3 ms·

Having only worked for larger companies (RSU stage), I'm curious what the typical breakdown of founder to early employee to investor to later employee equity lo

Having only worked for larger companies (RSU stage), I'm curious what the typical breakdown of founder to early employee to investor to later employee equity looks like. I'm sure it differs pretty wildly, but I'd love to know what a 'typical' case for mid-to-late-stage start up looks like.

parentheses 2y ago
I can share some details. Employee 1: ~1% Employee 10: ~0.1% Employee 1000: 0.01% I'm extrapolating from past experiences in SaaS companies where I was employee number X and X has varied fairly widely.
- o11c 2y ago
  If my math is correct, this fails catastrophically for companies with more than 15 tredecillion employees.
- atomicnumber3 2y ago
  This always seems like a huge scam to me. Employee 1 gets 1%? It seems unfair from multiple perspectives. One is just a straight up naive sense of fairness. If I'm going to be in the trenches with you, I had better be able to see my ownership % in a pie chart with my glasses off. If we're out here both making chairs and when we sell a chair for $100, you get $85 (assuming someone took one of the standard-ish seed rounds that are usually 10-20%?) and I get $1? No thanks. The other sense is aware that the founder is taking various risks and blah blah blah. Ok whatever. Let's pretend somehow 1% is a fair number and just look at it from a payoff perspective. 1% of stripe? Yeah I'll take that. 1% of the other 1000 startups who had mediocre exits or just muddle along to finally do some kind of tender? I'm barely breaking even. 1% of the other 10000 startups that just folded? At least I can mop the sweat off my brow with the paper I signed. It seems like the only reasonable way to look at this is you either join a company for a competitive wage and get WLB, or you join a rocket ship in the hopes of becoming genuinely wealthy while pouring your blood, sweat and tears into it. So taking 1% and a shitty salary and having terrible WLB sounds like a huge suckers game.
  - cbsmith 2y ago
    It's not even remotely fair, but it does follow the golden rule: he who has the gold makes the rules. The founders were the ones who investors were willing to trust their money with. Employee #1 was not.
  - kolinko 2y ago
    If you don’t believe a startup can be the next Stripe, then you definitely shouldn’t take 1% and work as one of the first employees. Also, the risk profile and expectations are vastly different between founders and first employees. E.g. founders are expected to not quit unless the company collapses completely, first employees can quit whenever they wish. Also, if the runway is short, founders work for free and can even go into debt, whereas employees have a stable salary.
    - temp90210 2y ago
      Outside US but I never regret getting equity/options and usually it went hand in hand with the higher paying jobs (paltry compared to US standards!) rather than being a salary/equity tradeoff. Atlassian is a great example though I have not worked for them. I think companies here tend to have less fuck you over terms in employment share schemes but OTOH are less likely to get rich but one company made several employees rich (does 8 figures count?) here.
  - zamfi 2y ago
    This isn't a terrible take, but there doesn't seem to be a shortage of people for whom this doesn't feel like a scam. I'm not particularly fond of the founder hype train, and the typical line is indeed "various risks and blah blah blah" but what's often left out is that employee #1 at a post-funding startup is a pretty different job/profile than co-founder. Most employee #1's don't have relationships with investors, might not be as employable outside the startup world, and they don't sit on the board, don't have the same formal responsibilities, and rarely are able to raise money to found their own startup -- in fact, this is the often the key reason they're even interested in being employee #1. It's a market, and as a market I'm not sure it's that skewed. Want 25%+ of the company? Start it. There's no cabal preventing you from doing that. Have better options than 1% of a likely-dead startup, that pay more and have better WLB? Take them. After all, few industries give any employees equity. First employee at an ice cream parlor? 0%. First employee of a hedge fund? 0%. First employee of a medical practice? 0%. Equity grants can be motivating and aligning, and frankly more industries should probably consider them. But not that many people are in a position to found a startup that can raise money (larger equity grants are much more common for pre-external-funding employees) and this differential reflects that. Btw, "1% of the other 10000 startups that folded" is worth about the same as a founder's 40%: $0. The issue is the middle ground, but there the equity grant is often not worth the paper it's written on: typically the acquirers dictate who gets the money. 1% or 5%, unless the acquirer is trying to retain you, chances are you'll see nothing even if the nominal payout is large. Anyway, the upshot is what people have been saying for decades: don't do a startup for the money. Do it because you want to be part of that kind of thing, and treat any exit money as a bonus.
openmajestic 2y ago
Here is a post with data from Carta - https://www.linkedin.com/posts/peterjameswalker_cartadata-startupequity-equitycomp-activity-7205962315052068864-s5Qf https://www.linkedin.com/posts/peterjameswalker_cartadata-st...

parentheses 2y ago

I can share some details. Employee 1: ~1% Employee 10: ~0.1% Employee 1000: 0.01% I'm extrapolating from past experiences in SaaS companies where I was employee number X and X has varied fairly widely.

o11c 2y ago
If my math is correct, this fails catastrophically for companies with more than 15 tredecillion employees.
atomicnumber3 2y ago
This always seems like a huge scam to me. Employee 1 gets 1%? It seems unfair from multiple perspectives. One is just a straight up naive sense of fairness. If I'm going to be in the trenches with you, I had better be able to see my ownership % in a pie chart with my glasses off. If we're out here both making chairs and when we sell a chair for $100, you get $85 (assuming someone took one of the standard-ish seed rounds that are usually 10-20%?) and I get $1? No thanks. The other sense is aware that the founder is taking various risks and blah blah blah. Ok whatever. Let's pretend somehow 1% is a fair number and just look at it from a payoff perspective. 1% of stripe? Yeah I'll take that. 1% of the other 1000 startups who had mediocre exits or just muddle along to finally do some kind of tender? I'm barely breaking even. 1% of the other 10000 startups that just folded? At least I can mop the sweat off my brow with the paper I signed. It seems like the only reasonable way to look at this is you either join a company for a competitive wage and get WLB, or you join a rocket ship in the hopes of becoming genuinely wealthy while pouring your blood, sweat and tears into it. So taking 1% and a shitty salary and having terrible WLB sounds like a huge suckers game.
- cbsmith 2y ago
  It's not even remotely fair, but it does follow the golden rule: he who has the gold makes the rules. The founders were the ones who investors were willing to trust their money with. Employee #1 was not.
- kolinko 2y ago
  If you don’t believe a startup can be the next Stripe, then you definitely shouldn’t take 1% and work as one of the first employees. Also, the risk profile and expectations are vastly different between founders and first employees. E.g. founders are expected to not quit unless the company collapses completely, first employees can quit whenever they wish. Also, if the runway is short, founders work for free and can even go into debt, whereas employees have a stable salary.
  - temp90210 2y ago
    Outside US but I never regret getting equity/options and usually it went hand in hand with the higher paying jobs (paltry compared to US standards!) rather than being a salary/equity tradeoff. Atlassian is a great example though I have not worked for them. I think companies here tend to have less fuck you over terms in employment share schemes but OTOH are less likely to get rich but one company made several employees rich (does 8 figures count?) here.
- zamfi 2y ago
  This isn't a terrible take, but there doesn't seem to be a shortage of people for whom this doesn't feel like a scam. I'm not particularly fond of the founder hype train, and the typical line is indeed "various risks and blah blah blah" but what's often left out is that employee #1 at a post-funding startup is a pretty different job/profile than co-founder. Most employee #1's don't have relationships with investors, might not be as employable outside the startup world, and they don't sit on the board, don't have the same formal responsibilities, and rarely are able to raise money to found their own startup -- in fact, this is the often the key reason they're even interested in being employee #1. It's a market, and as a market I'm not sure it's that skewed. Want 25%+ of the company? Start it. There's no cabal preventing you from doing that. Have better options than 1% of a likely-dead startup, that pay more and have better WLB? Take them. After all, few industries give any employees equity. First employee at an ice cream parlor? 0%. First employee of a hedge fund? 0%. First employee of a medical practice? 0%. Equity grants can be motivating and aligning, and frankly more industries should probably consider them. But not that many people are in a position to found a startup that can raise money (larger equity grants are much more common for pre-external-funding employees) and this differential reflects that. Btw, "1% of the other 10000 startups that folded" is worth about the same as a founder's 40%: $0. The issue is the middle ground, but there the equity grant is often not worth the paper it's written on: typically the acquirers dictate who gets the money. 1% or 5%, unless the acquirer is trying to retain you, chances are you'll see nothing even if the nominal payout is large. Anyway, the upshot is what people have been saying for decades: don't do a startup for the money. Do it because you want to be part of that kind of thing, and treat any exit money as a bonus.

openmajestic 2y ago

Here is a post with data from Carta - https://www.linkedin.com/posts/peterjameswalker_cartadata-startupequity-equitycomp-activity-7205962315052068864-s5Qf https://www.linkedin.com/posts/peterjameswalker_cartadata-st...