Startup jobs with low salary and negligible equity, what gives? • Hacker News Board

Re: Startup jobs with low salary and negligible equity, what gives?

#31

Post by bryanlarsen » Wed, Jan 21, 2015, 4:33 PM UTC

4k wrote: post #23

bryanlarsen wrote: post #13

Equity positions are very negotiable. Ask for more equity, a lot more, like 1 or 2 percent.

To be honest, I am half-scared of taking equity instead of cash pay. The reason is, I don't understand it as well as I should. It always scares me to think that through some VC-magic, whatever equity I have could end up nearly worthless (possibly an irrational fear since I don't understand the whole mechanism).

That's a good point -- ensure you get the same class of shares as the founders. Yes, sometimes even founder shares get diluted to worthless, but it only happens when the alternative is the company folding, in which case the shares would be worthless anyways.

Here's the math I do:

share of company * realistic potential valuation * chance of hitting it * expected dilution.

chance of hitting it ~= 3% expected dilution = 50%

So using your example:

0.0005 * 1B * 0.03 * 0.5 = $7500

Re: Startup jobs with low salary and negligible equity, what gives?

#32

Post by [deleted] » Wed, Jan 21, 2015, 4:33 PM UTC

lambda9009 wrote: post #9

Here's a way to counter this: interview, make them want you, and then decline any offer explicitly because of the comp. Startup founders are trying to go (even more) lean and cheap out on salaries, relying either on inexperienced new grads, the insecure, or on a "rah rah go team, the company is priority #1" culture of self-sacrifice. Don't play into it.

[deleted]

Re: Startup jobs with low salary and negligible equity, what gives?

#33

Post by lucaspiller » Wed, Jan 21, 2015, 4:33 PM UTC

snorkel wrote: post #22

Bachelors. Not as in Bachelors degree, but literally bachelors: They're young, cheap, work crazy hours, and easily seduced by free pizza - the ideal startup employee.

Can agree. I used to be like this and loved the free pizza. Now I'm earning more working my slightly less shiny corporate job with sensible hours. I have time to cook decent pizza though!

Re: Startup jobs with low salary and negligible equity, what gives?

#34

Post by nilkn » Wed, Jan 21, 2015, 4:36 PM UTC

karmajunkie wrote: post #11

carsongross wrote: post #7

Low salaries and negligible equity are the natural consequence of there not being enough technical talent in the Bay Area. ...

How do you figure? This is exactly the opposite of what one would expect would arise in a talent-constrained seller's market.

I think he's poking fun at the currently trendy idea that there's a talent shortage of programmers.

Re: Startup jobs with low salary and negligible equity, what gives?

#35

Post by AndrewKemendo » Wed, Jan 21, 2015, 4:37 PM UTC

4k wrote: post #23

bryanlarsen wrote: post #13

Equity positions are very negotiable. Ask for more equity, a lot more, like 1 or 2 percent.

To be honest, I am half-scared of taking equity instead of cash pay. The reason is, I don't understand it as well as I should. It always scares me to think that through some VC-magic, whatever equity I have could end up nearly worthless (possibly an irrational fear since I don't understand the whole mechanism).

No, you are right to be scared. Very few of the first employees will see anything come from equity.

Re: Startup jobs with low salary and negligible equity, what gives?

#36

Post by joezydeco » Wed, Jan 21, 2015, 4:38 PM UTC

brudgers wrote: post #26

jacquesm wrote: post #6

> Who would take these deals? People that are insecure about what they bring to the table. Pre series-A the risks are still huge and the stock should be priced accordingly. Say the founders think a pre series-A company is worth $2M and they offer 0.05% equity you could enter negotiations asking for 1% more if you feel like it (and walk away if it goes below 75% of your counter opening bid) if you can defend the posit…

1% isn't enough equity to justify a below market salary for something with a 10% chance of a $100,000,000 exit in five years...and if only the outlook were that good and imagining no dilution and benevolent actions by controlling shareholders. If the equity is important, then it should have some chance of producing fuck-you-money at liquidation. 0.05% is only fuck-you-money if there's a Google IPO size liquidation an…

10% chance of a $100,000,000 exit in five years

That seems highly optimistic.

Re: Startup jobs with low salary and negligible equity, what gives?

#37

Post by mrgriscom » Wed, Jan 21, 2015, 4:41 PM UTC

jacquesm wrote: post #6

> Who would take these deals? People that are insecure about what they bring to the table. Pre series-A the risks are still huge and the stock should be priced accordingly. Say the founders think a pre series-A company is worth $2M and they offer 0.05% equity you could enter negotiations asking for 1% more if you feel like it (and walk away if it goes below 75% of your counter opening bid) if you can defend the posit…

If they're so stingy with the equity upfront, won't that make you suspicious they'll just try to screw you out of it later?

Re: Startup jobs with low salary and negligible equity, what gives?

#38

Post by ConfuciusSay » Wed, Jan 21, 2015, 4:41 PM UTC

brudgers wrote: post #26

jacquesm wrote: post #6

> Who would take these deals? People that are insecure about what they bring to the table. Pre series-A the risks are still huge and the stock should be priced accordingly. Say the founders think a pre series-A company is worth $2M and they offer 0.05% equity you could enter negotiations asking for 1% more if you feel like it (and walk away if it goes below 75% of your counter opening bid) if you can defend the posit…

1% isn't enough equity to justify a below market salary for something with a 10% chance of a $100,000,000 exit in five years...and if only the outlook were that good and imagining no dilution and benevolent actions by controlling shareholders. If the equity is important, then it should have some chance of producing fuck-you-money at liquidation. 0.05% is only fuck-you-money if there's a Google IPO size liquidation an…

Or getting "let go" 24 hours before vesting date.

Re: Startup jobs with low salary and negligible equity, what gives?

#39

Post by alain94040 » Wed, Jan 21, 2015, 4:45 PM UTC

$90k in salary for an experienced developer and 0.05% equity

Yes, that looks wrong. Equity should be 10X more (0.5%). Whether it's a good deal for your situation or not is a different discussion, but at least that would be more in line with typical deals.

Re: Startup jobs with low salary and negligible equity, what gives?

#40

Post by codescorrectly » Wed, Jan 21, 2015, 4:46 PM UTC

hkarthik wrote: post #15

The target candidate for these startups largely doesn't exist. Most folks accepting such a salary in the Bay Area are recently out of college and living in small apartments with roommates. When it's all said and done, most of these startups will settle for a few offshore contractors or hire remote people who live in cheaper parts of the country where $90K goes a lot further. The tried and true "solution" to this prob…

Even H1's would scoff at that. The pay discrepancy is largely overstated.