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

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

#131

Post by graylights » Thu, Jul 03, 2014, 11:35 PM UTC

eloff wrote: post #82

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 know you're not being serious about the bank thing, but I just want to say, if you're a programmer and you love what you do, and you're good enough to be choosy, don't work for anyone (especially banks!) whose main job is not software. There are a few exceptional companies, but mostly it's a good rule of thumb. Working for Dilbert's pointy haired boss is just not a recipe for happiness - who cares if it pays well.…

I disagree and I would change your statement: Don't work for anyone whose success is not tied to the success of their software.

Plenty of non-software companies can live or die on the quality of their algorithms. It could be a small development team but it can be challenging and rewarding. Plus it will give you a bigger perspective.

The key is to work somewhere that you are valued.

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

#132

Post by pyrrhotech » Fri, Jul 04, 2014, 1:46 AM UTC

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.

Is that even minimum wage in SF? My neighbor is a toll booth colector and makes double that amount

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

#133

Post by Spooky23 » Fri, Jul 04, 2014, 1:51 AM UTC

kristiandupont wrote: post #43

dreese wrote: post #38

Earlier quoted context omitted.

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…

>Equity = compensation for taking the risk of working at a company with a high chance of failure But if you are getting a normal salary, what is this risk?

You're probably drawing lousy benefits and a no-frills 401k with bad funds. Plus the bonus of having to figure out when the payroll dollars run out.

I worked at a startup where towards the end before their buyout, they weren't paying the phone bills, and their core profit center was a call center. When you work in that situation and trying to troubleshoot downed circuits, which turn out to be shut off for non-payment, that's some serious stress.

Right now I work for a government org with some really awesome technology challenges. Plenty if politics, but also security and ok pay. I'd rather have a constitutionally protected pension and startup+ pay than startup pay and no equity

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

#134

Post by mattm » Fri, Jul 04, 2014, 2:47 AM UTC

Jemaclus wrote: post #94

mattzito wrote: post #27

Earlier quoted context omitted.

A lot of the startups that I see that try this are doing it because they really believe that they're bringing the value in this relationship - that they're going to be so successful, there's so much money here, they have SUCH a good concept, that the applicant should be grateful to get in on the ground floor. Of course, 90%+ of the time they're totally wrong about everything about what they're bringing to the table,…

I got an offer last year from a company who offered me a 25% salary cut from my current salary and some negligible equity percentage, and then got all huffy when I tried to negotiate the salary. In their mind, the equity was worth so much money, they could pay me peanuts and I should still take the job. It was a huge turn-off. The guy basically told me to go off. "Why bother with startups, then?" he says. Completely…

Also, if the equity is worth so much money, why are they even offering it to you in the first place? You'd think they'd want to keep it all for themselves.

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

#135

Post by IgorPartola » Fri, Jul 04, 2014, 3:05 AM UTC

dasil003 wrote: post #127

IgorPartola wrote: post #112

Earlier quoted context omitted.

There is a huge difference between making a startup succeed and a sale that pays out to you. A startup can get sold for lots of money but if during that sale your stock is not set up to be paid out, you lose. As an employee you can make a difference for whether the sale happens or not. You have very little control over how it happens.

Seems like you're moving the goal posts. I acknowledged luck in the equation, but how the sale happens has a lot to do with the founders, that is the people you decided to fall in with. Again, it's different from a lottery ticket because you can have knowledge about the founders, their track record and there modus operandi. The average first time startup employee might not have a clue, but that doesn't mean it's impo…

That is a fair point.

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

#136

Post by potatolicious » Fri, Jul 04, 2014, 3:47 AM UTC

ambrood wrote: post #96

potatolicious wrote: post #78

Earlier quoted context omitted.

Right, but for engineers working in startup hubs, is that really a risk? You can pick up a phone and have a parade of offers on your desk in a few days. At most your risk is missing out on, say, a week's wages between jobs.

There are many of us on an H1-B here potatolicious. Technically I get 10 days to wrap my affairs and leave the country, not to mention losing any greencard application...

I'm also on a H1B, transferring one is trivial, though you're right that green cards make it more complicated.

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

#137

Post by fsk » Fri, Jul 04, 2014, 3:58 AM UTC

krschultz wrote: post #57

IgorPartola wrote: post #40

Earlier quoted context omitted.

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+.

For retention. If the company actually starts taking off, the equity keeps people there. If they don't have equity, every person with a decent title at a fast growing startup will jump ship to other competitors immediately and get a big (cash) raise. The equity keeps people in the fast growing startup longer. Golden handcuffs and all that.

Conversely, if the startup starts taking off, the startup might look for an excuse to fire you to weasel out of paying your unvested options. That happened at Zygna and Facebook.

So, there are several bad things that can happen with options/equity.

1. The company fails, the options are worthless

2. The company is moderately successful, but not spectacularly successful. If your unvested options are worth (say) $30k/year, then they have no reason to give you a $30k raise if market rates increased by $30k (either due to a better job market, or your increased experience).

3. The company is spectacularly successful, your unvested options are worth big $$$. Now, your employer has an incentive to cheat you. They can look for an excuse to fire you (not too hard with at-will employment). They can raise another round of financing with a liquidation preference, reducing the value of your common shares. They can block you from selling your shares (Uber did this recently). The executives can give themselves big options grants, further diluting your common shares (happened to Eduardo Saverin at Facebook).

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

#138

Post by dasil003 » Fri, Jul 04, 2014, 8:07 AM UTC

IgorPartola wrote: post #135

dasil003 wrote: post #127

Earlier quoted context omitted.

Seems like you're moving the goal posts. I acknowledged luck in the equation, but how the sale happens has a lot to do with the founders, that is the people you decided to fall in with. Again, it's different from a lottery ticket because you can have knowledge about the founders, their track record and there modus operandi. The average first time startup employee might not have a clue, but that doesn't mean it's impo…

That is a fair point.

Thank you! I hope I'm right in my particular case ;)

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

#139

Post by Blackthorn » Fri, Jul 04, 2014, 8:09 AM UTC

Iftheshoefits wrote: post #34

hkmurakami wrote: post #17

Earlier quoted context omitted.

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 trivi…

I didn't know about that site so I went and checked it out.

Holy crap. Most of the listings there are completely hilarious. They expect anyone to work in the bay area for those salaries? (and I'm a different demographic than you -- 20s guy, no mortgage, family w/ no kids.)

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

#140

Post by georgemcbay » Fri, Jul 04, 2014, 10:51 AM UTC

chiph wrote: post #2

Underwater means no big payday. :(

Or worse.

You can get screwed on AMT tax on fictional gains, you can also lose real upfront money if you exercise at a strike price early for long term cap gains [almost always a bad move for common stock employees, but lots do it because of their borderline irrational hatred of the idea of taxes].