Someone should mention Steve Wozniak here
Startup CEOs who gave up fortunes to turn employees into millionaires
101–110 of 142 posts
Re: Startup CEOs who gave up fortunes to turn employees into millionaires
#102Earlier quoted context omitted.
"you know, we would need to exit for a billion dollars for me to receive a million?" It's worse than that. By the time you factor in preferred shares and other investment dilution, your 0.1% will be more like 0.00001%[+]. Few people think about that, and unless someone is actively looking out for your interests (e.g. someone giving retention grants -- or you demanding them), it's difficult to make a lot of money as a…
That's a gross exaggeration. If you own 0.1% of the company, you're likely to be diluted to around 0.02% at the very worst, and most likely 0.04% or so assuming 3 rounds of funding. That's assuming a positive outcome that clears preferences of course - if the company goes in a fire sale you're not going to make anything at all. But assuming a billion dollar exit means you're assuming not a fire sale.
I was being flippant in my use of decimals there, but that's a detail.
Even if you get 0.1% and are ultimately diluted to 0.01%, a billion dollar sale is $100k. When people sign up for below-market pay, they're not envisioning a distant eventual windfall of a year of market-rate salary.
Re: Startup CEOs who gave up fortunes to turn employees into millionaires
#103I dont think startup CEOs have any requirement to do this type of thing. On the other hand I think there is a powerful reality distortion field around start ups. Its literally more work than at bigco, for about 70% of the salary, for a lotto ticket that has a 1 in 1000 chance of pay off, and the jackpot payoff is something like 50K-100K. Really Really doesnt make sense unless you enjoy the atmosphere you are not goin…
Good points, but one thing to keep in mind - a lot of people just enjoy working at smaller companies. I did some time at a large financial institution making great money, but absolutely hated how empty it all felt. Nothing got done, nothing changed, nobody listened to me. I work at a much smaller company now, and almost everything I do on a daily basis has a measurable impact. I can literally watch the things me and…
I can totally relate. I mean, I've only ever worked for small companies for that very reason.
Have you tried working for a big software company instead of a financial institution? I know that banks don't treat software devs all that well, but shops like Google, FB, Rackspace etc. have a pretty good reputation of having a great culture and work environment.
Personally, I've only worked for small shops. Nearly all the places I'm currently interviewing are BigCo's though, and I'm not sure how that is going to turn out.
Re: Startup CEOs who gave up fortunes to turn employees into millionaires
#104I think (still looking for opportunity in a startup) if I had to choose, I choose a startup based on
(1) the missions
(2) the investors
(3) founder(s) history and attitudes
equity is always a nice thing honestly there are startups that will never go IPO and there are the ones that will fail in a year or two, and there are ones that will go on for a very long time and held privately by founders and there are ones that will be acquired within a few years. The chances are, before your company is sold, you might be looking for another job already.
Also, read the equity/stock agreement CAREFULLY before you sign one and understand what you are signing up for.
Re: Startup CEOs who gave up fortunes to turn employees into millionaires
#105Earlier quoted context omitted.
That's a gross exaggeration. If you own 0.1% of the company, you're likely to be diluted to around 0.02% at the very worst, and most likely 0.04% or so assuming 3 rounds of funding. That's assuming a positive outcome that clears preferences of course - if the company goes in a fire sale you're not going to make anything at all. But assuming a billion dollar exit means you're assuming not a fire sale.
Is 0.1% realistic (or average) for an employee? What are typical equity ranges for employees?
It depends on when you get hired. Early engineering key hires, pre series A, are often 0.5-3%, but is probably around 50% of market salary ($80k on $160k, say). Employee 100 in the same role in a highly successful company could be as low as 0.01%, but is nearly at market salary ($140k?). There might be 2-4 years in between the two hires.
Re: Startup CEOs who gave up fortunes to turn employees into millionaires
#106It'd be great if instead of founders generously giving to employees post-facto, startup contracts were more employee-friendly from the beginning. How much % should engineers 1-10 demand? One percent is typical for eng #1. On day one, with no code written, where the founders depend entirely on the engineers, where it's just an idea and investor money, they're only a hundredth of the value of the company.
Re: Startup CEOs who gave up fortunes to turn employees into millionaires
#107Earlier quoted context omitted.
That's a gross exaggeration. If you own 0.1% of the company, you're likely to be diluted to around 0.02% at the very worst, and most likely 0.04% or so assuming 3 rounds of funding. That's assuming a positive outcome that clears preferences of course - if the company goes in a fire sale you're not going to make anything at all. But assuming a billion dollar exit means you're assuming not a fire sale.
So, if we take the above poster at their word that it would have to be a billion dollar exit to be worth their while (and net them a million dollars for X years at below market salary) and assume your dilution numbers are accurate, they'd only get 200 to 400k. There would have to be a 2.5 to 5 billion dollar exit for their diluted tenth of a percent to net them a million.
You're assuming all startups pay below market.
Re: Startup CEOs who gave up fortunes to turn employees into millionaires
#108When I joined a startup a couple years ago as a very early employee. The equity they offered was some tiny percentage, like 0.1%. I did the math and said, "you know, we would need to exit for a billion dollars for me to receive a million?" The founder seemed surprised at that. Nevertheless, I joined the startup. What I don't understand is if the company does sell, and I only get my 0.1%, I should be upset or call the…
"you know, we would need to exit for a billion dollars for me to receive a million?" It's worse than that. By the time you factor in preferred shares and other investment dilution, your 0.1% will be more like 0.00001%[+]. Few people think about that, and unless someone is actively looking out for your interests (e.g. someone giving retention grants -- or you demanding them), it's difficult to make a lot of money as a…
Preference is the thing that fucks you, not dilution directly. Dilution, assuming no down-rounds, is likely to be no more than 50% in total, because it's iterated -- all the early people get diluted in the first financing, but the first investors also get diluted in the next rounds, so rounds after A, unless something is very wrong, are usually more like 10-20% dilution each time, tops.
It's preference which turns a $200mm exit on a company which has raised $150mm into essentially a non-event for common stockholders (i.e. employees).
Re: Startup CEOs who gave up fortunes to turn employees into millionaires
#109Ask HN: So, I'm the sole founder here with investor. The dude's awesome, but the contract we signed puts me in significant financial risk if the company doesn't turn up profitable. I have more than several employees (some of them will probably read this) who I pay regular and competitive money though I'm not particulary pleased with their output (but hey, it's improving, and there's not much of a talent pool here). M…
I can understand a part of your perspective. After all, from an objective point of view you are the one who's ultimately accountable for getting things done. And by that logic, you deserve the lion's share of the rewards when they come due. But the problem with your reasoning is that, in reality, growing a successful company is a team sport. No matter how brilliant you are, you alone are no match for a high-performin…
Already prepping groundwork for the next CEO in the 2015, no worries. I know I'm not fit for this. 4 months to go.
"He who tells the truth will be chased out of nine villages."
Re: Startup CEOs who gave up fortunes to turn employees into millionaires
#110I feel stupid. What is "signaling"?
Basic meaning: doing a thing to send a message about yourself to others. Like wearing expensive brands to signal that you're rich.
But good signalling involves some additional factors. Signalling is usually used when you want to say something about yourself, but it's something that people would want to say about themselves whether it was true or not, so you have to say it in a way that is difficult or impossible to fake. A good signal is one that is highly visible (in the context where it matters; clothes are good for in-person signaling, profiles or photos are good for online signaling), and either cannot be sent without having the quality they're supposed to signify (you can't afford expensive things to show off if you don't have money), or are much easier to send if you have that quality than if you don't (it's easier to get a high StackOverflow score if you're good at programming and communicating than if you're not).
If you're giving employees extra stock to signal loyalty and trustworthiness, it's "cheaper" to do that if you actually value being loyal and trustworthy (rather than just wanting others to think that of you), because then you get value from being the sort of person you want to be and being thought well of by others. At least, that's the theory; you could just want other people to think you're a loyal person really, really badly.