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> That startup sold for 200 million dollars and, as the 10th engineer, I made ... 15000 dollars from that exit. Why so low?

srehnborg 8y ago
Insanely low. Strangest part of the article. Potentially it wasn't a successful exit? Dirty term sheet or multiple down rounds and $200m wasn't a successful exit?
- LAMike 8y ago
  He's from India, they probably thought 15k would set him up for life.
crazygringo 8y ago
Yeah, that's 0.0075%. Versus a ballpark of a 10th engineer getting, say, 0.5%. Even a few rounds of dilution can't explain a drop of two orders of magnitude. I'm thinking the author either didn't pay attention or care or trusted too much in the initial offer, didn't stay long enough to vest most of it, didn't buy most of their options in the end, or all of the above?
- kolbe 8y ago
  If the Lyft founders are entering the IPO with about 3.5% each, then I don't think it's crazy for 10th engineers these days to have less than a basis point.
  - askafriend 8y ago
    That doesn't tell the whole story. There's a dual class share structure and even with the 7.5%, they retain majority control of the company.
    - kolbe 8y ago
      When you're talking about valuing their shares, yes, it does tell the whole story. They cannot transfer their extra voting rights, so if they're ever interested in monetizing their investment, they have to convert to limited voting shares to sell. And all we're talking about here is the monetary payout of working at a startup.
      - askafriend 8y ago
        > And all we're talking about here is the monetary payout of working at a startup Fair, I concede my point based on this premise.
- klmr 8y ago
  That’s (substantially) more than I have as #5 at a startup. Truth be told I didn’t pay attention to this when joining because at the time they hadn’t yet set up their EMIs and I was told that negotiating for share options is pointless since their expected value is close to zero. So, if I had insisted I could probably have gotten more. But it’s neither unheard-of, nor even particularly rare from what I’ve heard (in the UK).
- cik 8y ago
  This number makes complete sense. I was a 'key employee' once upon a time - in a startup that had just raised f&f, and I received a FULL 2% (unheard of for Canada). Fast forward through the (usual) reality of 6 rounds of dilution, and my 2% was worth less than 0.02%. If the startup went from a $2M valuation to $200M (as it did) then my take would have been $40K. Do with that what you will.
  - smallgovt 8y ago
    It sounds like your startup was unfortunately an outlier with respect to the level of dilution experienced. 99% dilution over 6 rounds is far from 'usual reality'. More common is 20% dilution per round.
    - vkou 8y ago
      It was also an outlier, in the sense that it had a valuable exit. You've only got one lifetime to pull the equity slot machine, hoping that the reels come up all sixes.
    - eanzenberg 8y ago
      6 rounds of 20% dilution will get you to 74% total dilution from the initial grant.
      - Zephyr314 8y ago
        Which in this case nets you >$1M [0] vs the 80k quoted above. This also assumes no retention grants over 6 rounds. [0]: 0.02*0.8^6*$200,000,000 = $1,048,576
  - rubicon33 8y ago
    Something I am always curious about is, was your company / CEO open and honest with you about how your shares were doing? If you worked somewhere for 5 years, it could be easy to think you're safe but meanwhile the CEO is diluting your equity to fractions of what it originally was? Don't they have to report that to employees?
- icedchai 8y ago
  Dilution isn't all that matters. There's also investor liquidation preferences that can drastically change the outcome.
- kyleblarson 8y ago
  Liquidation pref for investors with preferred shares.
jatins 8y ago
I am the OP. I think it was because I was an overseas employee and the founders just didn't shell out equity to people who were not based out of US. I saw the equity distribution sheet that was disclosed after the acquisition as part of legal requirements and that was indeed true. IMO, equity represents ownership in the company and should not depend on purchase parity.
- thefujin 8y ago
  I think you should've mentioned this in your blog post, especially if you're comparing the money you've made from equity to new college grad salary at Facebook
- rpm33 8y ago
  >I think it was because I was an overseas employee and the founders just didn't shell out equity to people who were not based out of US. Isn't that illegal ?
  - ellisv 8y ago
    Why would it be illegal?
LAMike 8y ago
He's from India, I think it's not as common to get a big equity package as some startups in the US. I was confused too
LargeWu 8y ago
I worked at a company for roughly five years, that sold for 250M. When I was hired I was like 4th engineer, but by the time I left I had 2nd most seniority in engineering. Exercised my mostly vested options when I left. I got mid-5 figures. In the year following my departure to BigCo, the difference in my salary was more than what my options ended up being worth. One of the C-level guys who was there for 8 months when the company sold made 100x what I got. He wasn't a founder. He came on late in the game and basically had nothing invested. That's why working for a startup hoping to get rich is a sucker's bet. The game is rigged against you unless you're a company officer.
- eanzenberg 8y ago
  What was your equity grant by %?
  - LargeWu 8y ago
    They were ISO's, I only knew how many shares I was granted, but by the time of the exit, following several rounds of funding, it ended up being around 0.02%.
    - askafriend 8y ago
      This is the context everyone needs to share when telling their story of startup compensation. It very much looks like you got screwed on equity even before dilution. An early and somewhat senior employee should be getting anywhere from 0.5% to 1%. If the company is high quality, raised funding on standard terms and is actually successful, you'll still get diluted but not down to 0.02%. Your comp sounds off by an order of magnitude based on what I can infer. The fact that you didn't know how many total shares were outstanding at the time you were granted your ISO options is more proof that you likely got screwed. Not all startups are like this.
      - xmly 8y ago
        It depends on how much cash salary you received. If they pay cash a lot, the equity part is not worth that much.
misthop 8y ago
I'm guessing a bad options grant. I worked for a bootstrapped company that had some minimal investment and equity. Company sold for ~$12Mil and I pocketed 80K, on top of a market salary

srehnborg 8y ago

Insanely low. Strangest part of the article. Potentially it wasn't a successful exit? Dirty term sheet or multiple down rounds and $200m wasn't a successful exit?

LAMike 8y ago
He's from India, they probably thought 15k would set him up for life.

crazygringo 8y ago

Yeah, that's 0.0075%. Versus a ballpark of a 10th engineer getting, say, 0.5%. Even a few rounds of dilution can't explain a drop of two orders of magnitude. I'm thinking the author either didn't pay attention or care or trusted too much in the initial offer, didn't stay long enough to vest most of it, didn't buy most of their options in the end, or all of the above?

kolbe 8y ago
If the Lyft founders are entering the IPO with about 3.5% each, then I don't think it's crazy for 10th engineers these days to have less than a basis point.
- askafriend 8y ago
  That doesn't tell the whole story. There's a dual class share structure and even with the 7.5%, they retain majority control of the company.
  - kolbe 8y ago
    When you're talking about valuing their shares, yes, it does tell the whole story. They cannot transfer their extra voting rights, so if they're ever interested in monetizing their investment, they have to convert to limited voting shares to sell. And all we're talking about here is the monetary payout of working at a startup.
    - askafriend 8y ago
      > And all we're talking about here is the monetary payout of working at a startup Fair, I concede my point based on this premise.
klmr 8y ago
That’s (substantially) more than I have as #5 at a startup. Truth be told I didn’t pay attention to this when joining because at the time they hadn’t yet set up their EMIs and I was told that negotiating for share options is pointless since their expected value is close to zero. So, if I had insisted I could probably have gotten more. But it’s neither unheard-of, nor even particularly rare from what I’ve heard (in the UK).
cik 8y ago
This number makes complete sense. I was a 'key employee' once upon a time - in a startup that had just raised f&f, and I received a FULL 2% (unheard of for Canada). Fast forward through the (usual) reality of 6 rounds of dilution, and my 2% was worth less than 0.02%. If the startup went from a $2M valuation to $200M (as it did) then my take would have been $40K. Do with that what you will.
- smallgovt 8y ago
  It sounds like your startup was unfortunately an outlier with respect to the level of dilution experienced. 99% dilution over 6 rounds is far from 'usual reality'. More common is 20% dilution per round.
  - vkou 8y ago
    It was also an outlier, in the sense that it had a valuable exit. You've only got one lifetime to pull the equity slot machine, hoping that the reels come up all sixes.
  - eanzenberg 8y ago
    6 rounds of 20% dilution will get you to 74% total dilution from the initial grant.
    - Zephyr314 8y ago
      Which in this case nets you >$1M [0] vs the 80k quoted above. This also assumes no retention grants over 6 rounds. [0]: 0.02*0.8^6*$200,000,000 = $1,048,576
- rubicon33 8y ago
  Something I am always curious about is, was your company / CEO open and honest with you about how your shares were doing? If you worked somewhere for 5 years, it could be easy to think you're safe but meanwhile the CEO is diluting your equity to fractions of what it originally was? Don't they have to report that to employees?
icedchai 8y ago
Dilution isn't all that matters. There's also investor liquidation preferences that can drastically change the outcome.
kyleblarson 8y ago
Liquidation pref for investors with preferred shares.

jatins 8y ago

I am the OP. I think it was because I was an overseas employee and the founders just didn't shell out equity to people who were not based out of US. I saw the equity distribution sheet that was disclosed after the acquisition as part of legal requirements and that was indeed true. IMO, equity represents ownership in the company and should not depend on purchase parity.

thefujin 8y ago
I think you should've mentioned this in your blog post, especially if you're comparing the money you've made from equity to new college grad salary at Facebook
rpm33 8y ago
>I think it was because I was an overseas employee and the founders just didn't shell out equity to people who were not based out of US. Isn't that illegal ?
- ellisv 8y ago
  Why would it be illegal?

LAMike 8y ago

He's from India, I think it's not as common to get a big equity package as some startups in the US. I was confused too

LargeWu 8y ago

I worked at a company for roughly five years, that sold for 250M. When I was hired I was like 4th engineer, but by the time I left I had 2nd most seniority in engineering. Exercised my mostly vested options when I left. I got mid-5 figures. In the year following my departure to BigCo, the difference in my salary was more than what my options ended up being worth. One of the C-level guys who was there for 8 months when the company sold made 100x what I got. He wasn't a founder. He came on late in the game and basically had nothing invested. That's why working for a startup hoping to get rich is a sucker's bet. The game is rigged against you unless you're a company officer.

eanzenberg 8y ago
What was your equity grant by %?
- LargeWu 8y ago
  They were ISO's, I only knew how many shares I was granted, but by the time of the exit, following several rounds of funding, it ended up being around 0.02%.
  - askafriend 8y ago
    This is the context everyone needs to share when telling their story of startup compensation. It very much looks like you got screwed on equity even before dilution. An early and somewhat senior employee should be getting anywhere from 0.5% to 1%. If the company is high quality, raised funding on standard terms and is actually successful, you'll still get diluted but not down to 0.02%. Your comp sounds off by an order of magnitude based on what I can infer. The fact that you didn't know how many total shares were outstanding at the time you were granted your ISO options is more proof that you likely got screwed. Not all startups are like this.
    - xmly 8y ago
      It depends on how much cash salary you received. If they pay cash a lot, the equity part is not worth that much.

misthop 8y ago

I'm guessing a bad options grant. I worked for a bootstrapped company that had some minimal investment and equity. Company sold for ~$12Mil and I pocketed 80K, on top of a market salary