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Engineers: always negotiate for higher base salaries. In the vast majority of cases—especially during acquihires—your equity will be worth little or nothing. Fo
by stan_kirdey 1y ago
Engineers: always negotiate for higher base salaries. In the vast majority of cases—especially during acquihires—your equity will be worth little or nothing. Founders and VCs still get paid; employees rarely do.
Don't just accept promises. Ask for the 409A valuation, liquidation preferences, and pay bands. If a company won’t provide transparency, that’s your signal.
Equity is a lottery ticket. Salary is money in the bank.
- gsibble 1y agoI tell every engineer always to maximize their cash comp and every founder and investor always says "No, that's such a bad idea! Get more equity!" Yeah, because that is in your interests, not the engineer's.
- 01HNNWZ0MV43FF 1y agoI remember when my old employer was doing another round of funding They offered to sell me more shares I countered that I'd been trying to dump the shares they already gave me and if the shares are truly worth X dollars they should buy them back from me Anyway glad I quit
- debatem1 1y ago> if the shares are truly worth X dollars they should buy them back from me I always offer companies pushing equity hard to trade for cash at 10% of the highest number they try to get me to value it at. Nobody has ever taken me up on it, even when they really should have.
- usaar333 1y agoNot everything is adversarial. More cash pressure on the company itself can be bad for the company which is bad for you too. I always take more equity. I wouldn't work for you in the first place if I didn't believe in your equity.
- baq 1y agoThis may work for you, but in general isn’t good advice. You shouldn’t be confusing beliefs and risks. Risk should be managed - you should be comparing cash invested into the public market (or treasuries, or bitcoin, whichever you prefer) with equity in the startup, not with a savings account.
- usaar333 1y agoStartup equity is worth a lot:https://www.amafinance.org/startup_comp/ https://www.amafinance.org/startup_comp/
- baq 1y agoMaybe useful for VCs who have a portfolio of companies and need to put stuff in their presentations to LPs. If you’re an employee you can’t look at this like an investor would. Your risk profile is completely different. The write up is correct in that it’s basically a call option, correctly point out there is no market for it and then ignore the fact that zero liquidity means you can land a 747 between the bid and ask (if you get anyone to buy from you at all). This a feel good number generator.
- usaar333 1y agoAn employee can repeat jobs over and over. Assumption is an exit eventually occurs - same thing VCs feel as well.
- tensor 1y agoThere are more than enough stories about employees complaining that they didn't get a big enough payout on an acquisition or IPO to know that this isn't true. It all comes down to your risk reward preference. Sure, if you don't want to take a risk then look for a higher salary, and probably at a more established company because even if you have mostly salary and little equity a startup is still risky (and you're making it even more so by putting cash pressure on the company at that stage). On the other hand, if you want a chance at a bigger payout, you'll want more equity. And yes, you may well not get that payout.
- tedivm 1y ago> There are more than enough stories about employees complaining that they didn't get a big enough payout on an acquisition or IPO to know that this isn't true. That's exactly why it is true. If every person who held early stage stock walked out of those events happy then no one would recommend they focus on salary.
- cortesoft 1y agoThe problem is that your risk is compounded because your equity risk is correlated with your salary risk - if one fails the other is likely to fail, too. Even if each risk is a good one to make separately, it isn’t always good to make both risks.
- CalChris 1y agoThere is another variable. Find better companies to work for. If you don't think this is a unicorn, don't work for them. If this is another stablecoin startup leveraging quantum AI then you deserve what you get, cash comp or no.
- cortesoft 1y agoIt doesn’t matter if you think it is a unicorn or not, it is about risk management. Early stage investors know that even the best startups have a fairly low chance of success, which is why they diversify by investing in a lot of them. The many failures are paid for by the few successes. As an employee, you are only given stock in the one company you work for. Even if you think it will be a success, it isn’t smart to put all your eggs into that one basket. No investor would do that, and no employee should either. If you are working at a startup, a lot of your eggs are already in that basket; your ongoing salary is dependent on the company continuing to succeed. If you take less cash for more equity, you are putting even more eggs into that same basket. If it fails, you are going to lose all the equity AND your salary. You don’t want your investment risk and your salary risk to be that correlated.
- rgavuliak 1y agoIf anyone knew how to spot unicorns, the industry would be very different.
- CalChris 1y agoThere are certain unicorns; I've worked for one. There are maybe unicorns; I've worked for a few. Then there are non-unicorns. These may even start as maybe unicorns. But as soon as you know it's never going to be a unicorn, you can leave. Or stay, prospects depending. If you know it's never going to be a unicorn before you even join, you can think of it as glorified contracting. Done that too. Maybe lean on compensation rather than options because a whole lot of nothing is, tap-tap-tap, nothing. BTW, VCs think along similar lines.
- gsibble 1y agoI've tried to ask dozens of companies that wanted to hire me just for how many shares were outstanding and/or authorized. They almost always refused to share. You can almost never get any info on equity until it's too late and you realize it's worth nothing.
- georgemcbay 1y ago> I've tried to ask dozens of companies that wanted to hire me just for how many shares were outstanding and/or authorized. Those questions are certainly worth asking but employees should also keep in mind that even if they do share that information your equity can still later be diluted away to worthlessness.
- mgfist 1y agoThere's other gotchas too. Ratchets, liquidation preferences, restructurings (recapitalizations) etc etc There's many opportunities for VCs and founders to screw you over. And that's assuming things go well enough for that to be an option lol
- dilyevsky 1y agoMy 2c is these are almost always a consequence of the company not being a good business. Well, sometimes you get asshole founders/board members too that's not as common as the company just being an absolute money pit. So instead, I'd focus on asking about business fundamentals/strategy - if the company is money printer, everyone is likely going to do well financially
- toomuchtodo 1y agoAdditional resource: Ask HN: How to negotiate stock options? - https://news.ycombinator.com/item?id=28401655 https://news.ycombinator.com/item?id=28401655 - September 2021
- djoldman 1y agoIndeed. Likewise with non-guaranteed bonuses (gotta love the "plus a discretionary bonus!" commentary during offer discussions). It's always worth offering to take equity as long as they agree in writing to not ever dilute your shares and vest them immediately. However, it's unlikely that any company will agree. It's best to imagine compensation as exactly one's salary. Then (virtually) all surprises are good.
- azinman2 1y agoI don’t see how a company could promise this. Everyone gets diluted for every funding round, for example.
- djoldman 1y agoThey can easily, they just don't.
- Xylakant 1y agoLegally speaking, it’s probably possible. Practically speaking it almost certainly a guarantee that the company will never see outside investment. On every round someone would need to pony up the cash to fill that employees stock. Anti-dilution clauses exist, but they never work like that. Such a privilege is also likely to be almost worthless - if the company succeeds and the round makes it worth more, you’ll win even with dilution. If the company doesn’t, then other clauses such as liquidation preferences will make your stock worthless, regardless of how much you own.
- djoldman 1y agoThe difference is that if the company succeeds, an employee afforded this provision is guaranteed to make $X. Without this provision, it's possible in many ways for the employee to be left with far less than $X, even if the company succeeds. In some ways <<<<<<$X.
- gwd 1y ago
- usaar333 1y agoUnder any normal circumstance I've ever seen, you should be taking the higher equity/lower salary combination and should focus on equity rather than salary. The only time it ever makes sense to push for more salary instead is if you literally cannot get a job at a public company (or even a near IPO unicorn). Plenty of startup employees can, so clearly they believe their startup equity is worth something. Financially speaking, startup equity is actually worth a lot as an employee (https://www.amafinance.org/startup_comp/ https://www.amafinance.org/startup_comp/). Yah, over 50% it's going nowhere but expectation needs to consider how huge the win is even if it is lower probability.
- almostgotcaught 1y ago> Yah, over 50% it's going nowhere but expectation needs to consider how huge the win is even if it is lower probability. yes that's literally the definition of expectation value...... so ev = 1 bagillion * 0.0000000000000001 = ~0 hence you should absolutely not be taking higher equity/lower salary ever. hell i wouldn't even take that at a publically traded company if given the option.
- doctorpangloss 1y agoThe interesting thing going on is, stars align. The kind of person who has to think about this problem should take equity. The kind of person who would choose to take cash isn't going to be hired at the kind of VC backed business that will end up being worth something.
- Dayshine 1y agoYes, a company will do very well if it fills itself with naive employees who think that if they work insane hours and sacrifice their life for equity (which they'll never get an exit event for) will do very well. But you don't want to be that employee...
- almostgotcaught 1y agoMan what level of weird delusion is this? Windsurf was an app for code completion not interstellar space travel lol.
- makk 1y agoYes, maximize cash and use it to acquire a diversified portfolio.
- andy99 1y agoYes - equity should be an incentive to contribute the the company's success, and partial compensation for the risk of going to a startup. One should value it at precisely $0 in terms of life planning. This becomes truer and truer the more of an employee and the less agency over the company's choices you have, but generally if you're not a co-founder (founding engineer doesn't count) equity traded off against salary is someone scamming you.
- neilv 1y ago> equity should be an incentive [...] and partial compensation for [...] One should value it at precisely $0 in terms of life planning.* Not very good incentive or compensation, if you have to value it at $0.
- baq 1y agoStill better than a lottery ticket.
- daniel_iversen 1y agoNot if you live in a country where you can end up paying more taxes than the equity is worth! Be a little careful with Options and RSUs depending on where you live, and even more so for certain companies etc
- KingMob 1y agoGiven opportunity costs, you could easily argue that it should have negative value.
- parpfish 1y ago> equity should be an incentive to contribute the the company's success the much bigger motivation is "keep the company afloat so i can keep drawing my salary", so just boring old non-equity paychecks provide plenty of motivation. if you're an employee that thinks your contributions are so great that you are single-handedly juicing the stock price or valuation, you're probably wrong but if not... you should probably take those skills and found your own startup.
- fusslo 1y agomy equity from 2years pre-acquisition: ~$2800. Then the CEO gave out bonuses when everyone threatened to quit. Then after his 3 month vacation to Italy, he came back driving his new Ferrari. My equity from 4 years ( employee ~60, grew to over 500 ): worthless. No one is able to exercise any options. They also readjusted when the valuation came below the total raised, making the value of my vested shares ~$13k ( down from ~$200,000 ) . They 'made us whole' by giving more shares with a new 4 year vesting schedule. Startups have found ways to fuck everyone but the investors with equity. It's confederate dollars; funny money. Maybe some people get great deals, I don't know. From my limited experience at very successful startups, the only people who made real money were those able to parley huge bonuses or base salaries.
- dehrmann 1y agoAt some point, aren't the C Suite and directors failing their fiduciary responsibility? I know they have broad freedoms, but when you're reducing an a minority shareholder's equity by 95%, it's well past "fiduciary responsibility" and looking like fraud.
- fusslo 1y agoI am convinced every executive and wanna-be executive is on the 'inside joke' of funneling money out of the company into their pockets. I am also convinced that investors believe it's the C Suite's responsibility to tear away any equity from employees to leave the largest pot for investors.
- jjice 1y agoI had some RSUs from a previous company (likely will not be worth anything) and some options at another, but I have no idea how to understand how dilution like this works. My understanding is surface level of that scene in The Social Network. I feel like I understand _what_ an RSU is and what options are, but are there any good resources for me to learn from?
- baq 1y agoRSUs are much better than options, they’re actually properly shares, will go to zero when the company is bankrupt and even then not necessarily. Options go to zero much more often.
- fragmede 1y agoDilution is where things get fucky. So you're working at this startup. Lets say it's worth $10 million. To make things simple, in this company, there are 2 people, the fucker, the CEO, the guy that started it all. He holds 90,000 RSUs, each worth $100, so $9 million, and the fuckee, you, who holds 10,000 RSUs, each worth $100, for a cool million. Here's where the fucker fucks the fuckee, ie you. The company does a round, and then creates, out of thin air, a billion shares (1,000,000,000), and issues them to the new investors. Lets say the company reached unicorn status this round, which is to say a valuation of a billion. Holy hell a billion! But wait now there's 1,000,100,000 total shares out there, and the valuation of a billion, divided by the new shares, means that each share, of which you only have 10,000 of, is now worth just under one dollar. That's right, your $1 million just turned into $10,000. Which isn't nothing, I'd love to come across a random $10k I didn't know I had. But that's just, like, one really nice vacation for you and the kids, which you haven't seen enough of because you've been working so hard at this startup, and not, like, a college fund for the kid that's showing aptitude at engineering and that you were hoping was gonna go to MIT. Dilution is inevitable, there's no avoiding it. The scenario I presented is just to show you an example of how dilution fucks you. If things go well, would you rather have 10% of $1 million or 0.1% of $1 billion? For more, it depends on how you like your information. ChatGPT's got stuff like ISOs vs NSOs pretty well covered, Investopedia's got a lot of good stuff if you'd rather it that way.
- 1y ago
- tlogan 1y agoThis is a brilliant move by Google: it makes joining any AI startup even less appealing. Stock options were always a lottery. But this takes the shenanigans to a whole new level.
- jahewson 1y agoPro tip: do both.
- bravesoul2 1y agoIf you are gonna do that just work for a FAANG really right?
- closeparen 1y agoWorking at a startup pretty much always involves trading off money in the bank for other things. That’s the industry’s whole deal. Which is why I stay in Big Tech with liquid RSUs.
- myrandomcomment 1y agoI would like to understand a bit here about what you are saying as having been involved in a few startups and I do not quite understand what you are getting at. My understanding based on experience (successful exits, small exits and crash and burns) follow. First a 409A is generally engineered to keep the lowest value possible in order to allow the employees to exercise their options at the lowest value via an 83b election so at an exit they can be taxed at the long term capital gains rate. When someone joins a startup and is issued options the value of the stock is set via the 409A (which has to be renewed every year). The lower the number the more likely an employee can afford to write the check. 100K shares at $0.01 vs at $0.25 is a major factor for anyone to consider. Any startup worth their damn will make sure the facts in any 409A fit a low number for that reason. The reality of an exit where you are acquired will be based on other numbers that optimize for forward earns and value of your team and tech. The questions you need to ask are: What is the total authorized shares? What is the required process to raise that number? How are we funded? Does funding include preferred shares? What is the preference on those shares? On an exit what is the payment order? I agree about the salary bands and at my current company we provide them, as well as answering all the questions above upfront to any candidate with an offer. The reality of windsurf is that the founders are scum and this is going to end up in court for years. Google should be ashamed.