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We can't compete with being a founder on equity. Why not? If you need quality developers OFFER THEM FUCKING EQUITY!! They'll listen, trust me. Offer them 0.0

We can't compete with being a founder on equity. Why not? If you need quality developers OFFER THEM FUCKING EQUITY!! They'll listen, trust me. Offer them 0.07% equity and the most talented developers out there will brush you off and joke about you while downing beers with their friends on the weekends.

donw 14y ago
Say that Dan were to sign up tomorrow. Right now, 42Floors has a five-person team. While I'm not entire sure about the company structure, it looks like Jason and Alex are the cofounders. Let's assume a pretty optimal funding scenario: YC took 6%, and the next 400k cost them 9%. Figure the employee stock pool is somewhere around 5%, leaving 80% to split between the two cofounders. Dan may be awesome, but I don't really see a spare 10% or 20% in there for an employee. Dan may be awesome and talented, but you don't bring in people post-funding at that kind of equity stake, unless they've got some insane track record (and rolodex) that justifies it, and even then, getting the board to greenlight things would be a tough sell. There's only so much room in the CAP table to hand out equity to employees. What they can offer, and what is a big deal, is giving Dan the freedom to maximize his own potential, and to get paid for it. That's not a small offer, and even with the small mountain of opportunity I have on the table right now, I would think very deeply about working at 42Floors if they approached me like this. It's classy, and honest. I like that.
- mbesto 14y ago
  Dan may be awesome, but I don't really see a spare 10% or 20% in there for an employee. But if "Dan" (insert any developer here) gets them to their overall goal (exit?) than why shouldn't he get a piece of the pie.
  - donw 14y ago
    A piece, certainly, but employee-sized pieces top out around 2%.
    - mbesto 14y ago
      Says who? This is what I don't get. If hiring someone so talented is so critical to the success of your company then give him/her what they rightfully deserve. If it's not critical, then don't hire said person.
- robryan 14y ago
  Or just take an equity hit, raise a bigger round and pay people like Dan a rate nicely above what they can make elsewhere. Founders probably end up keeping more equity and the employee takes on less risk.
  - donw 14y ago
    Agreed; or, offer some other form of compensation that makes the offer 'worth it' to Dan. This could mean reduced hours, company time to work on personal ventures, etc. You can have a lot of flexibility in hiring if you can offer your employees what they want, and that's not always money.
- look_lookatme 14y ago
  There is a ton of room between 10% and the typical .1% or .5% (or less) that a new hire would get. Compete on equity by widening the employee pool from the start. They still have to vest, so it's on them to prove themselves.
phillmv 14y ago
I'm curious. I'm not sure equity in lieu of salary is a good deal, but equity to "sweeten the deal" seems reasonable. What do you personally consider reasonable?
- wavephorm 14y ago
  For an already funded company, that already has traction, I personally wouldn't consider a less than 1% equity offer. But for startup, that is still getting going, pre-revenue, I seriously would walk away at 5% or more because it is probably much better to start my own venture.

donw 14y ago

Say that Dan were to sign up tomorrow. Right now, 42Floors has a five-person team. While I'm not entire sure about the company structure, it looks like Jason and Alex are the cofounders. Let's assume a pretty optimal funding scenario: YC took 6%, and the next 400k cost them 9%. Figure the employee stock pool is somewhere around 5%, leaving 80% to split between the two cofounders. Dan may be awesome, but I don't really see a spare 10% or 20% in there for an employee. Dan may be awesome and talented, but you don't bring in people post-funding at that kind of equity stake, unless they've got some insane track record (and rolodex) that justifies it, and even then, getting the board to greenlight things would be a tough sell. There's only so much room in the CAP table to hand out equity to employees. What they can offer, and what is a big deal, is giving Dan the freedom to maximize his own potential, and to get paid for it. That's not a small offer, and even with the small mountain of opportunity I have on the table right now, I would think very deeply about working at 42Floors if they approached me like this. It's classy, and honest. I like that.

mbesto 14y ago
Dan may be awesome, but I don't really see a spare 10% or 20% in there for an employee. But if "Dan" (insert any developer here) gets them to their overall goal (exit?) than why shouldn't he get a piece of the pie.
- donw 14y ago
  A piece, certainly, but employee-sized pieces top out around 2%.
  - mbesto 14y ago
    Says who? This is what I don't get. If hiring someone so talented is so critical to the success of your company then give him/her what they rightfully deserve. If it's not critical, then don't hire said person.
robryan 14y ago
Or just take an equity hit, raise a bigger round and pay people like Dan a rate nicely above what they can make elsewhere. Founders probably end up keeping more equity and the employee takes on less risk.
- donw 14y ago
  Agreed; or, offer some other form of compensation that makes the offer 'worth it' to Dan. This could mean reduced hours, company time to work on personal ventures, etc. You can have a lot of flexibility in hiring if you can offer your employees what they want, and that's not always money.
look_lookatme 14y ago
There is a ton of room between 10% and the typical .1% or .5% (or less) that a new hire would get. Compete on equity by widening the employee pool from the start. They still have to vest, so it's on them to prove themselves.

phillmv 14y ago

I'm curious. I'm not sure equity in lieu of salary is a good deal, but equity to "sweeten the deal" seems reasonable. What do you personally consider reasonable?

wavephorm 14y ago
For an already funded company, that already has traction, I personally wouldn't consider a less than 1% equity offer. But for startup, that is still getting going, pre-revenue, I seriously would walk away at 5% or more because it is probably much better to start my own venture.