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it does, but one of the recurring themes on HN is that most employees at a startup would've done better financially by getting a job at a BigCo (not even neces

it does, but one of the recurring themes on HN is that most employees at a startup would've done better financially by getting a job at a BigCo (not even necessarily a fang) so it's also disingeneous to claim that _they're_ working for equity: they could've gotten much safer equity grants by joining an established company instead of yours. IMO one of the challenges I've never personally seen solved well is how to truly share the fruits of success with all the people who were necessary for it to happen. In this example it's of course not clear how much of a team there is, but I'm sure any non-founder employees are also working below market and would love for their wages to increase as revenue grows and the product matures.

JamesBarney 4y ago
I've only worked for big-co and as a founder but never as a startup employee, and this probably a dumb question but couldn't employees just not work for below market compensation?
- renewiltord 4y ago
  Yes. The market is liquid enough for jobs that both employers and employees can find themselves at the place they want. Where you choose your position on the comp curve wrt equity vs cash (including liquid RSUs) is up to you.
- Consultant32452 4y ago
  Employees want lottery tickets and employers want to sell lottery tickets. The people who buy lottery tickets want their money back once the numbers have been drawn.
- gowld 4y ago
  The hard part is (a) valuing equity if EV is not clearly 0 (b) valuing the work (a 40hr/week job is different from a 60 hr/week job, commute, culture compatibility, educational value, charitable value, etc)
- deleted 4y ago
  [deleted]
- whimsicalism 4y ago
  Yes, but in my experience employees systemically over-value startup equity.
  - fnimick 4y ago
    They're also encouraged to by most everyone they speak with. Founders, investors, pretty much everyone "successful" in the industry wants to promote this so that they can get cheap labor for their next spin at the merry-go-round.
  - JamesBarney 4y ago
    I think that's fair, but this seems to be changing. When I talked to our employees about receiving equity they valued it way below what prospective investors would.
    - mlyle 4y ago
      Prospective investors have preference items, rights, and control. This is why common is valued "way below"-- and it's rational for employees to view it the same way.
      - JamesBarney 4y ago
        For sure. (Though in our case the investors only had preference and moderate anti dilution rights vut had less control than common) We raised over a year ago and have grown revenue 300% YoY, and only had .5 arr in preferred. And they didn't value it as highly as the investors a year before. They preferred cash.
        HWR_14 4y ago
        If your example is "they don't value it as much" is based on a valuation over a year ago, it seems to be flawed. Could you raise at the same terms? Those young whippersnappers wouldn't even buy your house in 2009 either!
- q845712 4y ago
  this is funny - you're saying you've never done it, and asking why everyone else doesn't do the same thing as you, but you've been a founder, right? So you probably hired people? Did you pay them market comp, or do you have a story about why it was justified not to? Was it their fault for accepting the offer you made them? Were they somehow signaling their own inferiority by applying and/or accepting your offer, implying that they couldn't get full market comp? Were they trading something intangible like "autonomy" and "impact" for comp-dollars?
  - JamesBarney 4y ago
    The exact opposite. Im not asking why someone doesn't do the same as me. Being a founder is terrible choice financially, worse than being a startup employee. I'm asking why someone does something different than I did which is take below market rate to work for a startup. We posted a job for a certain compensation, they applied to and accepted the job at that compensation. If they could make more money elsewhere I don't know if it's their fault for accepting our offer, but it was their choice. I don't think they were signalling their inferiority. Some we paid above market to, some we paid below market to. People we paid below market to we try to increase their salary to match market. We never sold any intangibles, and the only intangible we offer but don't advertise is we're very flexible with hours and it's low pressure environment. At the end of the day these are not children but adults who need to do what's best for them. If our offer and job isn't what's best for them then they shouldn't have applied and accepted the offer.
JohnFen 4y ago
> it's also disingeneous to claim that _they're_ working for equity What they're really doing is gambling. The odds are that the equity such employees earn will never pay off, but if it does pay off, it can pay off huge. Personally, I gave up on working for equity a long time ago except in my own companies. The odds of it working out are just too low for my tastes.
simonw 4y ago
The bit I quoted was about salaries for founders. If you want to hire employees you should be paying them much closer to market rate in my opinion.
- daveidol 4y ago
  > If you want to hire employees you should be paying them much closer to market rate in my opinion. That doesn't seem to match with reality, sadly.
- q845712 4y ago
  agree and that's what I was highlighting - the article was very founder-focused, as though the majority of people in most companies aren't also carrying the majority of the weight.
27fingies 4y ago
> IMO one of the challenges I've never personally seen solved well is how to truly share the fruits of success with all the people who were necessary for it to happen. I always thought a co-op would be an interesting model but I don’t really know how to synthesize that with raising venture capital
- jll29 4y ago
  There's "VC as gambling" and "VC as a science". Most VCs are herd animals that gamble: they follow others and are afraid to lose out. But they never have the guts to bite first. Conducting VC investment as a scientific/engineering discipline means thinking about systematically constructing 10x, 100x, 1000x wealth from the capital given, in a systematic way, and while minimizing risk. So your thoughts about rewarding everyone that is included in making a startup a success is a very good idea. Co-cops sound leftist, but actually mean sharing risk and reward, so economically that makes sense. I had a related idea: imagine 10 entrepreneurs that trust each other, all involved in independent startups that do not compete with each other. They take a 5% stake in each other's business. Suddenly your assets as a founder include 10 stakes in 10 companies, which means you have an interest in the fact that not just you, but also your 9 trusted friends make it, and you will happily make your network available to them accordingly. Given that 9/10 startups fail (a cruel but true descriptive statistic), you will not even necessarily lose if your own startup does not make it. If most would not give 5% of their own startup for another particular startup's 5% stake, this may also be a pretty good litmus test that the idea may be flawed. Pooling risk is what insurances do as their business model. Startup entrepreneurs have not yet embraced this idea to self-organize in this way.
  - AQuantized 4y ago
    I don't think giving away 45% of your business for a 'network' is going to make sense in most cases, especially given the networking opportunities already available for e.g. YC companies, and it's going to be hard to explain to investors.
    - HWR_14 4y ago
sanedigital 4y ago
Truly sharing the fruits of success means truly sharing the risk taken.
- phone8675309 4y ago
  There is no reason that this has to be true.
  - sanedigital 3y ago
    Sure, just get the people that take the risk to agree to it. Should be easy.
yieldcrv 4y ago
Crypto startup compensation competes with FAANG because the additional non-cash compensation is liquid. Initial TC can be the same $300k - $1.2mm as FAANGs. The cash portion being more comparable to startups. and most importantly, its granted at a huuuuge discount to prices you ever see online. 90% below initial public prices. many employees are still not experiencing losses even with the steep decline in the crypto market. for tokens, a lot of that decline is a death spiral from employees vesting and selling.

JamesBarney 4y ago

I've only worked for big-co and as a founder but never as a startup employee, and this probably a dumb question but couldn't employees just not work for below market compensation?

renewiltord 4y ago
Yes. The market is liquid enough for jobs that both employers and employees can find themselves at the place they want. Where you choose your position on the comp curve wrt equity vs cash (including liquid RSUs) is up to you.
Consultant32452 4y ago
Employees want lottery tickets and employers want to sell lottery tickets. The people who buy lottery tickets want their money back once the numbers have been drawn.
gowld 4y ago
The hard part is (a) valuing equity if EV is not clearly 0 (b) valuing the work (a 40hr/week job is different from a 60 hr/week job, commute, culture compatibility, educational value, charitable value, etc)
deleted 4y ago
[deleted]
whimsicalism 4y ago
Yes, but in my experience employees systemically over-value startup equity.
- fnimick 4y ago
  They're also encouraged to by most everyone they speak with. Founders, investors, pretty much everyone "successful" in the industry wants to promote this so that they can get cheap labor for their next spin at the merry-go-round.
- JamesBarney 4y ago
  I think that's fair, but this seems to be changing. When I talked to our employees about receiving equity they valued it way below what prospective investors would.
  - mlyle 4y ago
    Prospective investors have preference items, rights, and control. This is why common is valued "way below"-- and it's rational for employees to view it the same way.
    - JamesBarney 4y ago
      For sure. (Though in our case the investors only had preference and moderate anti dilution rights vut had less control than common) We raised over a year ago and have grown revenue 300% YoY, and only had .5 arr in preferred. And they didn't value it as highly as the investors a year before. They preferred cash.
      - HWR_14 4y ago
        If your example is "they don't value it as much" is based on a valuation over a year ago, it seems to be flawed. Could you raise at the same terms? Those young whippersnappers wouldn't even buy your house in 2009 either!
q845712 4y ago
this is funny - you're saying you've never done it, and asking why everyone else doesn't do the same thing as you, but you've been a founder, right? So you probably hired people? Did you pay them market comp, or do you have a story about why it was justified not to? Was it their fault for accepting the offer you made them? Were they somehow signaling their own inferiority by applying and/or accepting your offer, implying that they couldn't get full market comp? Were they trading something intangible like "autonomy" and "impact" for comp-dollars?
- JamesBarney 4y ago
  The exact opposite. Im not asking why someone doesn't do the same as me. Being a founder is terrible choice financially, worse than being a startup employee. I'm asking why someone does something different than I did which is take below market rate to work for a startup. We posted a job for a certain compensation, they applied to and accepted the job at that compensation. If they could make more money elsewhere I don't know if it's their fault for accepting our offer, but it was their choice. I don't think they were signalling their inferiority. Some we paid above market to, some we paid below market to. People we paid below market to we try to increase their salary to match market. We never sold any intangibles, and the only intangible we offer but don't advertise is we're very flexible with hours and it's low pressure environment. At the end of the day these are not children but adults who need to do what's best for them. If our offer and job isn't what's best for them then they shouldn't have applied and accepted the offer.

JohnFen 4y ago

> it's also disingeneous to claim that _they're_ working for equity What they're really doing is gambling. The odds are that the equity such employees earn will never pay off, but if it does pay off, it can pay off huge. Personally, I gave up on working for equity a long time ago except in my own companies. The odds of it working out are just too low for my tastes.

simonw 4y ago

The bit I quoted was about salaries for founders. If you want to hire employees you should be paying them much closer to market rate in my opinion.

daveidol 4y ago
> If you want to hire employees you should be paying them much closer to market rate in my opinion. That doesn't seem to match with reality, sadly.
q845712 4y ago
agree and that's what I was highlighting - the article was very founder-focused, as though the majority of people in most companies aren't also carrying the majority of the weight.

27fingies 4y ago

> IMO one of the challenges I've never personally seen solved well is how to truly share the fruits of success with all the people who were necessary for it to happen. I always thought a co-op would be an interesting model but I don’t really know how to synthesize that with raising venture capital

jll29 4y ago
There's "VC as gambling" and "VC as a science". Most VCs are herd animals that gamble: they follow others and are afraid to lose out. But they never have the guts to bite first. Conducting VC investment as a scientific/engineering discipline means thinking about systematically constructing 10x, 100x, 1000x wealth from the capital given, in a systematic way, and while minimizing risk. So your thoughts about rewarding everyone that is included in making a startup a success is a very good idea. Co-cops sound leftist, but actually mean sharing risk and reward, so economically that makes sense. I had a related idea: imagine 10 entrepreneurs that trust each other, all involved in independent startups that do not compete with each other. They take a 5% stake in each other's business. Suddenly your assets as a founder include 10 stakes in 10 companies, which means you have an interest in the fact that not just you, but also your 9 trusted friends make it, and you will happily make your network available to them accordingly. Given that 9/10 startups fail (a cruel but true descriptive statistic), you will not even necessarily lose if your own startup does not make it. If most would not give 5% of their own startup for another particular startup's 5% stake, this may also be a pretty good litmus test that the idea may be flawed. Pooling risk is what insurances do as their business model. Startup entrepreneurs have not yet embraced this idea to self-organize in this way.
- AQuantized 4y ago
  I don't think giving away 45% of your business for a 'network' is going to make sense in most cases, especially given the networking opportunities already available for e.g. YC companies, and it's going to be hard to explain to investors.
  - HWR_14 4y ago

sanedigital 4y ago

Truly sharing the fruits of success means truly sharing the risk taken.

phone8675309 4y ago
There is no reason that this has to be true.
- sanedigital 3y ago
  Sure, just get the people that take the risk to agree to it. Should be easy.

yieldcrv 4y ago

Crypto startup compensation competes with FAANG because the additional non-cash compensation is liquid. Initial TC can be the same $300k - $1.2mm as FAANGs. The cash portion being more comparable to startups. and most importantly, its granted at a huuuuge discount to prices you ever see online. 90% below initial public prices. many employees are still not experiencing losses even with the steep decline in the crypto market. for tokens, a lot of that decline is a death spiral from employees vesting and selling.