211–220 of 325 posts
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Well, kind of the whole idea is that maybe they will be worth more than the cash in the future.
Great argument for paying people in lottery tickets!
Despite the fact that in reality even in best case scenario the sum is rather small -- like 0.01% of a Series A startup with $1B exit will give you like $40K for your 6 year work -- more important issue is different liquidation preferences VCs get for their money.
So, each of many many VCs that invested in a startup by the time of exit exercises own liquidation preferences to scrape every possible dollar -- and in many cases disproportionately more than their fair shares of the startup due to liquidation preferences. As a result there is not so much money left to share among employees after all investors in aggregate get out their money and exercised preferences.
And this is best case scenario. So, a startup needs to have multi-billion exit for employees could make any real money.
The worth of Bison dollars is wholly dependent on how much faith you have that Bison will enact his evil plan of holding the Queen for ransom and forcing the Bank of England to accept the proposed exchange rate of five pounds to the Bison dollar. Similarly, the value of stock or options is dependent on your faith that the startup will grow. Whatever the case, you want to have enough cash to make your expenses, as those odds are NOT in your favor. The VCs funding the company are hedging their bets against several other similar companies in the hopes that at least ONE will blow up and become a "unicorn".
I know 100+ people from a dozen companies who've made $1mm+ on equity. None of my friends would write a post like this. That said, valuing equity is complicated: - most offers include a healthy mix of cash and equity and benefits. Evaluate the whole package. - unless you can pre-exercise via 83(b), I generally avoid options. RSUs are fine and many companies are offering them. Clever hack: counter the offer with a dem…
> I know 100+ people from a dozen companies who've made $1mm+ on equity. None of my friends would write a post like this. This is addressed in the post: > Another common objection is something like “I know lots of people who’ve made $1m from startups”. Me too, but I also know lots of people who’ve made much more than that working at public companies. This post is about the relative value of compensation packages, not…
Another difference could depend on the nature of the individual earning that money. If that individual is disciplined and reasonably good at investing their money, taking the corporate job, living frugally and investing everything that's left might make them come out ahead. But if they're like most people, earning more will make them spend more and they'll come out behind the start-up employee who will usually immediately invest most of the windfall (either in a home or the market).
Neither route is obviously better, but it's probably worthwhile to look at the post-tax, post-spending bank balances of both sets of employees to see who comes out ahead since it's not a simple as comparing $1m to $1m.
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https://www.amazon.com/p/feature/z6o9g6sysxur57t "It’s not easy to work here (when I interview people I tell them, “You can work long, hard, or smart, but at Amazon.com you can’t choose two out of three”)"
Maybe I'm being thick, but is he saying you have to choose 3 of 3 or 1 of 3?
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Startups also like options because they believe it creates an "ownership mentality" among its employees. I believe this is mostly true. I think equity compensation is also a selection mechanism. If I'm running an early stage startup, I want everyone to have a stake in the game. Equity compensation attracts employees with that mindset. Conversely, if a potential employee would prefer all cash compensation to equity, t…
I'd prefer plain old stock without restrictions and a larger proportion of it. I think we ought to target a controlling interest for the employees (i.e. employees own over 51% of the company) and shareholders vote on the weight of their shares, like they normally do. In sum, I'd rather see a founder worth $100 Million and 999 employees worth $900k than a $800 Millionaire and 999 employees worth $200k. And I actually…
And on an economic level, if the net compensation level, including crushing levels of stress and overwork, was so bad between founders and employees, you'd see a lot more founders until the system balanced itself out. And you do not. Most real good engineers just want a fat paycheck and a clear delineation of responsibility. Trust me, a senior valley level salary and not riding that ride is a good gig.
That said, the side of the bread with the butter on it is pretty clear. The reasons for that are less clear until you've done it, but nobody's standing in your way-- you want to be the daddy/get really rich, found a company.
"If you look at companies that have made a lot of people rich, like Microsoft, Google, and Facebook, almost none of the employees who became rich had an instrumental role in the company’s success. " 100% false.
At the startup I worked at, a bunch of people made some money based on equity, and while it wasn't necessarily a perfect correlation between equity and contributions (and how could it be?), roughly speaking, equity and "having instrumental roles in the success" were certainly highly correlated.
I'm not even sure what the idea is here. Are early employees generally considered undeserving of the success of their companies? Who is deserving? The founders? Later employees?
"..why shouldn’t the startup go to an investor, sell their options for what they claim their options to be worth, and then pay me in cash?" Because an option held by an employee has more value because it functions as an incentive.
Earlier quoted context omitted.
Well, kind of the whole idea is that maybe they will be worth more than the cash in the future.
When a company gives you options instead of cash, they are making a bet with you that they can make a better return on the cash than you can. They are hoping they can convince you that cash_in_your_hand_now , but in order for them to even consider making the bet, they have to expect that value_of_shares_in_the_future .
I don't want to jump into a debate on a clearly biased post, but I feel that a few things need to be clear: - Many employees prefer options to cash, as it provides the opportunity to make a lot of money. The chances that happens are very low but many people want to take the chance. Just because it's not your preference doesn't mean it's not attractive. - Salaries increase over the life of the company, so if you join…