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> based on today’s valuation of the stock. This is the tricky part, especially if you are very early. Really what you want is the (statistical sense) expected

• dahart 5y ago
  It’s not that tricky, because the investors are getting a valuation. The money I risk/invest/forego now because it’s a startup maybe ought to get the same valuation the investors are getting, that’s all.
  • chris11 5y ago
    I really agree with your point. I don't see how most startups could make competitive offers with unicorns/FAANG, unless it was for non-monetary reasons like a promotion.
    • tomnipotent 5y ago
      Because there are considerably more jobs outside of FAANG then within it.
    • triceratops 5y ago
      Give out way more stock options, so that the pay is the same risk-adjusted.
      • lumost 5y ago
        Early stage startups should be showering employees with high risk equity and paying less cash compensation. This saves the company money and allows them to hire better talent. Having highly skilled engineers/bizops/designers/sales staff who are incentivized to make the company successful is a huge win.
        • chris11 5y ago
          I'm not really sure how options should be valued, and I haven't negotiated from a position of have a ton of unvested equity. But if an engineer got extremely lucky by joining the right startup, say Coinbase, leaving early might mean giving up a few million in unvested equity. That's a lot of equity if the startup treats that lost income as if the engineer had invested that amount in the last fundraising round. Options instead of stock, common instead of preferred shares, and risk adjustment should all probably increase the equity amount. I'm not sure that most startups would give mid-level engineers millions in equity.
          • lumost 5y ago
            so the key question here is what a "mid-level" engineer can do for your company early. An engineer with 5 years of experience at FAANG will easily make ~200-250k, competitive scaling startups and public companies will compensate equivalently withing ~30% in liquid compensation. If that engineer instead works for 100k and takes 100k in illiquid equity which may or may not be worth something in 10 years, they are losing well over a million dollars in opportunity. Given that 5 more years at a top-tier firm would double their compensation they could easily be giving up multiple millions. To be employee #5-50 this individual should be getting an equity option that would reasonably be worth millions in an exit scenario for it to make sense. Most startups simply aren't competitive for this mid-level engineer given current compensation practices. Which leads to a sub-selection of talent for those who for various reasons aren't willing or able to work at a firm willing to pay that level of compensation. Bear in mind, if the engineer had liquid equity from a public corporation they would be able to leave equity in hand after 4 years. Whether this is a problem or not is an interesting question for startup CEOs. Generally I've found success in software is more closely correlated to the quality of employees than the quantity, and historically companies with generous compensation practices seem to be the successful ones.
            • triceratops 5y ago
              Thank you!
        • 5y ago
  • ska 5y ago
    > It’s not that tricky, because the investors are getting a valuation That works ok in theory if you are signing a contract at the same time a round is finalizing... otherwise it remains tricky.