4 ms·

How about: give them a little bit more equity than just scraps? Everyone want to found their company because they know it's the only way for them to be rewarde

How about: give them a little bit more equity than just scraps? Everyone want to found their company because they know it's the only way for them to be rewarded if the company is successful. Right now it's more like: "the company got bought, the founder is a millionnaire, you get some pocket money and the awesome opportunity to be a cog in Google Adwords!"

_random_ 12y ago
What, you mean treat developers as managers? What a ridiculous suggestion! How about a nice Google-style office instead?
johnward 12y ago
"the company got bought, the founder is a millionnaire, you get some pocket money" That happened to me. I wasn't the earliest employee but I would have liked to have more than enough to buy a used 2000 Honda Civic when company sold for hundreds of millions. Winning the startup lottery is hard enough. I end up doing it and get basically nothing. I honestly never thought my equity would be worth anything so I guess I can't complain.
applecore 12y ago
Anyone who's founded a startup knows just how much risk is involved, and how significantly it's de-risked by the time they're hiring employee #1, #10, or #100. Basically, 50% of an idea is worth less than 0.05% of a startup with traction.
- angersock 12y ago
  Sure, but consider the case of B2B enterprise sales in some sectors: you might not be able to finish building a product until you've hired a few engineers. Those engineers? They're more vital to your company than your precious idea, because without them you have nothing. I don't think it's unreasonable at all to give them some real skin in the game.
- dasil003 12y ago
  There's something weird about the structure of your comment. How much traction do you assume a startup has when they hire #1? Personally I think startups are too stingy with equity, 2% is considered generous, but this is not enough to compensate for the risk for employees 1-10, which is part of the reason the savvy ones want to be a founder rather than employee. I think the stinginess persists partly because of ignorance of the average prospective employee on stock option plans, so they're not getting the level of pushback they will about salaries. But more importantly from the granting side, it's very hard for founders to tell if a prospective employee has the all-out intelligence, hustle and tenacity to be a part of the critical core group that literally builds a money-making machine from scratch. It's true that hiring is a huge risk, but this is what the vesting schedule is for. Companies need to bet bigger on individuals, because the risk profile does not decline as precipitously as the equity grants, there's a discontinuity there that is keeping savvy employees out. If you are selecting only for people who can afford to work for free then you're leaving talent on the table.
wuliwong 12y ago
I hate that "money" is nearly taboo to talk about. When considering a job, compensation is very important to me. Honestly, it is probably the #1 factor. Other factors matter a lot as well but they are usually only guesswork when at the interview/offer stage. Things like "office environment", "mission", how I get a long with my co-workers, etc all are important but what they tell me up front and what I imagine in my mind's eye might not turn out to be reality. But the money part, that is set. When they say $100,000/year, they pay it. Now we are talking start ups, so obviously equity is a different story. But you can still run the numbers and calculate what you will make depending on the size of the exit. I am not opposed to some risk for the reward (equity vs. salary) but if the reward is 10% of one year's salary if we sell for $100 million dollars, then why should that interest me? Sometimes they make those offers where you can choose more equity or more salary. Maybe I'm just insecure but it's as if taking the salary option says something about you and your commitment to the "mission" negatively. In the scenario I laid out above, I'd say it just meant you can perform simple arithmetic.
- fleitz 12y ago
  It's not taboo, most people just think it is, especially in industries where there is a lineup of qualified applicants. I pick salary every time, the equity is fuck all in most cases. There isn't a mission, it's a job, in exchange for my time I require money, as the founders will say they are taking most of the risk, so you should get most of the money. Dealing with these questions upfront is the way to get rid of people who don't know what they are doing who are wasting your time. If the business is wildly successful as the founders claim it will be then they should be encouraging you to take less equity rather than more. No sane investor only invests in one startup, which is what they are asking wrt equity. It's far better to make lots of money and invest that money in a variety of startups.
tptacek 12y ago
Being generous with equity by default is a bad strategy. Employees are bad at valuing it, and it becomes a point-score system, which is almost the worst-case scenario for equity allocation. It also does few favors for the employees themselves, because when allocations get out of whack, the company can and (because it often has to) will pull the rug out from under them. The better strategy is to be generous with salary, and to make equity available as an option for people who want a more uncapped upside and to assume more of the risk. That selects for people who understand what equity is, and is fair to everyone.

_random_ 12y ago

What, you mean treat developers as managers? What a ridiculous suggestion! How about a nice Google-style office instead?

johnward 12y ago

"the company got bought, the founder is a millionnaire, you get some pocket money" That happened to me. I wasn't the earliest employee but I would have liked to have more than enough to buy a used 2000 Honda Civic when company sold for hundreds of millions. Winning the startup lottery is hard enough. I end up doing it and get basically nothing. I honestly never thought my equity would be worth anything so I guess I can't complain.

applecore 12y ago

Anyone who's founded a startup knows just how much risk is involved, and how significantly it's de-risked by the time they're hiring employee #1, #10, or #100. Basically, 50% of an idea is worth less than 0.05% of a startup with traction.

angersock 12y ago
Sure, but consider the case of B2B enterprise sales in some sectors: you might not be able to finish building a product until you've hired a few engineers. Those engineers? They're more vital to your company than your precious idea, because without them you have nothing. I don't think it's unreasonable at all to give them some real skin in the game.
dasil003 12y ago
There's something weird about the structure of your comment. How much traction do you assume a startup has when they hire #1? Personally I think startups are too stingy with equity, 2% is considered generous, but this is not enough to compensate for the risk for employees 1-10, which is part of the reason the savvy ones want to be a founder rather than employee. I think the stinginess persists partly because of ignorance of the average prospective employee on stock option plans, so they're not getting the level of pushback they will about salaries. But more importantly from the granting side, it's very hard for founders to tell if a prospective employee has the all-out intelligence, hustle and tenacity to be a part of the critical core group that literally builds a money-making machine from scratch. It's true that hiring is a huge risk, but this is what the vesting schedule is for. Companies need to bet bigger on individuals, because the risk profile does not decline as precipitously as the equity grants, there's a discontinuity there that is keeping savvy employees out. If you are selecting only for people who can afford to work for free then you're leaving talent on the table.

wuliwong 12y ago

I hate that "money" is nearly taboo to talk about. When considering a job, compensation is very important to me. Honestly, it is probably the #1 factor. Other factors matter a lot as well but they are usually only guesswork when at the interview/offer stage. Things like "office environment", "mission", how I get a long with my co-workers, etc all are important but what they tell me up front and what I imagine in my mind's eye might not turn out to be reality. But the money part, that is set. When they say $100,000/year, they pay it. Now we are talking start ups, so obviously equity is a different story. But you can still run the numbers and calculate what you will make depending on the size of the exit. I am not opposed to some risk for the reward (equity vs. salary) but if the reward is 10% of one year's salary if we sell for $100 million dollars, then why should that interest me? Sometimes they make those offers where you can choose more equity or more salary. Maybe I'm just insecure but it's as if taking the salary option says something about you and your commitment to the "mission" negatively. In the scenario I laid out above, I'd say it just meant you can perform simple arithmetic.

fleitz 12y ago
It's not taboo, most people just think it is, especially in industries where there is a lineup of qualified applicants. I pick salary every time, the equity is fuck all in most cases. There isn't a mission, it's a job, in exchange for my time I require money, as the founders will say they are taking most of the risk, so you should get most of the money. Dealing with these questions upfront is the way to get rid of people who don't know what they are doing who are wasting your time. If the business is wildly successful as the founders claim it will be then they should be encouraging you to take less equity rather than more. No sane investor only invests in one startup, which is what they are asking wrt equity. It's far better to make lots of money and invest that money in a variety of startups.

tptacek 12y ago

Being generous with equity by default is a bad strategy. Employees are bad at valuing it, and it becomes a point-score system, which is almost the worst-case scenario for equity allocation. It also does few favors for the employees themselves, because when allocations get out of whack, the company can and (because it often has to) will pull the rug out from under them. The better strategy is to be generous with salary, and to make equity available as an option for people who want a more uncapped upside and to assume more of the risk. That selects for people who understand what equity is, and is fair to everyone.