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"You'll almost certainly walk away with the equivalent of a few hundred thousand per year" "Certainly" is an inappropriately strong word. Even if you assume a

"You'll almost certainly walk away with the equivalent of a few hundred thousand per year" "Certainly" is an inappropriately strong word. Even if you assume a salary of $150,000/year, in order to reach $300,000/year you would need to make $150,000/year in stock options, which comes out to $450,000 total if you assume it takes 3 years to get from series B+ to an acquisition/IPO. Of course, it could take longer. Or the median outcome could occur and neither event would happen. So even in the unlikely scenario that the company goes from series B -> liquidation event in 3 years, and you get 0.25% equity (I'm assuming unreasonably generous stock options here for your average engineer, especially given the base salary), the company needs a $180MM liquidation event for the math to work out. This of course assumes that all stock is equal and your investors don't have a liquidation preference or anything like that. It also assumes the company doesn't take additional financing that dilutes the option pool.

timr 12y ago
If you're in a company that's series B+, a $180M liquidation event is a fail, and you shouldn't expect to make anything. I'm not counting angel rounds as a series A here. I'm talking about the big rounds that are invested to scale the business of an already-successful product. Companies that take these kinds of rounds can still fail, but the rate is nowhere near the same as for an early stage startup. And there's still upside in it for the employees: if you get .01% at a $100M series B valuation, and the company eventually IPOs for $1B, you've walked away with a grant worth $100,000. We're only a factor of ~4 apart -- make that .02% and a $2B exit (or .01% at 50M for a $2B exit, or...), and you're basically there. And we haven't even talked about raises and/or retention grants, yet. So perhaps "certainly" was a strong choice of words, but it isn't totally ridiculous, either. Being a later stage employee at a hot company is a pretty good deal.
- jsaxton86 12y ago
  Yeah, I think we're pretty much on the same page. I think we both agree that established startups probably provide the best balance between risk and reward, but I'm less optimistic about the potential reward, especially for an engineer. I joined the company I currently work for about a year after they raised a series C round. Most importantly, I get a pretty competitive base salary, but I also have some stock options. Even in the best case scenarios I think I'm looking at new car money, not mid-six figures. From talking with other coworkers, joining shortly after the series B round would have increased my options by roughly a factor of 3, in which case that "new car money" becomes "down payment on a house" money. Which is great, I'm not complaining at all, but it's not enough such that anyone post-series B that I know will be making a few hundred thousand per year.

timr 12y ago

If you're in a company that's series B+, a $180M liquidation event is a fail, and you shouldn't expect to make anything. I'm not counting angel rounds as a series A here. I'm talking about the big rounds that are invested to scale the business of an already-successful product. Companies that take these kinds of rounds can still fail, but the rate is nowhere near the same as for an early stage startup. And there's still upside in it for the employees: if you get .01% at a $100M series B valuation, and the company eventually IPOs for $1B, you've walked away with a grant worth $100,000. We're only a factor of ~4 apart -- make that .02% and a $2B exit (or .01% at 50M for a $2B exit, or...), and you're basically there. And we haven't even talked about raises and/or retention grants, yet. So perhaps "certainly" was a strong choice of words, but it isn't totally ridiculous, either. Being a later stage employee at a hot company is a pretty good deal.

jsaxton86 12y ago
Yeah, I think we're pretty much on the same page. I think we both agree that established startups probably provide the best balance between risk and reward, but I'm less optimistic about the potential reward, especially for an engineer. I joined the company I currently work for about a year after they raised a series C round. Most importantly, I get a pretty competitive base salary, but I also have some stock options. Even in the best case scenarios I think I'm looking at new car money, not mid-six figures. From talking with other coworkers, joining shortly after the series B round would have increased my options by roughly a factor of 3, in which case that "new car money" becomes "down payment on a house" money. Which is great, I'm not complaining at all, but it's not enough such that anyone post-series B that I know will be making a few hundred thousand per year.