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>The ultimate realization was in a startup you have equity, a decent amount in a good startup. At Microsoft it was a base salary and set amount of stock. I joi

>The ultimate realization was in a startup you have equity, a decent amount in a good startup. At Microsoft it was a base salary and set amount of stock. I joined a startup in 1999. There were 3 founders and I was employee #2 after that. I received a ton of options (this was before RSUs became popular). We had a great product and a great team, but 18 months later ran out of money and unfortunately it was right after the dotcom implosion of early 2001 when funding had completely dried up. My takeaway was that base salary is actually the most important component of TC. Cash bonus based on some metric that you control comes second. Equity comes third. If you work for a FAANG, maybe equity can move higher up (though it remains to be seen how long this will be true). Outside of FAANG (and top executives at F500 sized public companies) very few people are getting rich off of the "equity" component of their TC. The vast majority of startups go bust before IPO or acquisition. Time is the most valuable commodity you have, don't squander it for lottery tickets and empty promises.

marcinzm 6y ago
>Time is the most valuable commodity you have, don't squander it for lottery tickets and empty promises. That goes the other way around too, the only way to have massive amounts of free time without going FIRE is to win the lottery. So why not throw the dice once or twice when you're young and then settle into a stable corporate job if it doesn't pay out?
- Swizec 6y ago
  Modern Silicon Valley lets you do both. Why not throw the dice and still make around $200k cash? As a [good] engineer you can have your cake and eat it too. Sure it won’t make you a billionaire but you can live a comfy life, maybe win the lottery, and retire at 50 if the lottery fails.
  - westurner 6y ago
    Living and working elsewhere with the wages of the region reduces expenses and opportunities; but the wealth of educational resources online [1][2] does make it feasible to even bootstrap a company on the side. Do you need to borrow money to scale quickly enough to pay expenses with sufficient cash flow for the foreseeable future? Income sources: Passive income, Content, Equity that's potentially worth nothing, a backtested diversified portfolio (Golden Butterfly or All Weather Portfolio and why?) of sustainable investments, Business models [3]; Software implementations of solutions to businesses, organizations, and/or consumers' opportunities Single-payer / Universal Healthcare is a looming family expense for many entrepreneurs; many of whom do get into entrepreneurship later in life. Small businesses make up a significant portion of GDP. Small businesses have to have to accept risk. There's still opportunity in the world. [1] Startup School > Curriculum https://www.startupschool.org/curriculum https://www.startupschool.org/curriculum [2] https://www.ycombinator.com/library https://www.ycombinator.com/library [3] "Business models based on the compiled list at [HN]" https://gist.github.com/ndarville/4295324 https://gist.github.com/ndarville/4295324 From "Why companies lose their best innovators (2019)" https://news.ycombinator.com/item?id=23887903 https://news.ycombinator.com/item?id=23887903 : > "Intrapreneurial." What does that even mean? The employee, within their specialized department, spends resources (time, money, equipment) on something that their superior managers have not allocated funding for because they want: (a) recognition; (b) job security; (c) to save resources such as time and money; (d) to work on something else instead of this wasteful process; (e) more money.
    - ryandrake 6y ago
      I’d you are going to start something on the side, carefully read your current employment agreement, particularly the part about IP assignment. Most Silicon Valley companies I’ve worked with, including FAANGs, claim ownership of everything you produce, inside or outside of employment, at home or in office, using their equipment or yours. You don’t want to lick into a unicorn idea and have your former employer’s lawyers send you that letter...
      - moneywoes 6y ago
        Are these actually enforceable?
        ryandrake 6y ago
        It probably doesn’t matter in practice. They will have more lawyers and more money to burn on legal process than you. Who will go bankrupt first fighting a legal battle between you and, say, Apple?
        ptudan 6y ago
        The only time they'd actually sue is if you made something worth money. in that case, there's a good chance you can get investors to pay the lawsuit.
        triceratops 6y ago
        Investors would check if you were subject to an IP assignment clause in your employment contract prior to investing. It's part of basic due diligence. They would then most likely pass on the investment.
        lotsofpulp 6y ago
        It does matter in practice in California.
        dv_dt 6y ago
  - tjs8rj 6y ago
    By the time a startup can pay you serious base cash compensation, I don’t think it’s likely they could also pay you serious equity compensation as an individual contributor. There’s no lottery ticket there, just trade offs. A lottery ticket is usually huge payoff or nothing. $500k or less, even a million or less doesn’t really sound like a lottery ticket (not to downplay how life changing that payoff could be). Philosophically the lottery ticket scenario is your own startup or early startup employee, where your rationalization is >$10 mil or bust. Either certified “seriously rich” anywhere in the world or you just wasted your time. That’s a asymmetric payoff of a lottery ticket
    - Swizec 6y ago
      I mean it depends right? Even employee 1000 at Google made many millions. And it’s rumored that the Lyft IPO made several hundred millionaires. Hell, a friend of mine made about 1mil at IPO (on paper) and she’s a tech support manager. Not sure how early she joined but always said the cash was her highest salary ever.
Viliam1234 6y ago
In my humble opinion, Bitcoin is a better lottery that equity, because it does not require you to work till 2am in morning. Instead of equity, ask for higher salary, and invest the difference in cryptocurrencies, stock market, and even the old-fashioned lottery. Maybe a bit of everything, to balance the portfolio. Your chances are not worse, and you can go sleep before the midnight.
- iancmceachern 6y ago
  Great thought! It doesn't have to be crypto, it could be any reasonable investment...
  - sharkweek 6y ago
    Friend of mine left MSFT back in the early 2010s for a startup that is set to IPO in the next year or two if all the prevailing winds remain relatively similar. He'll do pretty well in the IPO because he has some of those early enough options as one of the first 25ish employees. BUT!!!He left MSFT at $30-40ish a share, now worth $240 a share. Unfortunately, he divested most of it into more general index which has been fine, but not 6x. He would have EASILY covered whatever money he's likely to make in the IPO by just staying at Microsoft and holding company shares for the last 9 years, and in fact probably would have made way more given stock rewards/promotions/salary increases etc. That being said, he has enjoyed working at the startup and it has propelled him into a role that he wouldn't have been in at MSFT or any other big company so there is that to consider as well.
    - t0mas88 6y ago
      Investing in the right single stock always outperforms the index. But risk adjusted returns may not be better than a diversified portfolio, Microsoft could also have dropped due to some scandal whereas the downside risk of a balanced portfolio is much smaller.
      - sharkweek 6y ago
        Absolutely, and him and I both know this, but... I still like to remind him of it (only because we're close enough to prod each other like this).
harikb 6y ago
The thing most people forget about options & RSU is that one is taking away a big chunk of the TC and delay it to a future year. Even when you hate your job, you will be hesitant to leave the company because of FOMO and sunk cost fallacy That said, anecdotally, every one of my close circle of friends made decent amount money from equity (one of the many companies they worked at did very well) - far higher than the 10% stat that I hear talked about. May be the last two decades was lucky for this group of people.
- dhosek 6y ago
  I have never had a stock option that was worth as much as a penny in the course of my career. In one case, a “can't lose” employee stock purchase program (where you put aside money for purchase and at the end of the year you would get stock bought at the lower of the price at the beginning and end of the purchase period with a 10% discount on top of that) ended up being a loss because the stock dropped 50% between the purchase of shares and delivery of the shares. The company was eventually bought out by 3M and I got a hundred bucks or so out of my initial investment (which was, thankfully only a thousand or two, if I recall correctly).
  - laurent92 6y ago
    A company sold for 3 million is... I mean, in average, I see that the worth is about 1m$ per employee. If you sold for less, your stock performed poorly compared to others. Maybe the product or the engineering was great, but on the wrong market or never met its window. Business is difficult. The question is, would you have had excellent returns if the company had been worth $1m per employee?
    - Cd00d 6y ago
      I think OP was saying the company 3M bought the startup. Not that the startup was sold for $3mm.
    - saalweachter 6y ago
      In addition to the $3m/3M confusion, don't forget preferential liquidation. If you own 10% of a company and it sells for 2x the invested value, you might get < 5% of the sale price yourself once the investors are taken care of.
CydeWeys 6y ago
> Equity comes third. If you work for a FAANG, maybe equity can move higher up (though it remains to be seen how long this will be true). Tech companies are the largest companies in the US economy these days. They are the economy. For better or worse they're now too big to fail, and in some severe recession they would end up being bailed out like the banks were in 2008 since the alternative is a complete economic implosion. I treat my RSUs as cash that has some variance to it (less variance than crypto, and roughly the same as the stock market overall). I even auto-sell them.
g9yuayon 6y ago
Startup is not a lottery. Working for startup is risky, but the key is to build a system that increases your accumulated probability of success -- this is exactly why it's important to live in the bay area and work for some startups there, at least before the Covid-19. You get to see a large number of people who didn't fund any company, but still became financially independent or built an explosive career by choosing to join the right companies at the right time. You get to see how those people make their choices. You get to see how those people decide to jump ship. You get to build a social circle where you learn lots of first-hand information about startups. Yes, it's still risky to join a startup, but no it's not a lottery. The chance of being rewarded handsomely is orders of magnitude higher than buying lottery.
- jjeaff 6y ago
  I wonder how many people each year make at least $1m from startup equity appreciation (that is actually liquid). Because it's between 1500 and 2000 people that win at least $1m in lotteries in the US every year. Granted, lots more people play the lottery than start or join a startup, but it's an interesting comparison.
  - g9yuayon 6y ago
    I'm not sure if the calculation is correct. 2000 people winning lotteries out of at least millions of people, right? Yet in the startup word, it is thousands of people out a few hundreds of thousands? Another factor to consider is that your equity keeps giving, while lottery is a one-off deal.
    - CRConrad 6y ago
      But the GP's point pretty obviously wasn't a calculation of percentages, just comparing absolute numbers. As a percentage of the population it also holds, since that is the same whether you're looking at start-ups or rhe lottery. Another way to look at it is ease of entry: If you're already playing the lottery, also joining a start-up isn't all that easy (as you said yourself, the number who do is much lower). If you're already working at a start-up, OTOH, also playing the lottery...
wpietri 6y ago
As somebody who also has a bunch of lottery tickets that didn't pay off, I feel your pain. But I think there's a bit of hindsight bias to your conclusion. I think it's entirely reasonable for people to trade salary for equity. I also think it's reasonable to stick with cash. As long as people are making well-informed choices, I'm entirely fine with gambling on a positive-sum effort. That said, there are good questions about how much things have changed vs 25 years ago, how likely an early employee is to see a big payout on exit, and how much the fever for VC-backed startups distorts employee choices. But that's another rant.)
- jjeaff 6y ago
  There is also something to be said for the information asymmetry between employer and employee. From the outside, it is hard to know what the odds of winning really look like. Founders are always painting a rosy picture of how close we are to breaking out or getting that next huge round of funding. The reality may be totally different. Things may actually be rather bleak and they are hoping to just limp along, paying low salaries and giving out worthless stock in hopes that just maybe they will hit the startup lottery. At least with gambling, the house has to post the odds.
  - wpietri 6y ago
    Absolutely. And in addition to a pure information asymmetry, there's also a strong interpretive difference. A founder is generally going to be person who most believes in the company, so they'll value the stock more highly than anybody else. I think it's totally reasonable for a prospective employee to say, "I think the odds are good, but not that good" and lean toward cash. One formulation I've used that helps is to say, "From data source X, your market-rate comp package is $Y/year. You decide how much of $Y you want to use to buy in now, at a price set by the most recent investment round." That only works if the company has enough access to capital, of course. And it does set the price as that of the most optimistic VC the company could find. But I like that it takes it out of the realm of personality-based negotiation.
spoonjim 6y ago
The flip side is that I valued my equity at $0 when I joined but it’s now worth $2 million.
chokeartist 6y ago
> Time is the most valuable commodity you have, don't squander it for lottery tickets and empty promises. This should be the first thing someone sees when they load the Hacker News homepage.
trimbo 6y ago
> The vast majority of startups go bust before IPO or acquisition In recent times, these giant late rounds with the amount of preference given mean that when acquisition happens, it often doesn't pay out for regular employees/common stock. The common stock employees get is for the moon or bust, or hope an acquiring company is generous.
- ptmcc 6y ago
  The best many non-founders can hope for is a cushy acqui-hire deal. I've had several friends have the startups they worked for acquired, and their equity was worth nothing due to valuation and unfavorable liquidation preferences. They got a nice hiring package from a big company, but not significantly better than one can get from applying on your own. And the opportunity cost of taking a below-market wage for several years probably nets out to a loss in pure dollar terms.
alwaysdoit 6y ago
I actually lost money when the first company I worked for sold. At settle, I received a wire transfer for $7.22. The bank charged me a $15 incoming wire transfer fee.
kelnos 6y ago
I agree with your overall premise, but I think you and the parent are talking about fundamentally different things. If I'm at a startup and I'm constantly working 14 hour days, I want equity. Because I am not going to work 14 hour days (or even 10 hour days) for just a normal base salary. I mean, sure, I wouldn't mind instead taking 4x a normal base salary to work those 14 hour days, but no company (startup or established business) is going to give you that deal. That equity may end up being worth nothing over the long term, but by joining an early startup, I am betting on a solid founding team and the product, and the team's ability to execute. And because it's a small team, I'm betting that I personally can be a big component in whether or not the company succeeds or fails. (Often it'll succeed or fail despite what I do, but that's not the point.) We can debate the wisdom (with regard to productivity and health outcomes) of working habitual 14 hour days at all in the first place, but the bottom line is that if I'm going to be pouring so much of my life into something, I at least want the possibility (even if the probability is low) of a life-changing financial outcome. It's pretty rare that you're going to get that with a base salary, even at a larger, well-established, public company that has decently high growth. And I get it, some people just don't want to make the base vs. illiquid-equity trade off. An early-stage startup is probably not for those people anyway, and there's nothing wrong with that. I did it three times: one was a complete flop (after I'd paid to exercise options that became worthless shares), one was a mediocre flop (got out of there in under a year, knew they were incapable of shipping, turned out I was right), and one was more successful than I ever expected. And yet I'm happy I joined all three, even the first one. > Outside of FAANG (and top executives at F500 sized public companies) very few people are getting rich off of the "equity" component of their TC. Not even at* FAANG. A new hire (today) at one of those companies is not going to get a life-changing equity grant. A hire from back when they were relatively new companies (or, as with Apple, down in the dumps circa 2000) can get that. But, a hire at that point will be expected to work more (often much more) than a normal 8-hour day. I think people forget that a mulit-millionaire Googler who has been there since 2003 and is still there now is likely mainly rich because of the equity they got in the first 3 or 4 years. As companies mature, their equity comp declines rapidly. If that same person had joined Google 5 or 7 or even 10 years ago as an individual contributor, their equity comp would not make them rich; they're now getting most of their wealth from base salary. > The vast majority of startups go bust before IPO or acquisition. Right. And that's why you shouldn't join a startup because you expect to get rich. You should join because you like that style of work better than large-corporation life. But if they're going to expect you to pour your life into that startup, you should get a big chunk of equity that can -- if things work out -- compensate you for those long hours someday.
yibg 6y ago
I don't know if it's that black and white. The risk calculus changes based on stage of the startup for example. Joining doordash pre IPO is still more risky than google, but I there's some reasonable confidence it'll be of some value soon.
nojvek 6y ago
I'm not saying base salary is not important. It very much is. You need at-least somewhat a comfortable amount where money stops being a major issue. You can pay mortgage, go for a couple of vacations and have a decent amount in savings. At Microsoft, it would be hard to cross $10m over 5 years, unless you're a really big shot. At a startup that rises to be a deca-unicorn, if you joined 5-7 years ago, that would be possible. Dropbox, AirBnb, Doordash e.t.c probably minted quite a few deca-millionares on their IPOs. Entry level folks would have made that much. That's what I mean by equity and skin in the game. Sure, there is a lot more risk but your upside is also huge. You can see how your work moves top line ARR and incentivizes you to focus on customers and build what they want and will pay for. Sure at GOOG, MSFT, FB e.t.c once you go above senior to staff level, your equity/RSU component starts to be more valuable than the base salary. That's what I mean by skin in the game and proportional rewards. However those rewards can be unproportional once you have a large chain of managers. It incentivizes doing things that lead to climbing ladder rather than doing things that are good for your customers and long term ARR. Sometimes it's related, sometimes not. At a true startup, if it's unrelated the startup dies.
brailsafe 6y ago
Salary paid is salary owned. A company can only take away what they haven't given you. Options are not owned, only potentially owned.

marcinzm 6y ago

>Time is the most valuable commodity you have, don't squander it for lottery tickets and empty promises. That goes the other way around too, the only way to have massive amounts of free time without going FIRE is to win the lottery. So why not throw the dice once or twice when you're young and then settle into a stable corporate job if it doesn't pay out?

Swizec 6y ago
Modern Silicon Valley lets you do both. Why not throw the dice and still make around $200k cash? As a [good] engineer you can have your cake and eat it too. Sure it won’t make you a billionaire but you can live a comfy life, maybe win the lottery, and retire at 50 if the lottery fails.
- westurner 6y ago
  Living and working elsewhere with the wages of the region reduces expenses and opportunities; but the wealth of educational resources online [1][2] does make it feasible to even bootstrap a company on the side. Do you need to borrow money to scale quickly enough to pay expenses with sufficient cash flow for the foreseeable future? Income sources: Passive income, Content, Equity that's potentially worth nothing, a backtested diversified portfolio (Golden Butterfly or All Weather Portfolio and why?) of sustainable investments, Business models [3]; Software implementations of solutions to businesses, organizations, and/or consumers' opportunities Single-payer / Universal Healthcare is a looming family expense for many entrepreneurs; many of whom do get into entrepreneurship later in life. Small businesses make up a significant portion of GDP. Small businesses have to have to accept risk. There's still opportunity in the world. [1] Startup School > Curriculum https://www.startupschool.org/curriculum https://www.startupschool.org/curriculum [2] https://www.ycombinator.com/library https://www.ycombinator.com/library [3] "Business models based on the compiled list at [HN]" https://gist.github.com/ndarville/4295324 https://gist.github.com/ndarville/4295324 From "Why companies lose their best innovators (2019)" https://news.ycombinator.com/item?id=23887903 https://news.ycombinator.com/item?id=23887903 : > "Intrapreneurial." What does that even mean? The employee, within their specialized department, spends resources (time, money, equipment) on something that their superior managers have not allocated funding for because they want: (a) recognition; (b) job security; (c) to save resources such as time and money; (d) to work on something else instead of this wasteful process; (e) more money.
  - ryandrake 6y ago
    I’d you are going to start something on the side, carefully read your current employment agreement, particularly the part about IP assignment. Most Silicon Valley companies I’ve worked with, including FAANGs, claim ownership of everything you produce, inside or outside of employment, at home or in office, using their equipment or yours. You don’t want to lick into a unicorn idea and have your former employer’s lawyers send you that letter...
    - moneywoes 6y ago
      Are these actually enforceable?
      - ryandrake 6y ago
        It probably doesn’t matter in practice. They will have more lawyers and more money to burn on legal process than you. Who will go bankrupt first fighting a legal battle between you and, say, Apple?
        ptudan 6y ago
        The only time they'd actually sue is if you made something worth money. in that case, there's a good chance you can get investors to pay the lawsuit.
        triceratops 6y ago
        Investors would check if you were subject to an IP assignment clause in your employment contract prior to investing. It's part of basic due diligence. They would then most likely pass on the investment.
        lotsofpulp 6y ago
        It does matter in practice in California.
        dv_dt 6y ago
- tjs8rj 6y ago
  By the time a startup can pay you serious base cash compensation, I don’t think it’s likely they could also pay you serious equity compensation as an individual contributor. There’s no lottery ticket there, just trade offs. A lottery ticket is usually huge payoff or nothing. $500k or less, even a million or less doesn’t really sound like a lottery ticket (not to downplay how life changing that payoff could be). Philosophically the lottery ticket scenario is your own startup or early startup employee, where your rationalization is >$10 mil or bust. Either certified “seriously rich” anywhere in the world or you just wasted your time. That’s a asymmetric payoff of a lottery ticket
  - Swizec 6y ago
    I mean it depends right? Even employee 1000 at Google made many millions. And it’s rumored that the Lyft IPO made several hundred millionaires. Hell, a friend of mine made about 1mil at IPO (on paper) and she’s a tech support manager. Not sure how early she joined but always said the cash was her highest salary ever.

Viliam1234 6y ago

In my humble opinion, Bitcoin is a better lottery that equity, because it does not require you to work till 2am in morning. Instead of equity, ask for higher salary, and invest the difference in cryptocurrencies, stock market, and even the old-fashioned lottery. Maybe a bit of everything, to balance the portfolio. Your chances are not worse, and you can go sleep before the midnight.

iancmceachern 6y ago
Great thought! It doesn't have to be crypto, it could be any reasonable investment...
- sharkweek 6y ago
  Friend of mine left MSFT back in the early 2010s for a startup that is set to IPO in the next year or two if all the prevailing winds remain relatively similar. He'll do pretty well in the IPO because he has some of those early enough options as one of the first 25ish employees. BUT!!!He left MSFT at $30-40ish a share, now worth $240 a share. Unfortunately, he divested most of it into more general index which has been fine, but not 6x. He would have EASILY covered whatever money he's likely to make in the IPO by just staying at Microsoft and holding company shares for the last 9 years, and in fact probably would have made way more given stock rewards/promotions/salary increases etc. That being said, he has enjoyed working at the startup and it has propelled him into a role that he wouldn't have been in at MSFT or any other big company so there is that to consider as well.
  - t0mas88 6y ago
    Investing in the right single stock always outperforms the index. But risk adjusted returns may not be better than a diversified portfolio, Microsoft could also have dropped due to some scandal whereas the downside risk of a balanced portfolio is much smaller.
    - sharkweek 6y ago
      Absolutely, and him and I both know this, but... I still like to remind him of it (only because we're close enough to prod each other like this).

harikb 6y ago

The thing most people forget about options & RSU is that one is taking away a big chunk of the TC and delay it to a future year. Even when you hate your job, you will be hesitant to leave the company because of FOMO and sunk cost fallacy That said, anecdotally, every one of my close circle of friends made decent amount money from equity (one of the many companies they worked at did very well) - far higher than the 10% stat that I hear talked about. May be the last two decades was lucky for this group of people.

dhosek 6y ago
I have never had a stock option that was worth as much as a penny in the course of my career. In one case, a “can't lose” employee stock purchase program (where you put aside money for purchase and at the end of the year you would get stock bought at the lower of the price at the beginning and end of the purchase period with a 10% discount on top of that) ended up being a loss because the stock dropped 50% between the purchase of shares and delivery of the shares. The company was eventually bought out by 3M and I got a hundred bucks or so out of my initial investment (which was, thankfully only a thousand or two, if I recall correctly).
- laurent92 6y ago
  A company sold for 3 million is... I mean, in average, I see that the worth is about 1m$ per employee. If you sold for less, your stock performed poorly compared to others. Maybe the product or the engineering was great, but on the wrong market or never met its window. Business is difficult. The question is, would you have had excellent returns if the company had been worth $1m per employee?
  - Cd00d 6y ago
    I think OP was saying the company 3M bought the startup. Not that the startup was sold for $3mm.
  - saalweachter 6y ago
    In addition to the $3m/3M confusion, don't forget preferential liquidation. If you own 10% of a company and it sells for 2x the invested value, you might get < 5% of the sale price yourself once the investors are taken care of.

CydeWeys 6y ago

> Equity comes third. If you work for a FAANG, maybe equity can move higher up (though it remains to be seen how long this will be true). Tech companies are the largest companies in the US economy these days. They are the economy. For better or worse they're now too big to fail, and in some severe recession they would end up being bailed out like the banks were in 2008 since the alternative is a complete economic implosion. I treat my RSUs as cash that has some variance to it (less variance than crypto, and roughly the same as the stock market overall). I even auto-sell them.

g9yuayon 6y ago

Startup is not a lottery. Working for startup is risky, but the key is to build a system that increases your accumulated probability of success -- this is exactly why it's important to live in the bay area and work for some startups there, at least before the Covid-19. You get to see a large number of people who didn't fund any company, but still became financially independent or built an explosive career by choosing to join the right companies at the right time. You get to see how those people make their choices. You get to see how those people decide to jump ship. You get to build a social circle where you learn lots of first-hand information about startups. Yes, it's still risky to join a startup, but no it's not a lottery. The chance of being rewarded handsomely is orders of magnitude higher than buying lottery.

jjeaff 6y ago
I wonder how many people each year make at least $1m from startup equity appreciation (that is actually liquid). Because it's between 1500 and 2000 people that win at least $1m in lotteries in the US every year. Granted, lots more people play the lottery than start or join a startup, but it's an interesting comparison.
- g9yuayon 6y ago
  I'm not sure if the calculation is correct. 2000 people winning lotteries out of at least millions of people, right? Yet in the startup word, it is thousands of people out a few hundreds of thousands? Another factor to consider is that your equity keeps giving, while lottery is a one-off deal.
  - CRConrad 6y ago
    But the GP's point pretty obviously wasn't a calculation of percentages, just comparing absolute numbers. As a percentage of the population it also holds, since that is the same whether you're looking at start-ups or rhe lottery. Another way to look at it is ease of entry: If you're already playing the lottery, also joining a start-up isn't all that easy (as you said yourself, the number who do is much lower). If you're already working at a start-up, OTOH, also playing the lottery...

wpietri 6y ago

As somebody who also has a bunch of lottery tickets that didn't pay off, I feel your pain. But I think there's a bit of hindsight bias to your conclusion. I think it's entirely reasonable for people to trade salary for equity. I also think it's reasonable to stick with cash. As long as people are making well-informed choices, I'm entirely fine with gambling on a positive-sum effort. That said, there are good questions about how much things have changed vs 25 years ago, how likely an early employee is to see a big payout on exit, and how much the fever for VC-backed startups distorts employee choices. But that's another rant.)

jjeaff 6y ago
There is also something to be said for the information asymmetry between employer and employee. From the outside, it is hard to know what the odds of winning really look like. Founders are always painting a rosy picture of how close we are to breaking out or getting that next huge round of funding. The reality may be totally different. Things may actually be rather bleak and they are hoping to just limp along, paying low salaries and giving out worthless stock in hopes that just maybe they will hit the startup lottery. At least with gambling, the house has to post the odds.
- wpietri 6y ago
  Absolutely. And in addition to a pure information asymmetry, there's also a strong interpretive difference. A founder is generally going to be person who most believes in the company, so they'll value the stock more highly than anybody else. I think it's totally reasonable for a prospective employee to say, "I think the odds are good, but not that good" and lean toward cash. One formulation I've used that helps is to say, "From data source X, your market-rate comp package is $Y/year. You decide how much of $Y you want to use to buy in now, at a price set by the most recent investment round." That only works if the company has enough access to capital, of course. And it does set the price as that of the most optimistic VC the company could find. But I like that it takes it out of the realm of personality-based negotiation.

spoonjim 6y ago

The flip side is that I valued my equity at $0 when I joined but it’s now worth $2 million.

chokeartist 6y ago

> Time is the most valuable commodity you have, don't squander it for lottery tickets and empty promises. This should be the first thing someone sees when they load the Hacker News homepage.

trimbo 6y ago

> The vast majority of startups go bust before IPO or acquisition In recent times, these giant late rounds with the amount of preference given mean that when acquisition happens, it often doesn't pay out for regular employees/common stock. The common stock employees get is for the moon or bust, or hope an acquiring company is generous.

ptmcc 6y ago
The best many non-founders can hope for is a cushy acqui-hire deal. I've had several friends have the startups they worked for acquired, and their equity was worth nothing due to valuation and unfavorable liquidation preferences. They got a nice hiring package from a big company, but not significantly better than one can get from applying on your own. And the opportunity cost of taking a below-market wage for several years probably nets out to a loss in pure dollar terms.

alwaysdoit 6y ago

I actually lost money when the first company I worked for sold. At settle, I received a wire transfer for $7.22. The bank charged me a $15 incoming wire transfer fee.

kelnos 6y ago

I agree with your overall premise, but I think you and the parent are talking about fundamentally different things. If I'm at a startup and I'm constantly working 14 hour days, I want equity. Because I am not going to work 14 hour days (or even 10 hour days) for just a normal base salary. I mean, sure, I wouldn't mind instead taking 4x a normal base salary to work those 14 hour days, but no company (startup or established business) is going to give you that deal. That equity may end up being worth nothing over the long term, but by joining an early startup, I am betting on a solid founding team and the product, and the team's ability to execute. And because it's a small team, I'm betting that I personally can be a big component in whether or not the company succeeds or fails. (Often it'll succeed or fail despite what I do, but that's not the point.) We can debate the wisdom (with regard to productivity and health outcomes) of working habitual 14 hour days at all in the first place, but the bottom line is that if I'm going to be pouring so much of my life into something, I at least want the possibility (even if the probability is low) of a life-changing financial outcome. It's pretty rare that you're going to get that with a base salary, even at a larger, well-established, public company that has decently high growth. And I get it, some people just don't want to make the base vs. illiquid-equity trade off. An early-stage startup is probably not for those people anyway, and there's nothing wrong with that. I did it three times: one was a complete flop (after I'd paid to exercise options that became worthless shares), one was a mediocre flop (got out of there in under a year, knew they were incapable of shipping, turned out I was right), and one was more successful than I ever expected. And yet I'm happy I joined all three, even the first one. > Outside of FAANG (and top executives at F500 sized public companies) very few people are getting rich off of the "equity" component of their TC. Not even at* FAANG. A new hire (today) at one of those companies is not going to get a life-changing equity grant. A hire from back when they were relatively new companies (or, as with Apple, down in the dumps circa 2000) can get that. But, a hire at that point will be expected to work more (often much more) than a normal 8-hour day. I think people forget that a mulit-millionaire Googler who has been there since 2003 and is still there now is likely mainly rich because of the equity they got in the first 3 or 4 years. As companies mature, their equity comp declines rapidly. If that same person had joined Google 5 or 7 or even 10 years ago as an individual contributor, their equity comp would not make them rich; they're now getting most of their wealth from base salary. > The vast majority of startups go bust before IPO or acquisition. Right. And that's why you shouldn't join a startup because you expect to get rich. You should join because you like that style of work better than large-corporation life. But if they're going to expect you to pour your life into that startup, you should get a big chunk of equity that can -- if things work out -- compensate you for those long hours someday.

yibg 6y ago

I don't know if it's that black and white. The risk calculus changes based on stage of the startup for example. Joining doordash pre IPO is still more risky than google, but I there's some reasonable confidence it'll be of some value soon.

nojvek 6y ago

I'm not saying base salary is not important. It very much is. You need at-least somewhat a comfortable amount where money stops being a major issue. You can pay mortgage, go for a couple of vacations and have a decent amount in savings. At Microsoft, it would be hard to cross $10m over 5 years, unless you're a really big shot. At a startup that rises to be a deca-unicorn, if you joined 5-7 years ago, that would be possible. Dropbox, AirBnb, Doordash e.t.c probably minted quite a few deca-millionares on their IPOs. Entry level folks would have made that much. That's what I mean by equity and skin in the game. Sure, there is a lot more risk but your upside is also huge. You can see how your work moves top line ARR and incentivizes you to focus on customers and build what they want and will pay for. Sure at GOOG, MSFT, FB e.t.c once you go above senior to staff level, your equity/RSU component starts to be more valuable than the base salary. That's what I mean by skin in the game and proportional rewards. However those rewards can be unproportional once you have a large chain of managers. It incentivizes doing things that lead to climbing ladder rather than doing things that are good for your customers and long term ARR. Sometimes it's related, sometimes not. At a true startup, if it's unrelated the startup dies.

brailsafe 6y ago

Salary paid is salary owned. A company can only take away what they haven't given you. Options are not owned, only potentially owned.