21–30 of 124 posts
When I was a kid my mom would complain about how the world was out to get her. She didn't frame it that way, but that's essentially what she was saying. One time she was complaining about lawyers because she was charged $300/hr or something like that. I asked her, "why don't you become a lawyer?" It made sense to me as a 12 year old and still does.
This isn't about who is more valuable, this about who took the risk . Employees take little or no risk in 99% of cases. You are not taking a risk making 75% of your max pay at Google/Facebook/Zynga/Twitter by going to a startup. You are taking a 25% haircut to be part of something new/small/etc. However, starting something from scratch, incorporating and putting your reputation on the line is a major risk. If you are…
At least in America, there is so little stigma associated with a failed startup that I don't see the reputation aspect of your argument. Short of flat-out malfeasance, a failed entrepreneur is far more fundable than someone who has never started a company.
I'm not a "founder" in the startup sense, but I did start my own indie development and consulting shop, and I think the startup founders can relate to my experience. For example, 16, 18, even 20 hour days are common. Keeping the business going becomes the major focus in your life. You think about it all day and dream about it if you manage to get some sleep at night. You hope and you dream and scratch and claw and fi…
IBM, KPMG, PwC, etc. are all service businesses that are massive and successful. There's a thousand other firms with middling market caps you've never heard of that also make billions.
This isn't about who is more valuable, this about who took the risk . Employees take little or no risk in 99% of cases. You are not taking a risk making 75% of your max pay at Google/Facebook/Zynga/Twitter by going to a startup. You are taking a 25% haircut to be part of something new/small/etc. However, starting something from scratch, incorporating and putting your reputation on the line is a major risk. If you are…
I think this is a greater factor in the relatively high compensation than "value added" or "risk taken".
This isn't about who is more valuable, this about who took the risk . Employees take little or no risk in 99% of cases. You are not taking a risk making 75% of your max pay at Google/Facebook/Zynga/Twitter by going to a startup. You are taking a 25% haircut to be part of something new/small/etc. However, starting something from scratch, incorporating and putting your reputation on the line is a major risk. If you are…
The real answer is way more simple: the founders hold most of the cards, and the engineers don't.
Edit: and if the engineers don't like this, they are free to try to start their own startups.
Some founders such as serial entrepreneurs who have proven their value, I could see 100-1000x. However, first-time and inexperienced founders should not get more than 10x their employees given that they providing a lower expectation.
Also priced into it should be the difficulty for you to do it yourself. If the company truly does amplify your value by 1000x, then by all means it is a fantastic deal.
Obviously this is not the case all the time.. just my experience...
I once surveyed several friends who joined tech startups (at similar funding rounds, # of employees) out of school as very similar software engineers. They received between 0.05% and 0.3% of those startups. That's a 6x range.
That certainly wasn't a result of a transparent and perfectly fair market; equity compensation numbers are opaque to many startup employees, plus the comparative data just isn't widely available. (Ackwire is the best I've seen, and it's new and rudimentary.)
And it's not really in the startup's interest to make them more aware-- who wants their employees to have the thought "my boss will make 100x more than me when we exit" in their head? (Not everyone is as hyperrational or founder-aspirational as the HN crowd...)
It may not be normal, but the startup I was involved in never had to raise money. Were we all founders? Is anyone they continue to hire a founder?
At some point your startup put a fair market value on its stock. That means equity for new hires had a dollar value when they joined.
Assuming that his company went public, or took outside money. If it is, and will remain, a private company (with no outside investors), why worry about stock at all? Stock is unnecessary overhead, perceived value is unnecessary overhead.