4 ms·

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 m

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!
        JamesBarney 4y ago
        I'd be surprised if we couldn't raise at 3.5x ARR, typical SaaS margins, and 300% YoY growth.
        HWR_14 4y ago
        I'm not saying you couldn't raise. The question is could you raise at the same terms? As I understand it, even if your valuation goes up, there's a lot more demand for more preferential treatment of the shares, etc. A little over a year ago seems to be the recent peak of VC funding and valuations.
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.

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!
      - JamesBarney 4y ago
        I'd be surprised if we couldn't raise at 3.5x ARR, typical SaaS margins, and 300% YoY growth.
        HWR_14 4y ago
        I'm not saying you couldn't raise. The question is could you raise at the same terms? As I understand it, even if your valuation goes up, there's a lot more demand for more preferential treatment of the shares, etc. A little over a year ago seems to be the recent peak of VC funding and valuations.

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.