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This strikes me as idealist and disconnected from reality. This is how some engineers think they should be paid without ever seeing the other side. - the first

This strikes me as idealist and disconnected from reality. This is how some engineers think they should be paid without ever seeing the other side. - the first year has a lot more risk than future years - often, you pay yourself less when starting out - raising money is hard - finding your first customers is hard - building from zero with no paying customers is much harder than adding features or reimplementing - quitting your job is hard I’m not saying that maybe early employees might deserve more equity, but to suggest that contributions in year 2 of a startup are somehow equal to those of the first year is laughable to me. Maybe strictly from coding contributions, but there’s office space, culture, vision, etc. If it was that easy, that person joining would have started their own.

wayoutthere 7y ago
I don’t know how others have done this; but when I’ve been involved in the past we have set aside a percentage of ownership to be distributed over the first few years of operation. A fixed amount is distributed every year, split between team members more or less evenly. This means that the 1 or 2 folks who join early get a big chunk of equity, and everyone else gets less while the early employees continue to accrue shares. The benefit of a system like this is that it allows you to be transparent. This is outside of executive hires, where equity is used for a different purpose (namely aligning the financial success of the company with the financial success of the individual). All that said, I don’t believe startup equity is valued by tech workers older than 25. We’ve all been burned enough to have looked up the stats and realize that upwards of 75% of startups will never experience a liquidity event, and for those that do a multi-million dollar exit is a lot like winning the lottery — with similar odds. Most folks just end up with a bunch of out of the money options or some penny stock that’s not worth the trouble of selling.
iandanforth 7y ago
This comment strikes me as idealistic and disconnected from reality. It idealizes the mythos of risk/reward/effort for founders while minimizing the risk and effort of later employees. Founders work very hard, but I know people at Apple who work harder. Founders take financial risks, but I know people who've taken pay-cuts an order of magnitude larger than bootstrap costs to get 1% of a company that ultimately failed. The reality is that there are no objective, consistent metrics which map risk to equity or effort to equity, all we have is cultural norms, pretending otherwise is a self-serving narrative.
- Kinnard 7y ago
  Have you started a company and made it successful?
  - andrepd 7y ago
    I've never held public office, yet I'm perfectly justified in complaining about politicians. I've never played football, yet I'm perfectly justified in yelling at my team's players on the tv. What's the point of your argument?
  - iandanforth 7y ago
    No. I've been a part of five startups, one which I founded, three are still going, one very well, the other two died (including the one I started.)
- tptacek 7y ago
  I don't know about "idealistic", but the parent commenter is right that this proposal is disconnected from reality; that's objectively true.
- JamesBarney 7y ago
  > but I know people who've taken pay-cuts an order of magnitude larger than bootstrap costs to get 1% of a company that ultimately failed. Starting a company can easily be a 70-100% paycut. If someone took a paycut that large for 1% of a company that was just a terrible and I don't think representative decision of a first employee.
em-bee 7y ago
the salary a person gets paid should be a factor in the calculation. if i work for 2 years and get paid 50K then i should own more than the person who works one year and got paid 100K.
- in_hindsight 7y ago
  Also not taking a salary should be rewarded much more because you are not just not getting paid you are actively going into the negative / red personally
  - em-bee 7y ago
    indeed, it should be rewarded as an equivalent investment.

wayoutthere 7y ago

I don’t know how others have done this; but when I’ve been involved in the past we have set aside a percentage of ownership to be distributed over the first few years of operation. A fixed amount is distributed every year, split between team members more or less evenly. This means that the 1 or 2 folks who join early get a big chunk of equity, and everyone else gets less while the early employees continue to accrue shares. The benefit of a system like this is that it allows you to be transparent. This is outside of executive hires, where equity is used for a different purpose (namely aligning the financial success of the company with the financial success of the individual). All that said, I don’t believe startup equity is valued by tech workers older than 25. We’ve all been burned enough to have looked up the stats and realize that upwards of 75% of startups will never experience a liquidity event, and for those that do a multi-million dollar exit is a lot like winning the lottery — with similar odds. Most folks just end up with a bunch of out of the money options or some penny stock that’s not worth the trouble of selling.

iandanforth 7y ago

This comment strikes me as idealistic and disconnected from reality. It idealizes the mythos of risk/reward/effort for founders while minimizing the risk and effort of later employees. Founders work very hard, but I know people at Apple who work harder. Founders take financial risks, but I know people who've taken pay-cuts an order of magnitude larger than bootstrap costs to get 1% of a company that ultimately failed. The reality is that there are no objective, consistent metrics which map risk to equity or effort to equity, all we have is cultural norms, pretending otherwise is a self-serving narrative.

Kinnard 7y ago
Have you started a company and made it successful?
- andrepd 7y ago
  I've never held public office, yet I'm perfectly justified in complaining about politicians. I've never played football, yet I'm perfectly justified in yelling at my team's players on the tv. What's the point of your argument?
- iandanforth 7y ago
  No. I've been a part of five startups, one which I founded, three are still going, one very well, the other two died (including the one I started.)
tptacek 7y ago
I don't know about "idealistic", but the parent commenter is right that this proposal is disconnected from reality; that's objectively true.
JamesBarney 7y ago
> but I know people who've taken pay-cuts an order of magnitude larger than bootstrap costs to get 1% of a company that ultimately failed. Starting a company can easily be a 70-100% paycut. If someone took a paycut that large for 1% of a company that was just a terrible and I don't think representative decision of a first employee.

em-bee 7y ago

the salary a person gets paid should be a factor in the calculation. if i work for 2 years and get paid 50K then i should own more than the person who works one year and got paid 100K.

in_hindsight 7y ago
Also not taking a salary should be rewarded much more because you are not just not getting paid you are actively going into the negative / red personally
- em-bee 7y ago
  indeed, it should be rewarded as an equivalent investment.