people become more aware of this. You yourself agree that most startups are awful, so most people with startup experience don't have many good things to say about that experience. You see that reflected in HN threads, including this one. This leads to negative evaluation of all startups, since it's hard to tell which are good and which are bad - and mostly they are bad. Theoretically, a Lemon Market ultimately collapses. This isn't inescapable fate. If the industry reestablishes some ground rules, mostly obvious ones that already existed in early startup culture, then it can get on the path to recovery. For example, equity should be meaningful, instead of the scam it has become. There are way too many stories of companies enjoying a good exit while nobody benefits except the founders and the VCs. There's a lot of skilled people who will not go anywhere near a startup again because they and all their friends have been burned by this and similar endemic issues. Startups heavily recruit naive fresh grads for that very reason, but that pool is shrinking for them as profitable tech companies pay more and more competitively. Right now I think most of the top grads want to go to top tech, not to startups. If all the best engineers, especially senior ones, ditch the startup lemon market, that will be very bad for us here in the US. Our economy and culture has benefited immensely from startups like Google that became huge success stories because they offered meaningful equity, attracted top talent, and truly disrupted their market. Unless startup reposition themselves to attract this kind of talent, this won't happen anymore.

wdewind 8y ago

I think your analogy is 100% spot on. I'm not arguing that the startup industry isn't shady, I'm arguing that it is and, much like the shady used car industry, and much like you said, you can totally find good deals if you know what you're doing. Yes, like any way of making a lot of money, it is hard to know what you're doing and founders promising you millions in 2 years, like all get rich quick schemes, don't work out, it turns out. Let's not throw out the baby with the bath water though. > They don't tell you anything you need to know. "You'll get X shares, which we estimate to be worth roughly a gazillion dollars when we exit, since we'll be taking over a bajillion dollar market." I have literally only once been told what shares would be worth on an exit and it was the first, worst company I ever worked for. Every other time I have been told total # shares and current FMV. You're correct this is a sign for dogshit founders though. > That really is all you'll typically hear in the pitch talks. Seems like the vast majority of engineers never ask. So now when I ask for more information, I'm the odd one out. I got weird stares just for asking about the total size of the equity pool (!). My experience with this has only been positive. I have always found that founders respect you for asking these kinds of questions, even if they don't want to give you the information. If a founder reacts poorly, again, that's your free sign to leave. But look: yes, most people aren't good at starting startups and so most equity is worthless. Some of them are trying to screw you, but most of them just don't understand themselves. Don't buy most used cars. Don't join most startups. Don't live your life through simplistic stereotypes like sleazy used car salesman and misleading startup founder. Anyway all I can really do is offer my assistance in helping others figure this stuff out, as I did in a previous post. This can be a frustrating industry but it can be rewarding as well.

dunpeal 8y ago
> I'm not arguing that the startup industry isn't shady, I'm arguing that it is and, much like the shady used car industry, and much like you said, you can totally find good deals if you know what you're doing. Are you familiar with the term Lemon Market?: https://en.wikipedia.org/wiki/The_Market_for_Lemons https://en.wikipedia.org/wiki/The_Market_for_Lemons I suspect this is what's happening in the startup industry. At least back when I was involved, there were a handful of startups that were really good, and a vast majority that were really bad. As time goes by, people become more aware of this. You yourself agree that most startups are awful, so most people with startup experience don't have many good things to say about that experience. You see that reflected in HN threads, including this one. This leads to negative evaluation of all startups, since it's hard to tell which are good and which are bad - and mostly they are bad. Theoretically, a Lemon Market ultimately collapses. This isn't inescapable fate. If the industry reestablishes some ground rules, mostly obvious ones that already existed in early startup culture, then it can get on the path to recovery. For example, equity should be meaningful, instead of the scam it has become. There are way too many stories of companies enjoying a good exit while nobody benefits except the founders and the VCs. There's a lot of skilled people who will not go anywhere near a startup again because they and all their friends have been burned by this and similar endemic issues. Startups heavily recruit naive fresh grads for that very reason, but that pool is shrinking for them as profitable tech companies pay more and more competitively. Right now I think most of the top grads want to go to top tech, not to startups. If all the best engineers, especially senior ones, ditch the startup lemon market, that will be very bad for us here in the US. Our economy and culture has benefited immensely from startups like Google that became huge success stories because they offered meaningful equity, attracted top talent, and truly disrupted their market. Unless startup reposition themselves to attract this kind of talent, this won't happen anymore.