4 ms·

Based on the number of times I've been offered stock options as a benefit of joining a startup, I'd say it's very prominent in startup culture as a motivator an

Based on the number of times I've been offered stock options as a benefit of joining a startup, I'd say it's very prominent in startup culture as a motivator and recruitment tool. If it doesn't hold value (as it seems you're positing), then early employees are getting played in the worst way. They're the ones who are getting screwed. The context of what most people are saying is that founders are now getting their pound of flesh from VCs/investors (summary of other comments, not this thread.) The tone of those comments is that founders are simply putting steps in place to ensure they don't get screwed. If this is the case (I don't know how true it is) then the marker for who gets hosed lands squarely on those early employees, and THAT will be a gigantic problem for startups. If early employees begin to distrust founders and investors, it's not just a headwind -- it's pretty much game over. Early employees are quite often the difference between success & failure. Those top-flight team members you need to execute on that idea will use the only leverage they have in that relationship -- they simply won't join the startup. I hope AirBnB is an anomaly, but I expect this type of scenario to happen more and more. As for founders wanting to put themselves in position to do this -- who could blame them? But, it's not without consequence and their reputation as startup founders will be summarily tested with any future ventures. The smartest startups will very quickly learn that success will only come when all parts are working together, doing their jobs -- founders, investors, early employees.

philwelch 15y ago
There is a rational case for joining a startup as an early employee, especially if the startup is funded. It's likely to be less soul-crushing than working for a big company, you're going to earn a salary (perhaps even a market salary) and you're going to gain experience towards founding your own startup in the future. Stock options are a less significant part of the equation--they aren't worth anything unless there's an exit, and if there's an exit they still probably aren't worth especially much unless it's an extremely outsized exit, the once-in-a-decade type like Google, Amazon, or Microsoft. They're probably still worthwhile, but it's not prudent for an early employee to expect too much from them.
- jroseattle 15y ago
  That's a lovely sentiment, but it's not close to reality when it comes to the presentation made when pitching those early-stage employees to join a startup. Imagine a founder talking to an engineer about their fantastic idea, explaining how huge the opportunity is, etc. etc. and that the engineer will earn experience and a close-to-market salary. And you'll have options, but they likely won't be worth much unless we become Google, Amazon or Microsoft. Yeah, I can't imagine that conversation either. The demand for talent makes this situation appealing only to those who really need the experience. The highest quality talent -- the ones you need for your early-stage startup to succeed -- can do better than this nowadays.
  - philwelch 15y ago
    Pre-funding, yes, is a leap of faith. Post-funding, if you offer a market salary, standard benefits, and a startup working environment (which seems to be the norm for YC startups), why wouldn't top talent choose that over, say, working for Google?
    - jroseattle 15y ago
      > Post-funding, if you offer a market salary, standard benefits, and a startup working environment (which seems to be the norm for YC startups), why wouldn't top talent choose that over, say, working for Google? If someone was making this statement to me, as a prospective employee at Startup X, a giant red flag would go up. This is a signal that (a) this company isn't aware of what's being offered elsewhere, and (b) this company is projecting what's valuable to me as an employee (no financial gain, but "better working conditions".) I wish it was that trivial, but this is a quaint notion that simply doesn't work if your goal is to pull in premium talent. It may work once in a while, but long-term -- no way. Maybe that simplicity has worked for you in hiring situations, but in my geography -- you'll end up with mediocre talent. The bigco environment you mention -- the Amazons, the Googles, the Microsofts -- top flight candidates are using the pool of bigco and startups against each other to gain greater financial rewards. It's leverage, and the top candidates have it and are using it to their advantage. Play the reindeer games or not, the market is what it is.

philwelch 15y ago

There is a rational case for joining a startup as an early employee, especially if the startup is funded. It's likely to be less soul-crushing than working for a big company, you're going to earn a salary (perhaps even a market salary) and you're going to gain experience towards founding your own startup in the future. Stock options are a less significant part of the equation--they aren't worth anything unless there's an exit, and if there's an exit they still probably aren't worth especially much unless it's an extremely outsized exit, the once-in-a-decade type like Google, Amazon, or Microsoft. They're probably still worthwhile, but it's not prudent for an early employee to expect too much from them.

jroseattle 15y ago
That's a lovely sentiment, but it's not close to reality when it comes to the presentation made when pitching those early-stage employees to join a startup. Imagine a founder talking to an engineer about their fantastic idea, explaining how huge the opportunity is, etc. etc. and that the engineer will earn experience and a close-to-market salary. And you'll have options, but they likely won't be worth much unless we become Google, Amazon or Microsoft. Yeah, I can't imagine that conversation either. The demand for talent makes this situation appealing only to those who really need the experience. The highest quality talent -- the ones you need for your early-stage startup to succeed -- can do better than this nowadays.
- philwelch 15y ago
  Pre-funding, yes, is a leap of faith. Post-funding, if you offer a market salary, standard benefits, and a startup working environment (which seems to be the norm for YC startups), why wouldn't top talent choose that over, say, working for Google?
  - jroseattle 15y ago
    > Post-funding, if you offer a market salary, standard benefits, and a startup working environment (which seems to be the norm for YC startups), why wouldn't top talent choose that over, say, working for Google? If someone was making this statement to me, as a prospective employee at Startup X, a giant red flag would go up. This is a signal that (a) this company isn't aware of what's being offered elsewhere, and (b) this company is projecting what's valuable to me as an employee (no financial gain, but "better working conditions".) I wish it was that trivial, but this is a quaint notion that simply doesn't work if your goal is to pull in premium talent. It may work once in a while, but long-term -- no way. Maybe that simplicity has worked for you in hiring situations, but in my geography -- you'll end up with mediocre talent. The bigco environment you mention -- the Amazons, the Googles, the Microsofts -- top flight candidates are using the pool of bigco and startups against each other to gain greater financial rewards. It's leverage, and the top candidates have it and are using it to their advantage. Play the reindeer games or not, the market is what it is.