6 ms·

Ask HN: First employees, how much equity did you get?

42 points by sidyapa 8y ago

jedmondn 8y ago
None at first. I was hired by a client after the dev shop I worked for went under. We were so inexperienced/grateful for the job we didn’t think to ask for any equity. The salary is just below market average, which is fair considering my experience level. Some background: this is my first startup, we’re a team of 5 (CEO, Android, iOS, Web/CTO, Customer support). 6 months after we were hired the runway began to get tight and we had to take some semi-drastic measures to stretch it: the CEO (who hadn’t been taking a salary for quite some time) asked us to stay on but work half-time until we were far enough along to raise the correct amount of funding. Because I believe in both the mission and the CEO I offered to stay on full-time for half-pay and half-equity. For the past 5 months half of my salary has been converted into shares. Instant vesting, shares are being given at our current valuation. Each month translates to roughly 0.1% of the company.
- matt_the_bass 8y ago
  Lots of people will give you opinions of should you ask for more. My opinion is you should ask for what you think is fair. If you think the current split is fair, then you don’t need to ask for more. Keep in mind that most cases equity turn out to have little monetary value.
- captain_perl 8y ago
  > I offered to stay on full-time for half-pay and half-equity. There's a lot of red flags here ... some random advice: 1) Ensure your deal is in writing. 2) To protect your equity, you need to be in the room when new investments are negotiated. Otherwise you will be diluted or new options pools created without you even knowing. 3) Business people think very little of programmers in general, until they need to hire one. To them, you're a secretary with an attitude. 4) a product launch costs about $1 million. If they have money for that, then they can also pay your salary 5) It's irrelevant to you whether the CEO is taking a salary or not. Unless you have access to the books, how do you even know? It seems that generally CEOs land on their feet. 6) The shares you think they gave you "clutter up the cap table" and make it more difficult to get investors later. Typically VCs try to wipe out the angel investors (who have lawyers.) Guess what they'll do to a programmer.
  - acct1771 8y ago
    Reminder that being in the room doesn't mean anything if the people in the room aren't legally beholden to you.
    - balladeer 8y ago
      So let's say I am hired by a startup and I am getting half the industry salary rate for my role. What kind of "stock/share/esop/options" I should ask for that changes like a founder's would? Of course it will be a lot less than the founder's (and it will be fulfilled in stages) but iff, let's assume, I want to get that "kind" of "share" of that startup what it would be? Is there a specific term for it? Or it varies from company to company? Unless it it's public where's it's the "share", right? edit: any recommended reading on this?
Neablis 8y ago
Employee number 4 at a very small startup in the bay area. 1% equity slightly after seed. I have been at a few startups which are more commonly .1 - .5%. I was very appreciative of the amount and hope it will pay off in the long run.
gesman 8y ago
I think it's meaningless. Employees with "equity" options will: 1. Get diluted with every VC round (oh, but value of our company is increased so you potentially own more in dollars!) 2. Left in a dark about preferred shares schedules and conditions that every VC gets. Preferred shares allows VC's to get paid first and in multiples of their original investments in case of an exit. This effectively can and most often will leave exactly $0 for employees with every exit regardless is employee owns 1% 5% or 25% of options. Upon hiring - request disclosure of preferred shares schedules - before and during employment - and you'll quickly be given some excuse or shown the door if you insist. If you're lucky and given equity right before IPO or given RSU (actual shares with vesting schedule) of publicly traded company - then it could make a world of difference.
- Axsuul 8y ago
  What do you recommend an employee do to protect themselves before signing? Are there any special clauses you recommend be on there to maximize profits from an exit or any red flags to look out for? Is it typical to ask for additional options during every fundraising round?
  - gesman 8y ago
    >> Is it typical to ask for additional options during every fundraising round? You may, and they may as well give you some extra paper options to keep you interested. But what's the point? $0+$0 = $0 - in 99.9% of early stage startup cases. Engineering force pretty much has no negotiation power in this. Engineering (surprise!) is a liability, not an asset. Sales is an asset. Anything that generates direct and immediate revenue is an asset. Even if such clause would exist - VC's won't allow it - they won't invest in anything that jeopardize their lion's share of exit. My take: for 99.9% of early stage startups (Non-pre-IPO, not publicly traded) - get as much cash as you can as compensation. Don't get tricked into working for peanuts for the promise of future that has low probability of happening. It just safer bet. Invest the difference into real assets or save it for real estate or so.
    - deleted 8y ago
      [deleted]
deanmoriarty 8y ago
1.6%, third hire. Now the company is at series C, 4 years later. Significant dilution as expected (own roughly 0.5%), but clean terms for all rounds (liquidation preference 1X, non participating).
- anotheryou 8y ago
  1.6% of something/the company here as ~#2, too. But I don't count on an exit anyways and jumped the boat a year ago.
  - deanmoriarty 8y ago
    In my case, even if the company is still illiquid, I luckily was able to sell a good portion of my vested shares as part of a secondary transaction for a decent amount, so I was happy about that. I'll risk the rest.
expertentipp 8y ago
Equity? No such thing over here.
- markatkinson 8y ago
  Zero to me too and thank goodness actually. I received a proper salary instead which worked out a lot better in the end.
anotheryou 8y ago
As you are probably asking because you might become employee #1: I think either you get payed close to market rate or you should get a lot of equity.
throwaway5250 8y ago
Years ago, I was around employee number ten in a database software startup. When the company was sold, my shares were worth about $2000. (Yeah, that was my last startup.)
- fatnoah 8y ago
  If it makes you feel any better, I've worked at three startups. Two exited and one is still going. The net stock contribution to my bottom line was a $200 capital loss. The only actually money I got was retention cash and RSUs from the acquiring company.

42 points by sidyapa 8y ago

None at first. I was hired by a client after the dev shop I worked for went under. We were so inexperienced/grateful for the job we didn’t think to ask for any equity. The salary is just below market average, which is fair considering my experience level. Some background: this is my first startup, we’re a team of 5 (CEO, Android, iOS, Web/CTO, Customer support). 6 months after we were hired the runway began to get tight and we had to take some semi-drastic measures to stretch it: the CEO (who hadn’t been taking a salary for quite some time) asked us to stay on but work half-time until we were far enough along to raise the correct amount of funding. Because I believe in both the mission and the CEO I offered to stay on full-time for half-pay and half-equity. For the past 5 months half of my salary has been converted into shares. Instant vesting, shares are being given at our current valuation. Each month translates to roughly 0.1% of the company.

matt_the_bass 8y ago
Lots of people will give you opinions of should you ask for more. My opinion is you should ask for what you think is fair. If you think the current split is fair, then you don’t need to ask for more. Keep in mind that most cases equity turn out to have little monetary value.
captain_perl 8y ago
> I offered to stay on full-time for half-pay and half-equity. There's a lot of red flags here ... some random advice: 1) Ensure your deal is in writing. 2) To protect your equity, you need to be in the room when new investments are negotiated. Otherwise you will be diluted or new options pools created without you even knowing. 3) Business people think very little of programmers in general, until they need to hire one. To them, you're a secretary with an attitude. 4) a product launch costs about $1 million. If they have money for that, then they can also pay your salary 5) It's irrelevant to you whether the CEO is taking a salary or not. Unless you have access to the books, how do you even know? It seems that generally CEOs land on their feet. 6) The shares you think they gave you "clutter up the cap table" and make it more difficult to get investors later. Typically VCs try to wipe out the angel investors (who have lawyers.) Guess what they'll do to a programmer.
- acct1771 8y ago
  Reminder that being in the room doesn't mean anything if the people in the room aren't legally beholden to you.
  - balladeer 8y ago
    So let's say I am hired by a startup and I am getting half the industry salary rate for my role. What kind of "stock/share/esop/options" I should ask for that changes like a founder's would? Of course it will be a lot less than the founder's (and it will be fulfilled in stages) but iff, let's assume, I want to get that "kind" of "share" of that startup what it would be? Is there a specific term for it? Or it varies from company to company? Unless it it's public where's it's the "share", right? edit: any recommended reading on this?

Neablis 8y ago

Employee number 4 at a very small startup in the bay area. 1% equity slightly after seed. I have been at a few startups which are more commonly .1 - .5%. I was very appreciative of the amount and hope it will pay off in the long run.

gesman 8y ago

I think it's meaningless. Employees with "equity" options will: 1. Get diluted with every VC round (oh, but value of our company is increased so you potentially own more in dollars!) 2. Left in a dark about preferred shares schedules and conditions that every VC gets. Preferred shares allows VC's to get paid first and in multiples of their original investments in case of an exit. This effectively can and most often will leave exactly $0 for employees with every exit regardless is employee owns 1% 5% or 25% of options. Upon hiring - request disclosure of preferred shares schedules - before and during employment - and you'll quickly be given some excuse or shown the door if you insist. If you're lucky and given equity right before IPO or given RSU (actual shares with vesting schedule) of publicly traded company - then it could make a world of difference.

Axsuul 8y ago
What do you recommend an employee do to protect themselves before signing? Are there any special clauses you recommend be on there to maximize profits from an exit or any red flags to look out for? Is it typical to ask for additional options during every fundraising round?
- gesman 8y ago
  >> Is it typical to ask for additional options during every fundraising round? You may, and they may as well give you some extra paper options to keep you interested. But what's the point? $0+$0 = $0 - in 99.9% of early stage startup cases. Engineering force pretty much has no negotiation power in this. Engineering (surprise!) is a liability, not an asset. Sales is an asset. Anything that generates direct and immediate revenue is an asset. Even if such clause would exist - VC's won't allow it - they won't invest in anything that jeopardize their lion's share of exit. My take: for 99.9% of early stage startups (Non-pre-IPO, not publicly traded) - get as much cash as you can as compensation. Don't get tricked into working for peanuts for the promise of future that has low probability of happening. It just safer bet. Invest the difference into real assets or save it for real estate or so.
  - deleted 8y ago
    [deleted]

deanmoriarty 8y ago

1.6%, third hire. Now the company is at series C, 4 years later. Significant dilution as expected (own roughly 0.5%), but clean terms for all rounds (liquidation preference 1X, non participating).

anotheryou 8y ago
1.6% of something/the company here as ~#2, too. But I don't count on an exit anyways and jumped the boat a year ago.
- deanmoriarty 8y ago
  In my case, even if the company is still illiquid, I luckily was able to sell a good portion of my vested shares as part of a secondary transaction for a decent amount, so I was happy about that. I'll risk the rest.

expertentipp 8y ago

Equity? No such thing over here.

markatkinson 8y ago
Zero to me too and thank goodness actually. I received a proper salary instead which worked out a lot better in the end.

anotheryou 8y ago

As you are probably asking because you might become employee #1: I think either you get payed close to market rate or you should get a lot of equity.

throwaway5250 8y ago

Years ago, I was around employee number ten in a database software startup. When the company was sold, my shares were worth about $2000. (Yeah, that was my last startup.)

fatnoah 8y ago
If it makes you feel any better, I've worked at three startups. Two exited and one is still going. The net stock contribution to my bottom line was a $200 capital loss. The only actually money I got was retention cash and RSUs from the acquiring company.