
Ask HN: Would turning down equity offend recruiters? - nodelessness
I plan on interviewing at a few start-ups. Everyone offers equity in the company these days.&lt;p&gt;Would turning down all equity be a red flag to a start-up? Would that be seen as a sign of lack of commitment?
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nostrademons
You're not going to offend the recruiter, rejection is their job.

However, you may signal to the startup that you want the job for the wrong
reasons, or your risk tolerance is not high enough to do a startup. PG advises
startups to look for the sort of folks who are willing to work mostly for
equity, because that aligns incentives around the startup's success. If you're
taking mostly salary you have little skin in the game.

~~~
glimcat
As a counter-example:

Buffer offers a choice between extra salary or extra equity. _Every single one
of their engineers_ is taking the salary election, while it's mixed for other
roles.

Want good people? Don't undermine your ability to attract people who are
investing in themselves as much as in you, or who have families and mortgages
to worry about.

~~~
nostrademons
As an engineer, it's usually more rational to take extra salary over
equivalently-valued equity. The median equity grant at a startup ends up being
worth zero.

That doesn't contradict equity aligning incentives more between the startup
and the employee. The _reason_ it's more rational to take salary is because
you get paid even if the startup tanks; if you're a startup founder and your
primary goal is to prevent the startup from tanking, you want your people to
take equity as much as possible so they have every incentive not to let it
fail.

The original question was about signaling, and here's the problem with wanting
to do a startup and yet get paid mostly in salary: it exists in a bit of a no-
man's-land as far as risk tolerance goes, where you still face significant
risk of being out of a job and yet don't get the upside of startup success. If
you _really_ want stability and a paycheck, why not go work for Google?
They're not going anywhere any time soon. The only time I would recommend
taking a startup job paid primarily in salary is if you're mostly in it for
the learning experience, so that you can see how things are done in a small
company and yet financially insulate yourself from things going poorly.

~~~
glimcat
_" If you really want stability and a paycheck, why not go work for Google?"_

Because you can often get a less corporate job doing work you enjoy more with
people you enjoy more while still having manageable risk and progressing your
career. That goes triple for software engineers in the Bay Area, for whom "out
of a job" is a minimal risk that frequently results in a pay raise.

People mostly don't work for startups for the lottery ticket. Equity isn't
really compensation, or shouldn't be taken as compensation, so much as it's a
social signal. And even then, equity is more about investors than employees.
Equity only evaluates to any sort of compensation at all in the event of an
exit, in which case they want the senior staff to have some degree of
additional incentive not to immediately leave for a new gig.

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lutusp
> Would turning down all equity be a red flag to a start-up?

Possibly. The idea of equity (in the form of options) is the company avoids
paying as much up front as they might otherwise, in exchange for a stake in
the company's future. If you turn down the future stake, you may signal that
you don't think the company has a reliable future, or you may be taken as a
pragmatist -- it depends on the individual to whom you speak.

Obviously the extreme would be a company that only offers options, no salary
-- there's a cut-off point where no one will take them up on their offer. And
remember to look at this from the opposite perspective -- the company wants to
attract intelligent, creative people, the kind that might understand options
too well to want them. They need to understand candidates' likely responses
and the reasoning.

~~~
naterator
Shouldn't there be some kind of formula for this kind of thing? Some kind of
way to gauge how much salary/year you should give up based on how likely you
think they will be successful. For example,

[% annual salary haircut] = [likelihood success in 10 years] * [estimated
stock price] * [expected salary sans options]

... or something. Obviously it's far from a science, but I think there should
be some kind of general way to arrive at reasonability. Currently start-ups
essentially rely on how poorly people gauge the probability that a company
will actually be successful vs. actual numbers. Or, put another way, how
willing the hiree is to gamble/risk.

I only bring this up because, after personally seeing or being on the losing
end, I would never accept the salary haricut for options again unless I could
somewhat reliably gauge them, probabilistically. Maybe that's something I'll
look into for the future. People do this kind of thing in the Insurance
industry and on wall street all the time, I suppose.

Sidenote: Paul, thanks for all the really cool stuff you've done over the
years.

~~~
lutusp
> Shouldn't there be some kind of formula for this kind of thing?

It's not like science or math. There are too many subjective issues at work --
a relatively new company in a fluid marketplace, issues of personal
psychology, guessing how applicants will respond to the prospect of options.
Any fixed formula or policy would likely be invalidated by events in a short
time. It reminds me of the old saying, "The first casualty of battle is the
battle plan."

> I only bring this up because, after personally seeing or being on the losing
> end, I would never accept the salary haricut for options again unless I
> could somewhat reliably gauge them, probabilistically.

Yes, and this is because you have experience. A younger applicant might not
understand the issue as well, or might have heard a statistically improbable
but dramatic story of someone becoming rich on options.

From the management side, they might guess at the age and experience level of
the applicants, and adjust their pitch accordingly.

> Paul, thanks for all the really cool stuff you've done over the years.

You're most welcome. Here's my latest article:
[http://arachnoid.com/IPython](http://arachnoid.com/IPython)

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JSeymourATL
No need to turn down equity, provided the company is meeting your targeted
salary expectations. Think of an equity stake as added incentive compensation.
It's nice to have, but there's a reason people call them lottery tickets.

