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The problem is that some people need money and can't say no. That's why anybody works for minimum wage... The executives and investors and FAANG engineers have

The problem is that some people need money and can't say no. That's why anybody works for minimum wage... The executives and investors and FAANG engineers have all made good money and seen decent RSU terms, you can't pull the wool over their eyes. Someone who is just getting into tech may be allured by a 50k salary and "1 MILLION OPTIONS!!!!" (There are ten trillion in the option pool). I think engineers would do well to know that you are a COST CENTER to the business and the people who run it. They need you to make their product so they can make money but they hire you begrudgingly. You are in their power and they want to take advantage of you by paying you the least they can (shady options awards) and working you as much as possible (why did you slip on this feature you story pointed!!!). Put yourselves in their shoes and you would do the same. Starting a successful business is all about customer growth and making money. If you aren't directly responsible for a part of that then you are a cost. Make sure you are getting paid what you are worth because nothing in this world gets built without great engineers, but the system is run by people who want to have power over you. Be careful.

chii 6y ago
> The problem is that some people need money and can't say no. If they need money, and this is the best offer they got, then what's the problem with accepting it? They are still better off than not accepting it.
- smattiso 6y ago
  No problem with that. The problem I have is with selling people bullshit golden promises of wealth when that is mathematically impossible given the cap table. Just don't even offer equity at all at that point so employees aren't deluded. At this point I know what I'm doing enough to not get burnt by these types of scams, and when I was an engineer I was lucky to basically work for FAANGs the whole time where they are very charitable to employees. But when I was 23 I didn't have the knowledge to evaluate pre-ipo equity and some startups prey on this information imbalance to delude people.
- solarkraft 6y ago
  Of course there's no issue with that. I think the point is to know your options and worth. If you have a low offer but no other options that's "fair" in a sense. If you can get something it'd be pretty silly to accept a bad deal, however.
- compiler-guy 6y ago
  The problem is that evaluating whether or not this is the "best" offer depends in great measure on how one values the options one is getting. And many founders are all sunshine and roses about that--just as the article portrays. Nothing wrong with taking your best offer. Everything wrong with misleading potential employees about what the offer means.
xur17 6y ago
> Someone who is just getting into tech may be allured by a 50k salary and "1 MILLION OPTIONS!!!!" This reminds me of a job offer from a startup I interviewed with that offered me a specific number of options, but wouldn't tell me anything that I could use to value them, effectively forcing me to value them at $0.
- Analemma_ 6y ago
  You should always value options at $0 even if they do give you information. Take the probability that the company won't go under, multiplied by how much you'll lose in further dilution rounds, multiplied by the likelihood that you'll get screwed by some other kind of dirty-dealing, and startup equity almost always comes out to be worthless. Work at one anyway if you want the experience, but never kid yourself that your options will amount to anything.
  - GauntletWizard 6y ago
    The real way to get rich by working at a startup is to advance your career while there - Gain experience and title increases at a startup, where such experience and title increases are easy to get because of the relative lack of competition. Iff you startup makes it big, ask for commensurate raises. Otherwise, leverage that experience into working for a larger company that will pay more.
  - alasdair_ 6y ago
    >You should always value options at $0 even if they do give you information. If the company has meaningful revenue and a solid margin AND they have already paid out to employees in previous liquidity events, it's pretty likely the options have value above zero.
    - icedchai 6y ago
      If that is the case, you're not working at a startup. You're working at a actual, real, proven business.
lumost 6y ago
I've seen startups willingly train their new employees to think about equity in broken or meaningless terms. Early in my career I sat through a discussion of equity with a VP of engineering where they explained that our options would always be priced ~$4 on acquisition and $12 on IPO. The finance people would always just make it work that way regardless of the number of options in the pool and the total valuation. I also once joined a company to be told 3 months in that the board was not approving any new-hire grants as the valuation/appraisal work had expired - and that it wasn't reasonable for me to ask them to pay 90k just to approve the options they had granted. At this point in my career having worked in FAANG, I wouldn't value private equity at all unless I could take 20-50% of the company. It's not even a lottery ticket anymore, and has just become a way for executives to exploit information asymmetry. I'd be curious if any startups have explored venture debt arrangements with employees to guarantee that they receive meaningful deferred compensation. Or if there are other mechanisms to publicly show that the equity is meaningful in most successful outcomes.
- icedchai 6y ago
  yup. we went through a down round at a previous company. if i were to exercise my options, I'd be immediately down 50%. some "incentive."
mooreds 6y ago
> I think engineers would do well to know that you are a COST CENTER to the business and the people who run it. They need you to make their product so they can make money but they hire you begrudgingly. I don't agree. Engineers are sometimes a cost center, but they can also be a profit center. You can help revenue by decreasing expenses by automating something or noticing how the business is wasting money w/r/t tech and taking steps to help fix that. You can also help revenue by increasing sales by building something, internal or external, that can either be sold or help sales. But your larger point is correct. When you are starting at a company, know how your efforts are connected to revenue and sales. If your interviewer can't answer how they will be, find someone who can. I wrote a bit more about understanding the business here: https://letterstoanewdeveloper.com/2018/10/12/understand-the-business/ https://letterstoanewdeveloper.com/2018/10/12/understand-the...
- rrrrrrrrrrrryan 6y ago
  > You can help revenue by decreasing expenses by automating something or noticing how the business is wasting money w/r/t tech and taking steps to help fix that I once worked with a process engineer who, a few months after being hired, had identified a number of manual processes as low hanging fruit that could be easily automated. He presented his findings to upper management, argued that they should let him build out a team to automate these processes, and that they could fund it with the headcount he's able to reduce. Management gave him the green light, adjusted his budget each quarter based on how much money he had saved the company over the previous quarter, and over a few years he was immensely successful. You'll be treated as a cost center so long as you let other people think of you as a cost center, but if you can frame your contributions in a way that makes your value proposition obvious, it's possible to be treated differently while doing largely the same work.
  - mooreds 6y ago
    > You'll be treated as a cost center so long as you let other people think of you as a cost center, but if you can frame your contributions in a way that makes your value proposition obvious, it's possible to be treated differently while doing largely the same work. So true! I have to drop this link, as it does a much better job than any number of comments at explaining this: https://www.kalzumeus.com/2011/10/28/dont-call-yourself-a-programmer/ https://www.kalzumeus.com/2011/10/28/dont-call-yourself-a-pr...
vinay_ys 6y ago
Engineers consume capital that was raised to produce highly valuable products that create enterprise value that justify the capital that was raised. Those who call engineers as cost centers in today's world are doomed because they don't understand what's the most value creating activity in their value chain.

chii 6y ago

> The problem is that some people need money and can't say no. If they need money, and this is the best offer they got, then what's the problem with accepting it? They are still better off than not accepting it.

smattiso 6y ago
No problem with that. The problem I have is with selling people bullshit golden promises of wealth when that is mathematically impossible given the cap table. Just don't even offer equity at all at that point so employees aren't deluded. At this point I know what I'm doing enough to not get burnt by these types of scams, and when I was an engineer I was lucky to basically work for FAANGs the whole time where they are very charitable to employees. But when I was 23 I didn't have the knowledge to evaluate pre-ipo equity and some startups prey on this information imbalance to delude people.
solarkraft 6y ago
Of course there's no issue with that. I think the point is to know your options and worth. If you have a low offer but no other options that's "fair" in a sense. If you can get something it'd be pretty silly to accept a bad deal, however.
compiler-guy 6y ago
The problem is that evaluating whether or not this is the "best" offer depends in great measure on how one values the options one is getting. And many founders are all sunshine and roses about that--just as the article portrays. Nothing wrong with taking your best offer. Everything wrong with misleading potential employees about what the offer means.

xur17 6y ago

> Someone who is just getting into tech may be allured by a 50k salary and "1 MILLION OPTIONS!!!!" This reminds me of a job offer from a startup I interviewed with that offered me a specific number of options, but wouldn't tell me anything that I could use to value them, effectively forcing me to value them at $0.

Analemma_ 6y ago
You should always value options at $0 even if they do give you information. Take the probability that the company won't go under, multiplied by how much you'll lose in further dilution rounds, multiplied by the likelihood that you'll get screwed by some other kind of dirty-dealing, and startup equity almost always comes out to be worthless. Work at one anyway if you want the experience, but never kid yourself that your options will amount to anything.
- GauntletWizard 6y ago
  The real way to get rich by working at a startup is to advance your career while there - Gain experience and title increases at a startup, where such experience and title increases are easy to get because of the relative lack of competition. Iff you startup makes it big, ask for commensurate raises. Otherwise, leverage that experience into working for a larger company that will pay more.
- alasdair_ 6y ago
  >You should always value options at $0 even if they do give you information. If the company has meaningful revenue and a solid margin AND they have already paid out to employees in previous liquidity events, it's pretty likely the options have value above zero.
  - icedchai 6y ago
    If that is the case, you're not working at a startup. You're working at a actual, real, proven business.

lumost 6y ago

I've seen startups willingly train their new employees to think about equity in broken or meaningless terms. Early in my career I sat through a discussion of equity with a VP of engineering where they explained that our options would always be priced ~$4 on acquisition and $12 on IPO. The finance people would always just make it work that way regardless of the number of options in the pool and the total valuation. I also once joined a company to be told 3 months in that the board was not approving any new-hire grants as the valuation/appraisal work had expired - and that it wasn't reasonable for me to ask them to pay 90k just to approve the options they had granted. At this point in my career having worked in FAANG, I wouldn't value private equity at all unless I could take 20-50% of the company. It's not even a lottery ticket anymore, and has just become a way for executives to exploit information asymmetry. I'd be curious if any startups have explored venture debt arrangements with employees to guarantee that they receive meaningful deferred compensation. Or if there are other mechanisms to publicly show that the equity is meaningful in most successful outcomes.

icedchai 6y ago
yup. we went through a down round at a previous company. if i were to exercise my options, I'd be immediately down 50%. some "incentive."

mooreds 6y ago

> I think engineers would do well to know that you are a COST CENTER to the business and the people who run it. They need you to make their product so they can make money but they hire you begrudgingly. I don't agree. Engineers are sometimes a cost center, but they can also be a profit center. You can help revenue by decreasing expenses by automating something or noticing how the business is wasting money w/r/t tech and taking steps to help fix that. You can also help revenue by increasing sales by building something, internal or external, that can either be sold or help sales. But your larger point is correct. When you are starting at a company, know how your efforts are connected to revenue and sales. If your interviewer can't answer how they will be, find someone who can. I wrote a bit more about understanding the business here: https://letterstoanewdeveloper.com/2018/10/12/understand-the-business/ https://letterstoanewdeveloper.com/2018/10/12/understand-the...

rrrrrrrrrrrryan 6y ago
> You can help revenue by decreasing expenses by automating something or noticing how the business is wasting money w/r/t tech and taking steps to help fix that I once worked with a process engineer who, a few months after being hired, had identified a number of manual processes as low hanging fruit that could be easily automated. He presented his findings to upper management, argued that they should let him build out a team to automate these processes, and that they could fund it with the headcount he's able to reduce. Management gave him the green light, adjusted his budget each quarter based on how much money he had saved the company over the previous quarter, and over a few years he was immensely successful. You'll be treated as a cost center so long as you let other people think of you as a cost center, but if you can frame your contributions in a way that makes your value proposition obvious, it's possible to be treated differently while doing largely the same work.
- mooreds 6y ago
  > You'll be treated as a cost center so long as you let other people think of you as a cost center, but if you can frame your contributions in a way that makes your value proposition obvious, it's possible to be treated differently while doing largely the same work. So true! I have to drop this link, as it does a much better job than any number of comments at explaining this: https://www.kalzumeus.com/2011/10/28/dont-call-yourself-a-programmer/ https://www.kalzumeus.com/2011/10/28/dont-call-yourself-a-pr...

vinay_ys 6y ago

Engineers consume capital that was raised to produce highly valuable products that create enterprise value that justify the capital that was raised. Those who call engineers as cost centers in today's world are doomed because they don't understand what's the most value creating activity in their value chain.