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> "Startup employees haven't risked as much but their risk is compensated with appropriate equity the earlier they join and the more risk they take on in the fo
by potatolicious 14y ago
> "Startup employees haven't risked as much but their risk is compensated with appropriate equity the earlier they join and the more risk they take on in the form of lower salary and benefits."
This is the part where we wave our hands and drop a smoke bomb.
You're theoretically right, but it never works out that way. For all intents and purposes, in the current state of the tech economy, there is no inherent risk to working for a startup. If my company went belly-up today I'll bounce off the floor juuuust fine.
Equity at this point is not being given in exchange for the risk of the company failing, it's given as a tool to decrease other forms of compensation.
And it's a shitty trade. Founders know it and experienced employees know it. The only people who are falling for this are the fresh-faced college grads who think 0.1% pre-dilution of your startup will make them rich.
But lots of engineers get convinced to take huge pay cuts in exchange for a pittance in equity, and to forego huge amounts of benefits that are worth real cash.
"Compensated with appropriate equity" is bullshit. If this was standard operating procedure we wouldn't be walking around acting like sub-1% pre-dilution is worth anything whatsoever.
- waterlesscloud 14y agoI've been amazed the typical equity for early employees has stayed as low as it has for as long as it has.
- seeingfurther 14y agoIt's going to change.
- doktrin 14y agoI would replace "early employees" with "early engineers". Not sure why, precisely, but it wouldn't surprise me if negotiating prowess played a role. Companies I've worked for in the past would never dole out more than 1% to engineers, but dropped anywhere from 2-5% on sales / biz-dev / managers. In one case, the engineers had actually been with the company for years and working at half-market wages prior to the non-technical hires.
- throwawayhooray 14y agoEngineers/designers are not as good at negotiating than people in sales/biz-dev.
- seeingfurther 14y agoWell if it's a smoke bomb... let's change it. I agree with you there. I'm a current founder and my first 10 employees are going to get a hell of a lot more than .5%
- khuey 14y agoAre they going to have anti-dilution protection?
- seeingfurther 14y agoNobody gets anti-dilution protection. Including founders.
- danielweber 14y agoBy saying "including founders" you make it seem so fair. After all, if there is any benefit, founders should get it, right? But, founders obviously cannot have anti-dilution prevention. When a company is founded, by definition the founders have 100% of it, and the only way they can raise money is by diluting. If two founders and three VC reps are sitting around the board table discussing the next round of funding, if there is heavy dilution it will often include stock grants to all the people sitting around the table to reduce their pain. An employee doesn't have a seat sitting around that table, so he is more likely to be pinched by dilution that the founders or the VCs.
- khuey 14y agoWell it could work if the amount of stock is effectively fixed at creation time. Everyone I've ever talked to who doesn't already know how stock works is very surprised that more stock can be conjured out of nowhere. They always assume that new stock is formed by subdividing the existing stock (splitting) and that investors get shares that used to belong to the founders.
- seeingfurther 14y ago