Ask HN: First employees, how much equity did you get? - sidyapa
======
gesman
I think it's meaningless.

Employees with "equity" options will:

1\. Get diluted with every VC round (oh, but value of our company is increased
so you potentially own more in dollars!)

2\. Left in a dark about preferred shares schedules and conditions that every
VC gets. Preferred shares allows VC's to get paid first and in multiples of
their original investments in case of an exit. This effectively can and most
often will leave exactly $0 for employees with every exit regardless is
employee owns 1% 5% or 25% of options.

Upon hiring - request disclosure of preferred shares schedules - before and
during employment - and you'll quickly be given some excuse or shown the door
if you insist.

If you're lucky and given equity right before IPO or given RSU (actual shares
with vesting schedule) of publicly traded company - then it could make a world
of difference.

~~~
Axsuul
What do you recommend an employee do to protect themselves before signing? Are
there any special clauses you recommend be on there to maximize profits from
an exit or any red flags to look out for? Is it typical to ask for additional
options during every fundraising round?

~~~
gesman
>> Is it typical to ask for additional options during every fundraising round?

You may, and they may as well give you some extra paper options to keep you
interested. But what's the point? $0+$0 = $0 - in 99.9% of early stage startup
cases.

Engineering force pretty much has no negotiation power in this.

Engineering (surprise!) is a liability, not an asset.

Sales is an asset. Anything that generates direct and immediate revenue is an
asset.

Even if such clause would exist - VC's won't allow it - they won't invest in
anything that jeopardize their lion's share of exit.

My take: for 99.9% of early stage startups (Non-pre-IPO, not publicly traded)
- get as much cash as you can as compensation. Don't get tricked into working
for peanuts for the promise of future that has low probability of happening.

It just safer bet.

Invest the difference into real assets or save it for real estate or so.

~~~
burnallofit
This doesn't make sense.

"Engineering force pretty much has no negotiation power in this." Of course we
do. We don't have to accept an offer unless it meets our terms.

"Engineering is a liability. Sales is an asset." This is ridiculous. In an
early stage startup, most likely there is no product. Sales has nothing to
sell if not for engineering's efforts.

"VC's won't allow it." If a startup can't hire, then VCs have exactly nothing.

This isn't to say that cash isn't a good thing. I personally agree that
options need to be balanced with cash, especially when a startup is well
funded, and options are fractions of a penny, but that decision is individual.

~~~
deanmoriarty
One major problem is also that many times engineers themselves are not
concerned at all about compensation.

For example, at my current startup I work with a couple 10X engineers
(seriously, they are brilliant and able to solve problems in an incredibly
elegant way) who are paid 30% less of what I make in cash, and about 25X less
equity, despite having joined just a few months after me in a similar role and
with more years of experience than me (I know because as part of my due
diligence I took a peek at the cap table). The difference is that I negotiated
heavily before joining, and every ~12 months I express my discontent to my
boss about my current compensation, and he tries to bring it up with new
equity grant and/or salary raises and/or performance bonuses. In exchange for
that, I try to do my very best on the job.

To those people, the pay simply doesn't matter, it’s the specific opportunity
given by the startup what they are after (domain/tooling/authorship/etc.).
They will never complain about the compensation, or even ask to get more
equity, since, as software engineers, the "base" pay allows them to have a
reasonable quality of life. If the company sells for $10B and they make $0,
they'll be just as happy, they got to work on a for-profit project that became
super successful! yay!

Empirically, I've seen way more people like them in the software engineering
field than in other highly-skilled fields (e.g. law, medicine, accounting),
and I'm sure those fields are just as rewarding as software engineering, for
the person passionate about those aspects of human knowledge and creativity.

I've never raised these observations in a live setting, I am too scared I'd be
taken for a cynic who doesn't love his craft and it's only after money, while
in reality it couldn't be farther from the truth, I very much enjoy software
engineering and spend a considerable portion of my free time reading up and
improving my skills. It's just that for me both the compensation and the
opportunity need to be good, I won't be happy with just one of the two (so I
wouldn't take a very high paying job for a long period of time, if such job
would mean stagnating my technical growth as an engineer).

Why do you think that is?

------
jedmondn
None at first. I was hired by a client after the dev shop I worked for went
under. We were so inexperienced/grateful for the job we didn’t think to ask
for any equity. The salary is just below market average, which is fair
considering my experience level. Some background: this is my first startup,
we’re a team of 5 (CEO, Android, iOS, Web/CTO, Customer support).

6 months after we were hired the runway began to get tight and we had to take
some semi-drastic measures to stretch it: the CEO (who hadn’t been taking a
salary for quite some time) asked us to stay on but work half-time until we
were far enough along to raise the correct amount of funding. Because I
believe in both the mission and the CEO I offered to stay on full-time for
half-pay and half-equity. For the past 5 months half of my salary has been
converted into shares. Instant vesting, shares are being given at our current
valuation. Each month translates to roughly 0.1% of the company.

~~~
captain_perl
> I offered to stay on full-time for half-pay and half-equity.

There's a lot of red flags here ... some random advice:

1) Ensure your deal is in writing.

2) To protect your equity, you need to be in the room when new investments are
negotiated. Otherwise you will be diluted or new options pools created without
you even knowing.

3) Business people think very little of programmers in general, until they
need to hire one. To them, you're a secretary with an attitude.

4) a product launch costs about $1 million. If they have money for that, then
they can also pay your salary

5) It's irrelevant to you whether the CEO is taking a salary or not. Unless
you have access to the books, how do you even know? It seems that generally
CEOs land on their feet.

6) The shares you think they gave you "clutter up the cap table" and make it
more difficult to get investors later. Typically VCs try to wipe out the angel
investors (who have lawyers.) Guess what they'll do to a programmer.

~~~
acct1771
Reminder that being in the room doesn't mean anything if the people in the
room aren't legally beholden to you.

~~~
balladeer
So let's say I am hired by a startup and I am getting half the industry salary
rate for my role. What kind of "stock/share/esop/options" I should ask for
that changes like a founder's would?

Of course it will be a lot less than the founder's (and it will be fulfilled
in stages) but iff, let's assume, I want to get that "kind" of "share" of that
startup what it would be? Is there a specific term for it? Or it varies from
company to company? Unless it it's public where's it's the "share", right?

edit: any recommended reading on this?

------
deanmoriarty
1.6%, third hire. Now the company is at series C, 4 years later. Significant
dilution as expected (own roughly 0.5%), but clean terms for all rounds
(liquidation preference 1X, non participating).

~~~
anotheryou
1.6% of something/the company here as ~#2, too. But I don't count on an exit
anyways and jumped the boat a year ago.

~~~
deanmoriarty
In my case, even if the company is still illiquid, I luckily was able to sell
a good portion of my vested shares as part of a secondary transaction for a
decent amount, so I was happy about that. I'll risk the rest.

------
Neablis
Employee number 4 at a very small startup in the bay area. 1% equity slightly
after seed. I have been at a few startups which are more commonly .1 - .5%. I
was very appreciative of the amount and hope it will pay off in the long run.

------
throwaway5250
Years ago, I was around employee number ten in a database software startup.
When the company was sold, my shares were worth about $2000.

(Yeah, that was my last startup.)

~~~
fatnoah
If it makes you feel any better, I've worked at three startups. Two exited and
one is still going. The net stock contribution to my bottom line was a $200
capital loss. The only actually money I got was retention cash and RSUs from
the acquiring company.

------
anotheryou
As you are probably asking because you might become employee #1: I think
either you get payed close to market rate or you should get a lot of equity.

------
expertentipp
Equity? No such thing over here.

~~~
markatkinson
Zero to me too and thank goodness actually. I received a proper salary instead
which worked out a lot better in the end.

