4 ms·

I think the real issue is that the “larger amount of equity” needs to be significantly larger than it usually is in practice in order to justify the below-marke

I think the real issue is that the “larger amount of equity” needs to be significantly larger than it usually is in practice in order to justify the below-market salary for a strong hire. (Not saying that you guys didn’t offer people enough equity, rather that I’ve seen many stories of startups not offering nearly enough to justify the risk and below-market salary.)

Jemaclus 13y ago
Agreed! The other thing to consider here is that for a lot of people in the startup world, we already have equity. I already have equity in my current company. And not only that, but my current equity has started to vest! I'm actively making money from my equity right now. If you offer me X equity that's (theoretically) worth slightly more than my current equity but doesn't pay out for a year, you need to do something to incentivize me to give up my remaining, currently vesting equity to join your company. I.e., if my current salary is 100K and I have 50K in equity vesting between now and next November, and you offer me 90K and 250K in total equity, then I have to decide whether it's worth taking a 10K salary cut AND giving up 50K over the next year. The fact that you're offering me 250K in equity is actually going to wind up being equal to what I'm making now (250K - 50K = 200K, 200K / 4 = 50K/year), and the salary is actually lower! It's a net loss for me! So unless I really believe in your company and I really want to leave my current job, it's just probably not enough. And it's your job to either convince me that it's worth the loss or offer me more. And that's assuming your equity is actually worth anything. Given the number of startups that fail, it's a huge risk to take for something that's only theoretically equal to what I currently actually earn. So like I said, equity should be a bonus, not a replacement for salary. But to be fair, like nairteashop said, some people have different appetite for risk and are at different stages in life, so maybe the excitement of moving to a new company is enough to justify that. Anyway, I agree. You either need to beat my salary or beat the equity, but you can't offer me a lower salary and then offer equity and call it comparable, because you're not only offering me something, but you're asking me to give up stuff I already earned. You're asking me to walk away from free money. It's your job to convince me to do that, not to tell me I'm a moron for doing something completely logical.
- amirmc 13y ago
  There's something in your comment that confuses me. "I'm actively making money from my equity right now." How does that work? Also, you say "… that's assuming your equity is actually worth anything" but doesn't that assumption also apply to the equity you're currently vesting?
  - Jemaclus 13y ago
    No, because the company I work for has already IPO'd. I can turn around and sell my shares for cash on the market right now. The companies that are offering me jobs with lower salary and equity are not public, have no viable exit strategy in the near future, and therefore their equity is virtually worthless. There's a potential that it will be worth the equity at my current company, but the likelihood of that is low. That makes the risk high, so in order for me to justify leaving my currently vesting/cashable stock on the table, you have to offer me something I can't get right now, whether that's a higher salary, more equity, or something else. It's not entirely a money issue. If I really, really believe in your company or I really, really hate my current job, I could more easily be persuaded to leave my current job. I'm fairly content where I am, though, so that's hard.
  - walshemj 13y ago
    Or you work in the UK for a company that runs a share save scheme BT's due next year is going to return well over £60k (tax free) on a 12K investment.

Jemaclus 13y ago

Agreed! The other thing to consider here is that for a lot of people in the startup world, we already have equity. I already have equity in my current company. And not only that, but my current equity has started to vest! I'm actively making money from my equity right now. If you offer me X equity that's (theoretically) worth slightly more than my current equity but doesn't pay out for a year, you need to do something to incentivize me to give up my remaining, currently vesting equity to join your company. I.e., if my current salary is 100K and I have 50K in equity vesting between now and next November, and you offer me 90K and 250K in total equity, then I have to decide whether it's worth taking a 10K salary cut AND giving up 50K over the next year. The fact that you're offering me 250K in equity is actually going to wind up being equal to what I'm making now (250K - 50K = 200K, 200K / 4 = 50K/year), and the salary is actually lower! It's a net loss for me! So unless I really believe in your company and I really want to leave my current job, it's just probably not enough. And it's your job to either convince me that it's worth the loss or offer me more. And that's assuming your equity is actually worth anything. Given the number of startups that fail, it's a huge risk to take for something that's only theoretically equal to what I currently actually earn. So like I said, equity should be a bonus, not a replacement for salary. But to be fair, like nairteashop said, some people have different appetite for risk and are at different stages in life, so maybe the excitement of moving to a new company is enough to justify that. Anyway, I agree. You either need to beat my salary or beat the equity, but you can't offer me a lower salary and then offer equity and call it comparable, because you're not only offering me something, but you're asking me to give up stuff I already earned. You're asking me to walk away from free money. It's your job to convince me to do that, not to tell me I'm a moron for doing something completely logical.

amirmc 13y ago
There's something in your comment that confuses me. "I'm actively making money from my equity right now." How does that work? Also, you say "… that's assuming your equity is actually worth anything" but doesn't that assumption also apply to the equity you're currently vesting?
- Jemaclus 13y ago
  No, because the company I work for has already IPO'd. I can turn around and sell my shares for cash on the market right now. The companies that are offering me jobs with lower salary and equity are not public, have no viable exit strategy in the near future, and therefore their equity is virtually worthless. There's a potential that it will be worth the equity at my current company, but the likelihood of that is low. That makes the risk high, so in order for me to justify leaving my currently vesting/cashable stock on the table, you have to offer me something I can't get right now, whether that's a higher salary, more equity, or something else. It's not entirely a money issue. If I really, really believe in your company or I really, really hate my current job, I could more easily be persuaded to leave my current job. I'm fairly content where I am, though, so that's hard.
- walshemj 13y ago
  Or you work in the UK for a company that runs a share save scheme BT's due next year is going to return well over £60k (tax free) on a 12K investment.