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1. It's rare for startups to succeed 2. It's rare for non-owning employees to be able to exercise shares/receive money when the company sells due to the structure of VC-backing/ownership and the resulting order of who gets paid/when
We all hear stories about when employee equity does not work out. Are there any examples of when it DOES work out well for an employee with equity?
One issue is when you want to hire people and you want to feel confident that you are offering them a "real chance" for financial success, even if it is a slim chance. I mean if you know that it is very likely that even when "you" have a win (whatever your goal is) and your investors have a win, still your employees don't benefit significantly, that will be a sad story.
"As for me, while I wasn’t a “founder” financially, David was generous with my employee stock options back in the day. I won’t make yacht-and-helicopter money from the acquisition, and I won’t be switching to dedicated day and night iPhones. But as long as I manage investments properly and don’t spend recklessly, Tumblr has given my family a strong safety net and given me the freedom to work on whatever I want. And that’s exactly what I plan to do."
http://techcrunch.com/2011/10/11/linkedin-buys-real-time-hos...
Take Stripe, valued at $3.5b[1]. $1m / $3.5 b ~= 0.029%, so any employee who vested at least 0.029% (after dilution) is a paper millionaire, and chances are their early employees have more than 0.029% equity vested.
[1]http://www.bloomberg.com/news/articles/2014-12-02/apple-pay-...
I've lived in the valley for like 7 years now and my only friends who have taken a ton from equity are early Twitter folks and the few who sold their startups to bigger companies like Google, Square, Twitter, whatever.
My equity came out to about $300k. Which I know does not hit the thresholds that you put in the post, but clearly many of my coworkers who came in earlier and were more senior -- but still not founders nor part of the founding team -- did a lot better.
EDIT: I should point out $300k was more or less actual. If I had been really good at selling at the top of the market, it would've been more like $400k. I suppose that overall it might end up being more or less, I still have a few tens of thousands in stock, but most of it ended up being the down payment on my house. The $300k was after buying into the stock (since I wasn't a super-early employee, many of my options cost like 10-25% of the then-market-value to buy), and after some taxes? But not all? AMT and prepayment of some taxes and stuff and my overall lack of financial discipline made it really hard for me to figure out how much tax I owed specifically on the stock.
Another EDIT: Something else to point out was that at NetSuite, this was NOT principally from my initial grant at hire. NetSuite gave new grants of stock every year with ones yearly review, and those grants were pretty generous. Everything was on the same five year vest with a one-year cliff, so I got my entire year 1 and year 2 grants and then fractions of my remaining years. The year 1 grant was at the lowest rate to buy in, but that wasn't hugely important. I would guess that about 1/3rd of the stock that I eventually realized came from my year 1 grant. I've never been sure if that's common practice or not with other companies, and if someone could shed some light on that, it'd be awesome.
Large money comes from ownership and the inherent risk. No one will ever give you enough money to go away completely as an employee. Can you make a little scratch? Of course. This industry pays very well. But if you want 500k and up in lump sums? Being an employee is never going to make it happen imho.
And just for the record equity is not ownership. Go read up about all the maneuvers businesses can and will take to screw you out of your shares and you'll open your eyes. Businessmen don't give away anything they don't have to. Just a reality. If you can navigate that minefield you may one day be the outlier and get rich. But more likely you'll be fighting in court for years only to learn that well, you should've read the fine print.
Don't get duped out here guys. Don't do this to get rich. Do this because you want to do it and everything else, with hard work, will fall into place.