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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 re
by 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 agoAbsolutely. 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.