Ask HN: Pros and cons of working at a startup in 2018?

If you accept that compensation is the issue, and want to fix it, and get our best and brightest back into startups, that has to be corrected somehow. I can only think of 4 sources:

A) Pay them more, shortening operating runway B) Make their equity worth more, by making founders' worth less C) Make their equity worth more, by making startup companies worth more D) Make their equity worth more, by making investors' worth less

I'm going to argue as a current startup executive that (A) is already efficiently calibrated by the market and has yielded the current balance, so not likely to find more ground there.

The current supply/demand of founders would suggest (B) is not likely to make a dent either. If it could, that would suggest that there is an oversupply of (qualified) founders, such that we could do with fewer. I think most VCs would disagree with that world view, as most of them take 100s of meetings to do a single deal, and generally consider capital deployment to be their primary operating limitation.

If someone has serious ideas for (C) that can make a difference at scale, I think they would do well to share them here.

That leaves us with (D). Anybody who has negotiated a term sheet will tell you that this won't be easy. But I submit a humble suggestion for a cultural shift that I think could make a big difference here: make liquidation preferences unfashionable.

My reasoning is simple: in a modest outcome, the effect of the preference is much greater on employees (who lose out on their true equity value) than on investors. Most VCs have already hedged the downside risk within a given fund by diversifying over 10-20 other deals, and most of the time, at least one or two of them (if the fund is any good--and they won't be around long if not) will net a > 10x return. The value of the preference as downside protection is therefore quite limited.

On the flip side, it is a huge impact for an early employee, who might see an extra 50%+ dilution in a modest exit after the prefs get paid out. And let's face it... these modest exits are far more common than the unicorns.

Doing this would also free up better price competition among non-institutional investors who are happy to have non-controlling participation, especially in later growth rounds, and so could actually make the sector more attractive to a wider investor base.

This wouldn't produce an overnight change, but could result in more early employees having positive "EV" stories, which could eventually shift perception.

As somebody who has worked at startups, including a Y-Combinator startup.

The I have experienced three primary hiring issues that are so common they are worth noting.

1. People presume startups are inherently less stable than larger corporations. Risk aversion and the presumption that larger organizations are more stable in all cases, causes the candidate pool to drop. Helping people understand that competency is always in demand, would certainly help open up the talent pool.

2. Intentionally conflated salary figures have led to disillusionment with expected income. As many people already mentioned prior; how much are people really making? I have encountered several people who believe they absolutely deserve $250-350k, despite not having any requisite skills. Why? Often because recruiters have told them that is what they deserve... or because companies offering (often intentionally over-evaluated) shares, lie.

3. An unrealistic expectation of the number of hours they must work. Sure, there are some poor companies which believe hours-worked = value-added... but how many good ones? My experience has been that candidates expect they will have 60+ hr/week of work. Really? That's just not the case at companies with non-trivial intellectual property.

Want to convince more skilled developers to join the startup world? Dis-spell these myths.

If not, then what you're really doing is offering something you hope doesn't cost you anything and is therefore worth nothing. Good luck to you.

If so, then do everything you can to help them do it. Holding an employee hostage because in order to leave they have to write a check for a significant part of their life savings won't be productive. They're taking up a salary from someone who will actually be engaged and motivated.

In my experience, this definitely plays into individuals' job offer decisionmaking. At least the most sophisticated ones, which are usually the ones you're most interested in recruiting.

That's the joke! Nobody comes remotely close to offering enough equity that their total comp is equivalent!

Imagine a company that just raised a $1M seed round on convertibles at a $6M valuation cap. Now say they offer an "extremely generous" 2% equity package to their first employee. What is that 2% worth?

Well, the investors think that preferred shares in that quantity would be worth $120k. Of course, equity vests over four years. So your equity comp is... $30k/year. If it were preferred shares. But it's not, it's common shares. So it's worth even less.

You'd need to offer more like 10% to claim you are matching the RSUs people are getting at Google or Facebook. But at that point, you might as well call the person a co-founder. And maybe that's in fact the answer: add co-founders, not employees.

But this isn't what people are doing today. Instead they're convincing employees to take sub-market pay and sub-market equity to take a stressful job with almost no benefits.