Just how much is that 2% really worth? • Hacker News Board

Re: Just how much is that 2% really worth?

#31

Post by pessimizer » Thu, Jul 03, 2014, 3:52 PM UTC

[deleted] wrote: post #26

onion2k wrote: post #7

My advice to people who want to work in a startup is always very simple: Ignore any equity. If you'd take the job without any equity then take the job. If the equity is part of your reason for taking the job, you probably shouldn't take it. Base rate neglect[1] means we are terrible at evaluating the probability of equity being valuable. For every story about someone making millions out of their equity when the start…

[deleted]

>This is like telling people thinking about becoming a volunteer firefighter that they should factor out of consideration the possibility of a fire.

No, it's the opposite. The vast majority of firefighters eventually have to fight a fire. The vast majority of startups never catch fire.

Re: Just how much is that 2% really worth?

#32

Post by nawitus » Thu, Jul 03, 2014, 3:55 PM UTC

onion2k wrote: post #7

My advice to people who want to work in a startup is always very simple: Ignore any equity. If you'd take the job without any equity then take the job. If the equity is part of your reason for taking the job, you probably shouldn't take it. Base rate neglect[1] means we are terrible at evaluating the probability of equity being valuable. For every story about someone making millions out of their equity when the start…

>If you want to make millions in software, get a job writing code at a bank and invest your salary.

Really? Even if some 'banks' pay better, these banks tend to be located in a handful of cities in the world - but there are startups in a lot of more locations.

And it doesn't seem clear that finance firms pay that well: > The average base salary for a software engineer at a finance firm is $92,000, not far ahead of the average base salary of $87,000 for a software engineer at a tech company, according to salaries self-reported by employees on the jobs and careers site Glassdoor.com. http://www.marketwatch.com/story/silicon-valley-vs-wall-stre...

Re: Just how much is that 2% really worth?

#33

Post by [deleted] » Thu, Jul 03, 2014, 3:55 PM UTC

[deleted] wrote: post #26

onion2k wrote: post #7

My advice to people who want to work in a startup is always very simple: Ignore any equity. If you'd take the job without any equity then take the job. If the equity is part of your reason for taking the job, you probably shouldn't take it. Base rate neglect[1] means we are terrible at evaluating the probability of equity being valuable. For every story about someone making millions out of their equity when the start…

[deleted]

[deleted]

Re: Just how much is that 2% really worth?

#34

Post by Iftheshoefits » Thu, Jul 03, 2014, 3:56 PM UTC

hkmurakami wrote: post #17

nilkn wrote: post #13

This reminds me of the early-stage startup that offered me a $55k salary in a big city and zero equity to be engineer #3. They told me that if after a year I'd become an integral member of the team then we could discuss equity. Meanwhile they tried to sell me on the job by saying that if the company succeeded we'd never have to work again.

I really don't understand what these companies try to accomplish by essentially lying to you and trying to defraud you of your value. Do they really think you'd sitck around for long under these terms after you find out inevitably how badly you're getting fucked?

I think you underestimate the number of programmers who are willing to work under such conditions for the "glory" they perceive the position to bring (and, of course, there is no shortage of people who actually think their lottery ticket is worth far more than it really is).

In an area where there is a high concentration of people who are young (naive) and (relatively) debt/responsibility free it's easy, almost trivial, for a founder to exploit them. I perused Angel List some time ago. The salary offerings were hilarious. It's very clear to me (mid-30s guy with a family and mortgage) that they are targeting a certain age and social group.

Re: Just how much is that 2% really worth?

#35

Post by lhnz » Thu, Jul 03, 2014, 4:02 PM UTC

Instead of working for a big company you could just freelance and temporarily contract out to large companies. You get all of the $$$ but also the flexibility for high-optionality events afforded to you from copious free time to build startups and side projects (as well as time to network with others.)

In my opinion it is far better to secure a high salary and the free-time and autonomy to work on your own higher-risk pursuits, than it is to secure a low salary and share a tiny percentage of optionality and autonomy with others on a high-risk pursuit.

The only exception I'd make is when you're truly enamoured with a vision, a founder, prone to loneliness and need to belong, or don't wish to focus on your economic livelihood at all.

At the end of the day the likelihood is that the high-risk pay-off never comes. Just like almost everybody else you'll become old, have a family and want to be able to provide for them.

Re: Just how much is that 2% really worth?

#36

Post by Wilduck » Thu, Jul 03, 2014, 4:06 PM UTC

nawitus wrote: post #32

onion2k wrote: post #7

My advice to people who want to work in a startup is always very simple: Ignore any equity. If you'd take the job without any equity then take the job. If the equity is part of your reason for taking the job, you probably shouldn't take it. Base rate neglect[1] means we are terrible at evaluating the probability of equity being valuable. For every story about someone making millions out of their equity when the start…

>If you want to make millions in software, get a job writing code at a bank and invest your salary. Really? Even if some 'banks' pay better, these banks tend to be located in a handful of cities in the world - but there are startups in a lot of more locations. And it doesn't seem clear that finance firms pay that well: > The average base salary for a software engineer at a finance firm is $92,000, not far ahead of th…

I think you may be missing the point. The way to make millions was less about "work at a bank" and more about "invest your salary". With any decent salary and good financial planning, a few million dollars by retirement is easily within reach.

Re: Just how much is that 2% really worth?

#37

Post by drcoopster » Thu, Jul 03, 2014, 4:07 PM UTC

calebclark wrote: post #10

newcf wrote: post #6

I'm not entirely sure the calculations work.. Maybe I entered data wrong, but I was trying to model the acquisition/startup that I just went through. with our numbers, and our dollars, and my shares.... I walked with a heckuva lot of money, but that's not what the site said.

There is a bug that triggers when you add a funding round. It takes your equity percentage down to zero, regardless of the amount raised or pre-money valuation.

That's not a bug.

Re: Just how much is that 2% really worth?

#38

Post by dreese » Thu, Jul 03, 2014, 4:11 PM UTC

onion2k wrote: post #7

My advice to people who want to work in a startup is always very simple: Ignore any equity. If you'd take the job without any equity then take the job. If the equity is part of your reason for taking the job, you probably shouldn't take it. Base rate neglect[1] means we are terrible at evaluating the probability of equity being valuable. For every story about someone making millions out of their equity when the start…

I think about startup employee equity like this:

Salary = compensation for doing the job

Equity = compensation for taking the risk of working at a company with a high chance of failure

Therefore, in the future, an employee with lots of equity should still be paid a normal salary/raise/bonus because the equity isn't "current" compensation for doing the job, but a reward for taking a risk long ago.

But ignoring equity entirely is silly. Much better to say that you should consider salary and equity separately. One is for doing the job and the other for doing it now when uncertainty and the possibility of failure are high.

Also, some people (like me) would trade an increase in equity for a smaller salary, so it's not a perfect separation. I had a job offer once that gave me two options to choose from, which was really cool.

Re: Just how much is that 2% really worth?

#39

Post by [deleted] » Thu, Jul 03, 2014, 4:12 PM UTC

pessimizer wrote: post #31

[deleted] wrote: post #26

Earlier quoted context omitted.

[deleted]

>This is like telling people thinking about becoming a volunteer firefighter that they should factor out of consideration the possibility of a fire. No, it's the opposite. The vast majority of firefighters eventually have to fight a fire. The vast majority of startups never catch fire.

[deleted]

Re: Just how much is that 2% really worth?

#40

Post by IgorPartola » Thu, Jul 03, 2014, 4:13 PM UTC

onion2k wrote: post #7

My advice to people who want to work in a startup is always very simple: Ignore any equity. If you'd take the job without any equity then take the job. If the equity is part of your reason for taking the job, you probably shouldn't take it. Base rate neglect[1] means we are terrible at evaluating the probability of equity being valuable. For every story about someone making millions out of their equity when the start…

So why the hell do startups bother offering equity? It seems like for the founders there are only downsides in offering it, while for the employees there is no upside at all. Perhaps a better model for a two founder startup looking for a first employee is to just find a third partner who will only take equity (that is in double digit percentages), then actually start paying only salaries to person 4+.