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After the 2000 dotcom bubble equity for employees became a lottery. If you got really lucky your shares were priced at a 50k market cap and the company ended up

After the 2000 dotcom bubble equity for employees became a lottery. If you got really lucky your shares were priced at a 50k market cap and the company ended up only diluting those down by 50% and the company went public making your shares worth 800k. But now that situation is rare. The investors and founders and bankers ensure that they take the vast majority of the upside when going public. If you are joining a company and taking less than 1% of equity in the company the best way to think about the equity is "This may end up being a yearly bonus of 50-150k, but probably will be worth nothing"

matthewowen 4y ago
I don’t really buy this, but that’s largely based on own fairly positive experience of stock compensation at private companies. I will say that I think these conversations tend to be a little distorted because people who have had positive experiences feel awkward about saying “i made $xxMM from employee stock” but people who haven’t seem comfortable saying “stock based compensation was worthless”. Also tbh a lot of people are just really bad at judging companies and wind up working at startups that are obviously going to fail. You really do have to make an honest assessment of if you are good at picking winners.
- Retric 4y ago
  Sure people may not want to talk about it, but a big part of this is so few people make $xxMM from employee stock. Yes, if you where one of the first 50 employees at Google you probably made low $xxMM, but it’s a long wait until IPO and the overwhelming majority of people at Google didn’t get anything close to that much. Worse the overwhelming majority of companies aren’t Google style success stories. Also, don’t forget nobody at Stripe has gotten to cash out yet. Your looking for very early employees, at wildly successful startups, who started 10+ years ago, and are still poking around online forms, and willing to talk about it.
  - rcme 4y ago
    I think Google employees did alright. Let's say you joined in Sep. 2013 (random date). 4 years later, the stock was up 200%. So if you got a $500K grant over 4 years, you'd have 1.5 million. After taxes, that'd be around $1 mm.
    - deleted 4y ago
      [deleted]
    - Retric 4y ago
      People getting 500k grants in 2013 from Google were just making a lot of money in general. Remember a grant isn’t an option you’re getting actual stock even the company stayed roughly flat they could have sold the 500k worth of stock. Grants that size don’t represent a typical employee either. It’s closer to a 2-30% annual bonus that happened to appreciate rather than some life changing payday.
  - matthewowen 4y ago
    If you take a look at some of the examples in https://blog.pragmaticengineer.com/equity-for-software-engineers/#1-why-equity-is-important-success-stories https://blog.pragmaticengineer.com/equity-for-software-engin... you see that you really don't have to be at a "first 50 at google" level of success to see 8 digit equity values. Bear in mind that even private companies have some level of liquidity for option holders via secondary sales.
    - Retric 4y ago
      Highly compensated employees handed grants aren’t startup employees taking risks they are well compensated employees getting deferred compensation. Even if the stock stays flat they still get the face value of the grant. That said, the double digit examples were 12M “software engineer 2” and 10M “first 10 employees”.
      - matthewowen 4y ago
        Software engineer 2 is a reference to level, not when they were hired (doordash was big by then)
- marcus_holmes 4y ago
  > Also tbh a lot of people are just really bad at judging companies and wind up working at startups that are obviously going to fail. You really do have to make an honest assessment of if you are good at picking winners. It's luck, not good judgement. No-one knows how to accurately assess whether an early-stage startup is going to succeed or fail. If it was possible, accelerators would have better-than-background rates of success. Even YC, who get their pick of pretty much every startup, has barely better than background rates of success. If it was possible, VC's would have better than background rates of success. They don't. They rely on the successes being much bigger than the failures because the failures are limited by bankruptcy while the successes have no limits. I think blaming people for being bad at judging early stage startup success likelihood is poor form when no-one else in the entire industry has any idea how to do this.
  - matthewowen 4y ago
    You don't need to join an early-stage startup – as a mid-to-senior engineer, even if you only join places that are series-B or later you can still get equity packages that ultimately end up netting to >1MM/year with the kind of valuation growth that the successful companies in that profile see. I think luck is a big part of it absolutely, I just don't think it's the only piece. But I also know that IME some engineers looking at new roles think about likelihood of company success way less than they should relative to "do I like the technology/culture/whatever" and so it is not surprising if they don't end up at successful companies.
    - marcus_holmes 4y ago
      I think the reverse: that entering a company based on "am I going to enjoy it here?" is a better bet. If you hate it there, you'll probably leave and never vest your equity. Even if you hang on and suffer through it to get your equity, it'll damage you in ways that money won't help with. If you hate it, chances are that everyone else does too, which means the good people will leave and the startup is less likely to succeed even if everything else is good. Most engineers enjoy interesting challenges, and this can be a big factor in choosing a role. If the startup is providing interesting challenges then it's doing interesting/difficult stuff. This is a factor in success - startups that aren't doing interesting/difficult stuff are easier to copy and have less barriers to entry for competitors. Even if you don't get lucky and win the equity lottery, you had a good job and probably learned some interesting things.

matthewowen 4y ago

I don’t really buy this, but that’s largely based on own fairly positive experience of stock compensation at private companies. I will say that I think these conversations tend to be a little distorted because people who have had positive experiences feel awkward about saying “i made $xxMM from employee stock” but people who haven’t seem comfortable saying “stock based compensation was worthless”. Also tbh a lot of people are just really bad at judging companies and wind up working at startups that are obviously going to fail. You really do have to make an honest assessment of if you are good at picking winners.

Retric 4y ago
Sure people may not want to talk about it, but a big part of this is so few people make $xxMM from employee stock. Yes, if you where one of the first 50 employees at Google you probably made low $xxMM, but it’s a long wait until IPO and the overwhelming majority of people at Google didn’t get anything close to that much. Worse the overwhelming majority of companies aren’t Google style success stories. Also, don’t forget nobody at Stripe has gotten to cash out yet. Your looking for very early employees, at wildly successful startups, who started 10+ years ago, and are still poking around online forms, and willing to talk about it.
- rcme 4y ago
  I think Google employees did alright. Let's say you joined in Sep. 2013 (random date). 4 years later, the stock was up 200%. So if you got a $500K grant over 4 years, you'd have 1.5 million. After taxes, that'd be around $1 mm.
  - deleted 4y ago
    [deleted]
  - Retric 4y ago
    People getting 500k grants in 2013 from Google were just making a lot of money in general. Remember a grant isn’t an option you’re getting actual stock even the company stayed roughly flat they could have sold the 500k worth of stock. Grants that size don’t represent a typical employee either. It’s closer to a 2-30% annual bonus that happened to appreciate rather than some life changing payday.
- matthewowen 4y ago
  If you take a look at some of the examples in https://blog.pragmaticengineer.com/equity-for-software-engineers/#1-why-equity-is-important-success-stories https://blog.pragmaticengineer.com/equity-for-software-engin... you see that you really don't have to be at a "first 50 at google" level of success to see 8 digit equity values. Bear in mind that even private companies have some level of liquidity for option holders via secondary sales.
  - Retric 4y ago
    Highly compensated employees handed grants aren’t startup employees taking risks they are well compensated employees getting deferred compensation. Even if the stock stays flat they still get the face value of the grant. That said, the double digit examples were 12M “software engineer 2” and 10M “first 10 employees”.
    - matthewowen 4y ago
      Software engineer 2 is a reference to level, not when they were hired (doordash was big by then)
marcus_holmes 4y ago
> Also tbh a lot of people are just really bad at judging companies and wind up working at startups that are obviously going to fail. You really do have to make an honest assessment of if you are good at picking winners. It's luck, not good judgement. No-one knows how to accurately assess whether an early-stage startup is going to succeed or fail. If it was possible, accelerators would have better-than-background rates of success. Even YC, who get their pick of pretty much every startup, has barely better than background rates of success. If it was possible, VC's would have better than background rates of success. They don't. They rely on the successes being much bigger than the failures because the failures are limited by bankruptcy while the successes have no limits. I think blaming people for being bad at judging early stage startup success likelihood is poor form when no-one else in the entire industry has any idea how to do this.
- matthewowen 4y ago
  You don't need to join an early-stage startup – as a mid-to-senior engineer, even if you only join places that are series-B or later you can still get equity packages that ultimately end up netting to >1MM/year with the kind of valuation growth that the successful companies in that profile see. I think luck is a big part of it absolutely, I just don't think it's the only piece. But I also know that IME some engineers looking at new roles think about likelihood of company success way less than they should relative to "do I like the technology/culture/whatever" and so it is not surprising if they don't end up at successful companies.
  - marcus_holmes 4y ago
    I think the reverse: that entering a company based on "am I going to enjoy it here?" is a better bet. If you hate it there, you'll probably leave and never vest your equity. Even if you hang on and suffer through it to get your equity, it'll damage you in ways that money won't help with. If you hate it, chances are that everyone else does too, which means the good people will leave and the startup is less likely to succeed even if everything else is good. Most engineers enjoy interesting challenges, and this can be a big factor in choosing a role. If the startup is providing interesting challenges then it's doing interesting/difficult stuff. This is a factor in success - startups that aren't doing interesting/difficult stuff are easier to copy and have less barriers to entry for competitors. Even if you don't get lucky and win the equity lottery, you had a good job and probably learned some interesting things.