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I agree that early employees need to share in the win. However, this approach has several fundamental problems: (1) 10 years in, your founding engineers won't

I agree that early employees need to share in the win. However, this approach has several fundamental problems: (1) 10 years in, your founding engineers won't have had much more impact than number 4, or 5, or 10. I think you'll have a real problem on your hands when two peers have 100x different equity stake and their tenures are just 1 year apart. (2) In fact, your founding engineers probably won't be your best or highest impact folks. I much prefer the approach where you give very generous re-ups to your high performers. (3) Founders and founding engineers are not the same. (3a) Founding engineers eventually will require market compensation. Founders will not. (3b) Founding engineers can leave at any time without inflecting the direction of the company. In fact they leave all the time: I've never seen a company where all the founding engs are around 10 years in. (3c) Founding engineers do not have the investor, customer, and executive relationships that the founders have. An I'm sorry to tell you that those are much more important than engineering prowess. FWIW, I like Sam Altman's recommendation of 10% for the first 10 employees (https://blog.samaltman.com/employee-equity https://blog.samaltman.com/employee-equity). It's more than most companies do today...

lr4444lr 2y ago
Equity isn't mainly based on performance. It's based on risk. If I join as the first engineer, before any paying customers, that is in fact worth exponentially more than when there is some revenue, the first cease and desist is conquered, the rest of the core team is put together and working well, etc. Trusting a potentially insane one-man shop of the founder is way different than trusting a group of 5-10 people who pay rent at the end of the month as proof that the concept might work. Investors have even less to go on: the founder might be an outright crook and run off to the Bahamas.
- thr0waw4y1234 2y ago
  (A) I don't know who told you that equity compensation was based on risk, but it's not. A CRO hired at series C will get more equity than any IC level employee hired as employee #1. It's a compensation lever like any other. (B) I keep hearing people talk about "risk". Is this "risk" in the room with you right now? The reality is that founding engineers at many startups get competitive salary, get to work on incredible problems, and can leave after a few years having vested a bunch of equity and added a solid entry to their resume. (C) Yes, if you're currently an L6 eng at Google you'd get a pay cut working at a startup. This isn't risk, it's opportunity cost. And guess what: those people very rarely join early stage startups. Those that do negotiate hard and get bigger equity packages. Most early stage startup employees are earlier in their careers / haven't hit the Google jackpot yet. (I'll set aside the fact that many people leave big tech and join startups for non-financial reasons. Harder to draw generalization about those because the motifivations are so personal, but I know many.)

lr4444lr 2y ago

Equity isn't mainly based on performance. It's based on risk. If I join as the first engineer, before any paying customers, that is in fact worth exponentially more than when there is some revenue, the first cease and desist is conquered, the rest of the core team is put together and working well, etc. Trusting a potentially insane one-man shop of the founder is way different than trusting a group of 5-10 people who pay rent at the end of the month as proof that the concept might work. Investors have even less to go on: the founder might be an outright crook and run off to the Bahamas.

thr0waw4y1234 2y ago
(A) I don't know who told you that equity compensation was based on risk, but it's not. A CRO hired at series C will get more equity than any IC level employee hired as employee #1. It's a compensation lever like any other. (B) I keep hearing people talk about "risk". Is this "risk" in the room with you right now? The reality is that founding engineers at many startups get competitive salary, get to work on incredible problems, and can leave after a few years having vested a bunch of equity and added a solid entry to their resume. (C) Yes, if you're currently an L6 eng at Google you'd get a pay cut working at a startup. This isn't risk, it's opportunity cost. And guess what: those people very rarely join early stage startups. Those that do negotiate hard and get bigger equity packages. Most early stage startup employees are earlier in their careers / haven't hit the Google jackpot yet. (I'll set aside the fact that many people leave big tech and join startups for non-financial reasons. Harder to draw generalization about those because the motifivations are so personal, but I know many.)