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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.

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.

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.