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A startup makes sense if you are looking to do something different or to expand you skillset. Working at a major corporation can feel stifling over time. The im

A startup makes sense if you are looking to do something different or to expand you skillset. Working at a major corporation can feel stifling over time. The important thing to understand that there is almost 0% chance that your "1-4%" ownership will ever be more than 6 figures.

pc86 6y ago
Almost a 0% chance it will be worth anything more than $0 and, maybe, a good story.
- ericd 6y ago
  This is a commonly repeated trope, I guess it's to inoculate people from being "suckered in", but it hasn't been true from what I've seen, having lots of friends involved startups. Even "failing" startups frequently get acquihired for non-trivial amounts per person, and since the point of that is to get the people, those amounts typically go to retaining the people. And many of the people I've known have done really well by employee equity, a couple with multiple 7 figure payoffs, some with instant retirement amounts, a couple with serious maybe-I-buy-a-jet megawealth. It's not guaranteed like a FAANG salary (which actually isn't completely, the past few years have seen great stock appreciation), usually it takes a few rolls of the dice, but it's just not accurate to describe it as a definite 0. Startup selection ability pays a serious role here, I've seen people whose picks I shake my head at consistently, and some people who can home in on successful ones like heatseeking missiles. If you're the type to take the story of a business person about lofty valuations and prospects at face value, though, you're probably going to have a bad time and end up bitter and talking about how bad a deal startups are on the internet.
  - TuringNYC 6y ago
    Selecting at random, i'd disagree with you. Selecting with loaded dice sounds intriguing. Can you please share some high level selection criteria to evaluate potential startup employers? The only one i follow is repeat-founder-previous-exit.
    - ericd 6y ago
      Like investing in companies, its not a list of hard and fast criteria. You have to ask yourself if you could reasonably see this company being huge ($10B+) - do they have a great product? Does this have an aha! feel like Stripe and Dropbox did at their public launches? Do the founders really understand their market well? What are the risks - is this a hardware startup in a totally new market? Is the market saturated? How do people feel about the existing products? And do the founders respect you enough to share cap table/preference overhang, the percentage your equity stake represents, and growth metrics? Also, value your equity stake at the current valuation, not a future one - the current valuation already has the expected future growth priced in. What is that equity grant worth per year that it vests? Do you need a larger grant to make it worth the salary disparity vs your other offers? But basically, you really need to do your homework and treat it like you’re making an investment.
      - TuringNYC 6y ago
        Thanks for the detail. For everyone else, the last point is CRUCIAL > treat it like you’re making an investment Remember, if you are giving up a market total-comp package (e.g., 200 or 300k+) for a below-market startup package -- you are literally investing the difference. Treat the difference as an investment. Also keep in mind, unlike public stock or real estate investments this major, you also often have no visibility into financials -- discount for that. You also cant sell when you may need to -- discount for that also. Unlike a property or stocks, you dont get interim dividends/yield -- discount for that also. You may also be forced to invest heavily or forgo stock if you leave the company -- discount for that.
        bob33212 6y ago
        You may have different goals than the investors or owners of the company. Maybe you are happy to sell if that means you get 5M, but the investors are looking to add a "Unicorn" to their resume. They are willing to risk your 5M for that, and you don't get a say.
hn_throwaway_99 6y ago
Agreed, but that's why my argument is that if you have the chance to work at a FAANG, work there first, then you can easily afford to take time off and do whatever you want after a few years.
TuringNYC 6y ago
And that is if you even have 1-4%. It is common to get 5,000 or 10,000 or some other amount of options/shares while having now access to the cap table -- you know the numerator but not the denominator and no details on preference. The only realistic value to assign is zero.

pc86 6y ago

Almost a 0% chance it will be worth anything more than $0 and, maybe, a good story.

ericd 6y ago
This is a commonly repeated trope, I guess it's to inoculate people from being "suckered in", but it hasn't been true from what I've seen, having lots of friends involved startups. Even "failing" startups frequently get acquihired for non-trivial amounts per person, and since the point of that is to get the people, those amounts typically go to retaining the people. And many of the people I've known have done really well by employee equity, a couple with multiple 7 figure payoffs, some with instant retirement amounts, a couple with serious maybe-I-buy-a-jet megawealth. It's not guaranteed like a FAANG salary (which actually isn't completely, the past few years have seen great stock appreciation), usually it takes a few rolls of the dice, but it's just not accurate to describe it as a definite 0. Startup selection ability pays a serious role here, I've seen people whose picks I shake my head at consistently, and some people who can home in on successful ones like heatseeking missiles. If you're the type to take the story of a business person about lofty valuations and prospects at face value, though, you're probably going to have a bad time and end up bitter and talking about how bad a deal startups are on the internet.
- TuringNYC 6y ago
  Selecting at random, i'd disagree with you. Selecting with loaded dice sounds intriguing. Can you please share some high level selection criteria to evaluate potential startup employers? The only one i follow is repeat-founder-previous-exit.
  - ericd 6y ago
    Like investing in companies, its not a list of hard and fast criteria. You have to ask yourself if you could reasonably see this company being huge ($10B+) - do they have a great product? Does this have an aha! feel like Stripe and Dropbox did at their public launches? Do the founders really understand their market well? What are the risks - is this a hardware startup in a totally new market? Is the market saturated? How do people feel about the existing products? And do the founders respect you enough to share cap table/preference overhang, the percentage your equity stake represents, and growth metrics? Also, value your equity stake at the current valuation, not a future one - the current valuation already has the expected future growth priced in. What is that equity grant worth per year that it vests? Do you need a larger grant to make it worth the salary disparity vs your other offers? But basically, you really need to do your homework and treat it like you’re making an investment.
    - TuringNYC 6y ago
      Thanks for the detail. For everyone else, the last point is CRUCIAL > treat it like you’re making an investment Remember, if you are giving up a market total-comp package (e.g., 200 or 300k+) for a below-market startup package -- you are literally investing the difference. Treat the difference as an investment. Also keep in mind, unlike public stock or real estate investments this major, you also often have no visibility into financials -- discount for that. You also cant sell when you may need to -- discount for that also. Unlike a property or stocks, you dont get interim dividends/yield -- discount for that also. You may also be forced to invest heavily or forgo stock if you leave the company -- discount for that.
      - bob33212 6y ago
        You may have different goals than the investors or owners of the company. Maybe you are happy to sell if that means you get 5M, but the investors are looking to add a "Unicorn" to their resume. They are willing to risk your 5M for that, and you don't get a say.

hn_throwaway_99 6y ago

Agreed, but that's why my argument is that if you have the chance to work at a FAANG, work there first, then you can easily afford to take time off and do whatever you want after a few years.

TuringNYC 6y ago

And that is if you even have 1-4%. It is common to get 5,000 or 10,000 or some other amount of options/shares while having now access to the cap table -- you know the numerator but not the denominator and no details on preference. The only realistic value to assign is zero.