
Ask HN: Founders of startups, do you expect equity to be enticing? - volkk
I&#x27;ve worked at a plethora of startups by now, and even the one that went public, I&#x27;ve still made almost no money on given my equity. It&#x27;s sort of what I expected, but even the companies that I really truly believed would do well, still didn&#x27;t because of some random other issue (usually incompetent upper management&#x2F;founders).<p>I ask, why do you expect a potential hire to appreciate X% of nothing when it&#x27;s well known that most VC&#x27;s that invest in your company know that you have a 99% chance of failing anyway, and thus diversify their portfolios with many startups to increase the risk of success. Why are employees expected to pretend anything otherwise? I&#x27;m so beyond the eyerolling phase of hearing that they&#x27;ll pay you .75X of your current salary but give you equity to make up for that, it&#x27;s just exhausting at this point, to be honest.
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uberman
From my experience, options for employees have NO VALUE at all. This is not
because VCs and C-Suite don't think that the company will make it, but because
they arrange things that way to maximize payouts for themselves.

Here is how this happens. Let's say for argument sake, there are 20 million
shares or options floating about. Let's say you own 500k of them. Now
Mega_Company and your company New_and_Cool announce a 20 million dollar
purchase. You think your might be in for a $300k windfall (or more), but here
is what is likely going to happen.

VCs will have a preferred stake that must be satisfied as part of any buyout.
Usually this preferred stake will require satisfaction that is a significant
multiple of the at risk position. The VC put up a million bucks but now
requires the first ten million as part of any buyout.

Next, C-Suite will arrange direct compensation and retention packages outside
of the context of common shares/options as part of the buyout. The CEO will
get a five million dollar direct payout while the rest of the C-Suite and
Board split an addition 5 million.

Then low and behold, your shares/options are worth... Nothing. Imagine that.

An equity position in New_and_Cool is snake oil and should be evaluated as
such. Yes, I know there are counter examples and "so and so's secretary" is
now living on a private island someplace thanks to their options. In my
opinion, these gilded accounts only serve to make the gullible more
susceptible.

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muzani
Simply put, startups don't have the budget to match higher salaries.

I did a startup setting aside a large portion of shares for employees, but
nobody asked for it. It was easier to just pay more - large businesses were
paying $1000/month for an mid level programmer. So it was just easier to offer
$1000/month to juniors.

However early stage VCs offered a rate of about 1% for 2 months salary. So
sometimes it's easier to offer that early stage employee the 1%. Some have
enough money in the bank that they'd like to invest in something.

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JMTQp8lwXL
It's an exhausting proposition to you, but not to others, probably folks new
to our industry, who haven't carefully considered the tradeoffs.

~~~
volkk
and i don't disagree that it's OK for new grads to work for startups to learn
a lot. but a lot of startups hire for senior engineers/staff engineers

