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Startup CEOs who gave up fortunes to turn employees into millionaires (businessinsider.com)
230 points by whyleym on Sept 4, 2014 | hide | past | web | favorite | 138 comments

Although Woz wasn't a CEO... for those that don't know about this, I thought you would find it interesting [1]:

"And when Jobs (in the movie, but really a board does this) denied stock to the early garage team (some not even shown) I'm surprised that they chose not to show me giving about $10M of my own stock to them because it was the right thing. And $10M was a lot in that time."

[1] Woz's entire post is on this page:


I truly hope that Woz is remembered as the guy behind Apple's early greatness and Jobs as just a dickhead who set us all back. Not just developers with his no compete bullshit, but everyone with his stupid no ports aesthetic. How are people supposed to learn to tinker when everything is locked down??

I believe it was Steve Kent's The Ultimate History of Video Games Atari portion that really fleshes out Steve Jobs. The two anecdotes I remember are:

1. People in Atari generally considering him an oderous hairy hippie who once disappeared from work to go to India for self-enlightenment, but returned with Hepatitis.

2. He (Steve) was once offered $100 per transistor he could eliminate below the 100-transistor mark for an arcade game (I believe it was mid 150 count at the time), so he went to Woz and paid him on the order of $100 to eliminate the transistors (Woz was woefully unaware of the deal between Steve and Atari). Woz got it down in the low 30's or high 20's, Steve got the large sum of money and Atari wound up adding transistors back because while it worked they couldn't figure out how.

> He (Steve)

I figured it out, but I just want to point out that there are three Steves to whom you refer.

Holy shit. ~30 transistors make a game? Woz was a genius.

I believe it was TTL chips and not transistors proper.

> oderous

I assume you mean odious not odorous? (P.s. Shakespeare made this pun in 'comparisons are odorous')

He was infamous for not bathing, and hence bad body order.

I agree that Woz's contributions to Apple are greatly understated and Jobs's contributions are greatly overstated, but I think you're taking it a bit far. Jobs was clearly a dickhead, but it's difficult to dispute that he built Apple into a great company.

Are you joking? Look at the developer community in OS X and iOS that are constantly tinkering and learning.

Jobs was absolutely an asshole, but to say he "set us all back" is preposterous.

You can develop on iOS? Can you do anything on iOS aside from what apple allows you? Not if someone hadn't figured out how to jailbreak the device.

Yes, I think it's really important to remember that the initial versions of iOS only allowed for JavaScript widgets, no applications at all!

Enterprising hackers who jailbroke the devices paved the way for the App Store as we know it: not Apple.

Woz wasn't even there for the time of Apple's greatest success. You don't have to like Jobs, but he did great things even without Woz.

WIthout Woz there is no Jobs or Apple to know of. He is (arguably) the more important founder in regards to Apple.

By his logic: Why would you want to tinker with something that's already perfect?

If Jobs wasn't there you never would have ever heard of Apple. Keep that in mind

And without Woz there would be no Apple to hear of.

You know that the simplicity Jobs rallyed for so hard early on is probably why computers are so successful in the mainstream, right?

No. In spite of his micro-managing engineers and developers managed to make great products that he advocated pretty packaging for. Apple has never made products for the mainstream anyway, they've always charged a premium which has put them squarely out of the mainstream.

When I joined a startup a couple years ago as a very early employee. The equity they offered was some tiny percentage, like 0.1%. I did the math and said, "you know, we would need to exit for a billion dollars for me to receive a million?" The founder seemed surprised at that. Nevertheless, I joined the startup.

What I don't understand is if the company does sell, and I only get my 0.1%, I should be upset or call the founder "greedy" if he doesn't give me more money than what was in my contract?

If I'm going to take less than what I believe to be the "market rate" for my services in lieu of some equity and my motivation is to make money, then I'm going to do the math and weigh the probabilities of my equity and the lower-than-market salary being more lucrative than taking a job with no equity and a market rate salary.

I just don't see how founders who honor contracts that employees sign as being greedy. Arguments that the founders take more risk or work harder or whatever seems to me to be beside the point. If the employee doesn't think the percentage of equity is good, then they shouldn't sign the contract. That's how I see it. And maybe if more of us took that stance we wouldn't have to hope that founders would just give us money out of the goodness of their hearts and instead have satisfactory agreements already in writing.

"you know, we would need to exit for a billion dollars for me to receive a million?"

It's worse than that. By the time you factor in preferred shares and other investment dilution, your 0.1% will be more like 0.00001%[+]. Few people think about that, and unless someone is actively looking out for your interests (e.g. someone giving retention grants -- or you demanding them), it's difficult to make a lot of money as an early startup employee. You can easily find yourself in a situation where you vest your grant, leave the company, and later find out that a new hire is making an order of magnitude more money than you in an exit. That's startup life.

The game here is predicting the expected value of an extremely improbable future event, and sacrificing present day money in favor of that event. There's no "fair" way to do it, so if a founder is asking that kind of commitment of you, they should be looking out for your interests over the long term as well.

[+] edit: I overstated my case here. You can probably expect 1-2 orders of magnitude dilution, but it doesn't really change the argument.

That's a gross exaggeration. If you own 0.1% of the company, you're likely to be diluted to around 0.02% at the very worst, and most likely 0.04% or so assuming 3 rounds of funding.

That's assuming a positive outcome that clears preferences of course - if the company goes in a fire sale you're not going to make anything at all. But assuming a billion dollar exit means you're assuming not a fire sale.

I was being flippant in my use of decimals there, but that's a detail.

Even if you get 0.1% and are ultimately diluted to 0.01%, a billion dollar sale is $100k. When people sign up for below-market pay, they're not envisioning a distant eventual windfall of a year of market-rate salary.

So, if we take the above poster at their word that it would have to be a billion dollar exit to be worth their while (and net them a million dollars for X years at below market salary) and assume your dilution numbers are accurate, they'd only get 200 to 400k. There would have to be a 2.5 to 5 billion dollar exit for their diluted tenth of a percent to net them a million.

You're assuming all startups pay below market.

I'm taking the post we're responding to at face value: "If I'm going to take less than what I believe to be the "market rate" for my services in lieu of some equity and my motivation is to make money, then I'm going to do the math and weigh the probabilities of my equity and the lower-than-market salary being more lucrative than taking a job with no equity and a market rate salary."

Is 0.1% realistic (or average) for an employee? What are typical equity ranges for employees?

It depends on when you get hired. Early engineering key hires, pre series A, are often 0.5-3%, but is probably around 50% of market salary ($80k on $160k, say). Employee 100 in the same role in a highly successful company could be as low as 0.01%, but is nearly at market salary ($140k?). There might be 2-4 years in between the two hires.

Preference is the thing that fucks you, not dilution directly. Dilution, assuming no down-rounds, is likely to be no more than 50% in total, because it's iterated -- all the early people get diluted in the first financing, but the first investors also get diluted in the next rounds, so rounds after A, unless something is very wrong, are usually more like 10-20% dilution each time, tops.

It's preference which turns a $200mm exit on a company which has raised $150mm into essentially a non-event for common stockholders (i.e. employees).

I agree with timr here. You guys are missing the point. It's not math. It's trust.

There's no way to predict the outcomes. Options are little more than signals of intention. At point of exit, everything is in the air and you are not part of the negotiation. What's it worth? Do you have to move? Do you report the Chief VP of Total and Complete Meanness?

You get paid because someone is looking out for you.

The way to evaluate the deal you're getting from a founder is to ask yourself whether they would pay you out of their own pockets. There will be a moment when, in effect, they make that choice. The good ones won't be able to enjoy the money unless their team shares in the wealth. The bad ones will cobble together a rationalization about risk or how smart or deserving they are. You don't assess the offer, you assess the people. I know because I'm not very good at assessing the people ;)

Hey, do you want to join a cool startup that I'm working on? I'll look out for you, no worries. Just work and have fun, and I'll take care of the rest.

By the way, there's also an investment opportunity, you see I've recently came into ownership of a certain bridge....

No thanks.

I'm not saying you shouldn't have an agreement or you shouldn't make it as solid as you can. Obviously, you should do this. I'm saying that's not enough. The perfect agreement means very little if the agreement is with someone untrustworthy.

Trustworthiness is often harder to judge than you might think because untrustworthiness and charisma seem to intersect pretty heavily to me. That leads to the unfortunate situation that assholes are likable. Boo hoo.

> I've recently came into ownership of a certain bridge

Sorry, I'm saving my money for this sweet deal that's coming up on the Eiffel tower.


I agree here to some extent, but there are a lot of ways companies can exit with employees receiving less than their equitable share of the company's acquisition price/value.

Ex. Salary & retention package for founders & certain execs while common stock purchase price is drastically reduced. (just one example)

I dont think startup CEOs have any requirement to do this type of thing. On the other hand I think there is a powerful reality distortion field around start ups. Its literally more work than at bigco, for about 70% of the salary, for a lotto ticket that has a 1 in 1000 chance of pay off, and the jackpot payoff is something like 50K-100K.

Really Really doesnt make sense unless you enjoy the atmosphere you are not going to get rich as an employee in a start up, even if the start up sells for 500 million. you are going to get back the 30% a year you lost by not going to bigco unless the founders just feel like making everyone rich.

Good points, but one thing to keep in mind - a lot of people just enjoy working at smaller companies.

I did some time at a large financial institution making great money, but absolutely hated how empty it all felt. Nothing got done, nothing changed, nobody listened to me.

I work at a much smaller company now, and almost everything I do on a daily basis has a measurable impact. I can literally watch the things me and my team do increase the bottom line. I derive value from this myself, as it allows me to grow my team, hire new employees, give people responsibility of their own, etc.

I can totally relate. I mean, I've only ever worked for small companies for that very reason.

Have you tried working for a big software company instead of a financial institution? I know that banks don't treat software devs all that well, but shops like Google, FB, Rackspace etc. have a pretty good reputation of having a great culture and work environment.

Personally, I've only worked for small shops. Nearly all the places I'm currently interviewing are BigCo's though, and I'm not sure how that is going to turn out.

This would be the main attraction for me as well. What kills me at larger places (and even smaller soul-less companies) is the amount of dead weight and inefficiency.

Bullshit work created by people with bullshit titles for bullshit reasons.

Perhaps it is similar to how people buy lottery tickets for an epsilon chance of super happiness? Except it's easier to convince yourself that this startup isn't in a random lottery. And that your work can really influence things and change the outcome. It's true to some extent, but people are usually too prone to not even thinking about the priors.

Beyond a certain amount of money (I'll throw out a number and say, $10M), the incremental gain is not much. The change in your lifestyle in going from $0M to $5M is huge; but from $10M to $15M? Not much. So these CEOs are doing the smart thing (in addition to the nice thing). They know that when they get the inevitable itch to do the next startup, they can count on a stellar reputation and recruit some great talent.

I think a game changer cash position for most people is 2.5MM liquid -- not tied up in real estate.

5MM means you're flying business/first with your family anytime/anywhere. You may have a pied a terre somewhere.

10MM means you're angel investing, vacationing, and not generally "working" anymore.

15M++ means you bank with The Private Bank of Wells Fargo, have a ridiculous line of credit // no checking account, multiple properties, trust, etc.

$5M doesn't go that far anymore. If you're young and you have $5M, you could take 4-5% per year and make it last 40-50 years.

That's only $250,000 per year, pre tax. Good money, but certainly not enough to not have to think about money anymore.

Your $5M liquid would be earning interest the entire time too. With that much money, it'd be 'easy' to make 4% - 5%/year, so you could live on $250k/year and never touch the principle.

That was my point. A good rule of thumb is that you can pull 3-4% out of a investment each year and you will never run out. Increase that to 4-5% and it should last your entire life.

Don't get me wrong, $250K per year pre-tax is a very comfortable lifestyle. However, it's not so much money that you can spend without thought.

Ask HN:

So, I'm the sole founder here with investor. The dude's awesome, but the contract we signed puts me in significant financial risk if the company doesn't turn up profitable.

I have more than several employees (some of them will probably read this) who I pay regular and competitive money though I'm not particulary pleased with their output (but hey, it's improving, and there's not much of a talent pool here). Most work on their hourlies, and if milestones/deadlines are not met, I try to find somebody else and handle all the consequences of that myself. Basically, I handle entire risk and stress.

Now, if what we work on turns profitable, or has a successful exit or whatnot, you know how much of that money do I think it's fair to give to them?

Nada. Zilch. Zero. Go through the shit I'm going through yourself if you want a big payout and then we'll talk.

What do you think?

Not in the tech industry, but @ 42 I've worked in a lot of industries with a wide range of experience and worked with a lot of entrepreneurs and founders.

Without actually knowing you, I can't say what type of person you are. But I can say the type of people I've met who had similar viewpoints were very arrogant and rarely recognized the great contributions of their employees, and often took personal credit for directions or products created by others (often when they were incredibly dismissive of those ideas before a breakout success). I would ask you to re-examine your view of your employees, but if you are an example of the type I'm talking about, it most likely wouldn't do any good. Your ego will not allow you to actually recognize any contribution as anything but your own hard work. You blaming your apparent bad hiring decision on lack of talent pool rather than your own ability to seek out the best does not paint a favorable portrait.

The shit your employees have to deal with working for you just might be a magnitude order worse than what you are going through as their boss.

That's what I think solely based on your post.

His twitter certainly isn't doing him any favors as a character reference, either.

Firstly if you're at personal risk if you don't turn up profitable, you need to be incorporated. That immediately shifts all the financial and legal risks off your shoulders if you're operating above board.

Employers do take all the company's risk, however my boss (small construction company) gets to walk away with millions in savings with no personal liability. I get unemployment benefits. He gets to retire to a million dollar house, I risk losing mine.

You need to dislodge your head from your ass if you think you're the only person taking risk.

You need to realize that people are these things called humanbeings they have their own lives, their own motivations, problems and stresses. A great manager does this thing called managing where they use their knowledge of their employees to keep them motivated, something you quite clearly are not doing.

You employees sound unmotivated because you've got the attitude your company is already going to fail. FYI people can tell when a company is circling the drain and will half arse it and ride it out until the first paycheques bounce.

If you really think your employees will read this and know that you wrote this, you should probably delete this or reword this. Its bad for morale to appear flippant about employees.

That same flippant attitude might be why the output of his employees is less than stellar. Chances are respectful leadership is absent at whatever company this is.

The more I push the line of "I don't care what others think about me" to its absolute, the happier I am as a person. That does not neccesarily mean me earning more money or having a better team morale.

Your attitude is probably pretty standard fare for business overall. That said, you're probably going to continue to have the same problems that business overall has these days; detached employees, mediocre performance, and a generally escalating bitterness that the world does not love you as much as you think you love yourself.

Have fun with that.

Read: "I'm not good with people. So instead I'm pretend not to car so I don't have to confront that fact as often"

I can understand a part of your perspective. After all, from an objective point of view you are the one who's ultimately accountable for getting things done. And by that logic, you deserve the lion's share of the rewards when they come due.

But the problem with your reasoning is that, in reality, growing a successful company is a team sport. No matter how brilliant you are, you alone are no match for a high-performing team. Or even a medium-performing team.

The real issue is not what you deserve should the company "turn profitable." It is that you are extremely unlikely to become successful until you figure out how to build a great team. Which is hard, by the way.

My recommendation is that, if you have established product-market fit and are now in execution/scale mode, you need to either step up as CEO and make learning how to build and manage a team to achieve real results your #1 responsibility. Or if that's not your thing, you need to accept your strengths and weaknesses and find someone else who can play that role.

Already prepping groundwork for the next CEO in the 2015, no worries. I know I'm not fit for this. 4 months to go.

"He who tells the truth will be chased out of nine villages."

Disgraced unknown founder says: He who act like asshole get chased out of company.

That your probably a not very nice person with Narcissistic tendency's - no wonder you have a hard time attracting good talent

Perhaps you are just not beating your employees hard enough?

the beatings will continue until morale improves

Pretty much every one I knew that left a company or was terminated made some statement to the effect "They will be sorry when they realize all the crap I've been doing around here that won't get done now." And it is largely true, and largely irrelevent. Companies are the sum of their parts, regardless of how irreplaceable one or more employees feel.

If you read the article, the people in it generally liked and respected each other. That is key to making a healthy workplace. Without it you don't get nearly the output you might otherwise. My experience so far has been that when there is a lot of 'crap' that isn't getting picked up by anybody I have found issues with ownership (nobody feels like they own the results) and communication challenges.

I see that many people handle many responsibilities while the rest of the team is completely oblivious of the extent of their contribution.

But I'm not talking about that. I'm talking about risk. That's being picked up by only me and is _the_ determinating variable in the end game from my moral viewpoint. Risk can be in form of financial risk, time, legal... But I'm here taking all that while they're being paid market rate to, what, do regular JavaScript, Photoshop and ability to pack their suitcase and leave with no consequences at any point they feel like?

Nah, I don't think so.

My personal work experience has led me to believe that world is filled with self-entitled people without much to support it in either responsibility/risk handling/actual productive value. Mind you, we're from different cultures (Balkan).

I think I'm very glad you are not my boss, and never will be

It's sad that this behavior is unusual enough to be noteworthy.

I took a below market salary to work for a startup. When we were acquired I ended up with about 8 grand. I was kind of exciting because I honestly didn't think that the equity in my contract would be worth anything. Founders made something like 24m, 26m, and 8m. I handful of early employee my have made a couple hundred k. I still have all of the paperwork and I believe there were a handful of employee millionaires. I joined late and missed out on a big pay day. Do I wish I got more? YES. Do I think I deserve more? Probably a little bit more than 8k but I didn't put go through the early grind and put in the same work they did. I helped the company grow to acquisition though.

The thing about the startup lottery is that in the small chance your startup wins it, that doesn't mean you'll also win.

Founder did take the whole company on a tropical vacation which was unexpected and even paid partially for spouses.

At the bare minimum, wouldn't you have deserved whatever the discrepancy was between the below-market salary they offered you and the market salaries you could have gotten elsewhere, aggregated over the years you were at the startup? I'm guessing that would be more than $8k in total.

You also had to deal with the post-acquisition career turmoil of either losing your job or having to work for the acquiring company, neither of which would have happened had you taken a market salary at a larger company.

I wish. I took the position because my previous position was so terrible that I was taking the first offer someone shot my way. Had I not been so desperate and naive I may have negotiated for more salary or equity. I did manage a 43% raise post acquisition (still below market). I wish I would have put the whole 8k into the Tesla IPO too but I can't go back in time.

You know that the latest employee 5 year share scheme at British telecom a mature FSE 100 company returned well over £60K effectively tax free with zero risk to your capital?

It's sad that so much of the internet consists of people trying to tell others what to do with their own time and money.

Go be generous with your own money, dude, and quit trying to be generous with other people's.

This comment reads as entitled to me. Startup founders have an insane number of things on their plate, and that list just keeps growing and growing. Startup employees work hard, but the founders still bear most of the risk and responsibility.

What really needs to happen is for new ways to organize startups to distribute the risks and responsibilities better, so that it's not up to the goodness of the founder's heart to ensure a good outcome for the employees.

Of course, this implies that the pie is being made bigger, the risks and responsibilities being spread out are actually building more value in the company so as to generate a bigger exit. So far though founder-level discipline and risk-taking is rare enough in one individual that this is the situation we have to deal with.

> Startup employees work hard, but the founders still bear most of the risk and responsibility.

As much as I am a fan of startups and their founders, this statement seems excessive. In many cases, the financial risks are passed on to either angel investors or VCs (there are some startups funded by the founders' own savings or mortgages, which is a big risk, but there are still many that aren't). I don't see any significant negative consequences to the founders if a startup fails (they're not risking personal injury, bankruptcy, a lifetime of debt or anything else as severe).

Risk of employees is actually a lot higher than that of a founder. Founders have access to crucial financial information, employees do not. Thus higher risk. Founders have all the control, employees do not. Thus higher risk. Founders can make almost arbitrary hiring/firing decisions that can affect a future (!) career of an employee. Last, but not least, employees may need a reference from their former bosses, founders don't.

You forgot the obvious detail that the founder also stands to make far, far more money from an acquisition than most employees, but (if it's VC funded and not bootstrapped) is mostly insulated from any sort of real catastrophe if it fails.

Yes, and that's the reward part of the risk/reward equation.

I'm actually not concerned at all about the rewards, 'unfairness' or any other philosophical issues. What I don't like is that there's a myth "the founders bear most of the risk", while in fact, for VC-financed startups the opposite is probably true "the VCs and employees bear most of the risk."

How about bootstrapped startups?

In my experience, which may or may not be representative of the general case, bootstrapped and profitable startups with no funding often don't offer equity at all to employees.

Those are what I meant when I mentioned founders' savings, and I agree that they are risky:

> there are some startups funded by the founders' own savings or mortgages, which is a big risk

EDIT: Sorry, I now realize you meant startups that grow from their own income (or am I still misunderstanding?). Those don't seem very risky to me, since there's not much high gains/high losses potential to them.

I think it's far more entitled to think that because someone had a good idea and either connections, money, or a great pitch that they are entitled to 1000x more money than the people who actually turned the concept from a napkin into reality.

During the previous bubble I was employee #20 of a company that ended up having a $900M exit 5 years later.. I got less than 100k out of the deal. Do I think I was entitled to 50 million dollars? No way.. but I certainly think I added at LEAST 1 million dollars worth of that value.

What if the company was really worth $9 millions at its peak post-bubble, but its founder's good/lucky timing selling it near the peak of the bubble gave it a 100x multiplier?

Say your contribution to the company is worth 1% of the company's value, would you say you added $90k to the value of the company or $9 million?

It actually weathered the bubble collapse and was sold later, in 2003, after it was profitable.

I think it's hard to put a percentage on any single employee's contribution to a company's success, but I also think it's ludicrous to say that the combined value of every employee's contribution is worth less than a single founder's contribution. It's just dishonest.

Why is this post downvoted to grey? It is not offensive and states something with which many founders will agree. Just to chip in a personal anecdote, I tried giving away equity to employees twice as part of a package, and it didn't work out either time. I do not blame the other parties , but parent poster's comments on the risk-averse nature of most workers are not wrong. Most people want cash, and it is your responsibility as an employer to pay them regardless of whether you make money.

Anyone who believes the HN community is biased towards founders can see evidence here to the contrary.

And great employees can always go to {google, fb, twitter, microsoft, salesforce, etc} and get paid $250-$300 / year in cash or cash equivalents, instead of $125-$150 plus lottery tickets.

In fact, I remember reading that round A is the worse time for an employee to join a startup: the large grants are gone, but the business isn't derisked, so your lottery tickets still have shit ev.

Is the going rate $250-$300k these days?

Honestly, though - beyond just larger equity grants, I'd like to see companies have people get rewarded when the company does well... Through some kind of bonus (in equity or cash).

It seems like most companies either have bonuses that are pretty much an expected part of salary, or they have no bonus in any situation. I've only really been part of the latter, though.

Depends on the area but 300k is probably pushing it outside management and less than 15+ years of experience. Most fresh out of college offers at big companies these days I hear are slightly north of 100k, so 150-200k for senior folks isn't out of the ordinary.

For a highly experienced senior engineers capable of largely independent delivery of projects with roughly 8-10 years of experience on a platform, very deep understanding of at least one language with a bunch of experience in one or two more, etc etc seem to be getting about that much including grants at the big companies, particularly after being there perhaps 3 years and getting grants annually.

What is a grant? Familiar with the term in an academic setting, but not that much in a work setting.

In this context, it's a chunk of equity.

> $250-$300k Probably not the going rate, but to convince a top-notch dev to work in SF proper? Sure. Keep in mind that adjusted for cost of living, that's like $125k-$150k in most parts of the U.S., which isn't crazy for a top-notch systems engineer.

Right. Ultimately participating in a startup as an employee and as a founder are two totally different life choices with very different skill sets required and very different arcs. Founders have to juggle making sure the company is on track building value with courting investors, keeping track of the balance sheet, designing the product because they're the only ones with enough skin in the game to do them effectively.

It's a different level of hard work. And a different set of circumstances if the business fails.

Honestly as a society, we should be less focused on raising the mostly already-high ethical standards of busy founders and more on providing education and support to the next generation of startup founders and startup employees. Employees can bounce to any number of happy-to-have-them bigcos because those skills are almost as rare as those you need to be a founder.

If you're looking for a bottleneck, look in the mirror. There's always more that can be done to build the community. There's a huge hunger for tech skills, tech companies, tech products.

your comment is... well, less coolaid maybe, or less hero syndrome

Courting investors does not build value. Building a product builds value.

Plenty of people can and do design products.

In the case of an acquihire, founders, unlike employees, often clear a decent chunk of money (say $.5-$1.5mm) plus get an interesting job. (I personally know of several such cases).

There is plenty of unethical behavior by founders, but most of it isn't discussed in public or on HN, but rather privately between peers.

> instead of $125-$150 plus lottery tickets.

If you're working at a startup and getting $125-150k, you're lucky. Many people work at startups for half of that or less, plus those lottery tickets.

And, if you're working at a non-startup and getting $250-$300K, you are very, very lucky. That's far, far outside the realm of what I would consider believable, even in Silicon Valley. I may be a grossly underpaid sucker, but in my 15+ years of experience I've never seen even close to that. Jeez!

I have some first hand proof that google pays not-all-that-senior engineers that kind of money and more.

So if you're good then you may consider moving to one of the bigger players for a substantial increase in pay.

I can confirm this as well. I'm about 1 year out of college and just got a Google offer (salary + bonus + stock) that averages ~$240k per year.

Wow, Jesus. I think I'm going to delete the work history section from my resume and start looking around--I could double my salary.

Yep. I'll take my 10% ;)

Best of luck! And I really hope that works out for you.

How much of that was the base pay? I received a Google offer as well a couple of years ago, with a very concrete salary and a very handwavy "and there are bonuses and stock". Did your offer actually spell out how much the bonuses and stock were worth, or did you only find that out once you accepted the offer?

Haven't accepted yet (deciding between Google and a "hot" late-stage startup). The rough breakdown is $115k salary with 15% bonus if I "meet expectations" (presumably more if I "exceed expectations") + about ~$400k in stock over four years. Add in a sign-on bonus and we reach the $240k average.

What do you mean by founders bear most of the risk and responsibility? Most founders are not personally liable and haven't put significant amount of their own money in the company. At most they get some rough talk from the investors/customers, just like an under-performing employee would. They just stand to lose some of their time that could have been spent in more profitable employment.

> They just stand to lose some of their time that could have been spent in more profitable employment.

That's exactly what employees have to lose too. The way that I've always looked at it is that any employee, founder or not, should be entitled to current-valuation equity that's equal to the difference between their market rate and what they get paid by the startup.

Founders are frequently unpaid or poorly-paid at a time when the valuation is near zero, so they end up with a ton of equity. Early-stage employees should get considerable equity, since they're likely taking salaries well below market and the valuation is still tiny. Late-stage employees likely won't get much equity because they're not taking much below market and the equity is already worth a considerable amount.

> should be entitled to current-valuation equity that's equal to the difference between their market rate and what they get paid by the startup

Rrright. Only a founder can decide to dilute the stock while keeping that quiet, or do any number of other things. While an employee is on the receiving end.

The article says:

> There’s a startup in New York everyone talks about, and the things they say aren't very nice. The startup sold for ~ $80 million and the founders got rich. But, as the rumors go, no other employee made more than $50,000.

Does anyone know which startup they are referring to? carrentals.com? something else?

Hunch fits the location and approximate acquisition price, but I can't speak to how screwed over the non-founders were (or weren't).

Not sure that "everyone talks about" it (though that applies even more so for carrentals.com, IMO). Maybe they meant "everyone in NYC talks about it".

With Chris Dixon being praised in the piece, I have trouble believing the writer had Hunch in mind.

Good point! You're probably right.

Sounds like GroupMe, sold for 80 mill and was around a year old at the time

digg seems to be famous for doing well by Kevin Rose and not by anyone else. It happens out in the valley too.

'Everyone' isn't talking about this issue, so everyone's guess is just a guess.

That said, Invite Media was acquired by Google for $81MM a couple years back.

It'd be great if instead of founders generously giving to employees post-facto, startup contracts were more employee-friendly from the beginning. How much % should engineers 1-10 demand? One percent is typical for eng #1. On day one, with no code written, where the founders depend entirely on the engineers, where it's just an idea and investor money, they're only a hundredth of the value of the company.

Do employee stock options usually not vest automatically upon acquisition? The SinglePlatform story made it sound like employees get screwed if there's an early exit before their options had fully vested.

That very much depends on the contract. I have said this before and I'll repeat it on the off chance that it will save someone's bacon one day: insist on accelerated vesting clauses in change of control situations.

Is it easy to negotiate a change or add an acceleration clause in the options grant? Seems like those docs are set in stone and very hard to change without board approvals etc.

Then you go somewhere else. Nobody forces you to take a job with extra risks and a contractual situation that allows others to pull the rug out from under you when the pay-off materializes.

Really, the only potentially bad contracts are the ones that you've signed. So as long as you haven't signed you have negotiation room and if your choice is between being paid 'market rates' versus being paid 'half of market rate + options' and those options are subject to change without notice then you're just setting yourself up for being hurt if you chose the second.

Nothing is set in stone, that's more a matter of self-confidence and knowing when to walk away.

The grant itself requires board approval, so that isn't a huge roadblock. The bigger issue is how much leverage you have. If you're experienced and they need you, getting double-trigger acceleration shouldn't be an issue, and it can't hurt to at least ask for single-trigger...

An acceleration on change of ownership clause is considered a poison pill.

Please do yourself a favour and ask your company about this. A lot of my peers just assume that every stock option contract has this clause.

I've never been offered options that vest upon acquisition. I don't know what's usual though.

Steve Wozniak for one. Steve Jobs wouldnt share his Apple stock with anyone. He repeated this with Pixar.

In the 1980s a decent IPO would be about $100K for workers. It would go towards a home down payment.

Misleading title IMO. None of these CEOs gave up their fortunes, they just shared a (small) part with their employees.

I think (still looking for opportunity in a startup) if I had to choose, I choose a startup based on

(1) the missions

(2) the investors

(3) founder(s) history and attitudes

equity is always a nice thing honestly there are startups that will never go IPO and there are the ones that will fail in a year or two, and there are ones that will go on for a very long time and held privately by founders and there are ones that will be acquired within a few years. The chances are, before your company is sold, you might be looking for another job already.

Also, read the equity/stock agreement CAREFULLY before you sign one and understand what you are signing up for.

Tivoli Systems, where I worked, went public in 1996. Not long after that it was acquired by IBM (which bought control of the company through a tender offer for the shares). 26 or 27 of the original employees of the company made over one million dollars. Even the administrative assistant, hired in the early years, was able to pay off her house.

Same buyer didn't work out as well for us

I feel stupid. What is "signaling"?

Basic meaning: doing a thing to send a message about yourself to others. Like wearing expensive brands to signal that you're rich.

But good signalling involves some additional factors. Signalling is usually used when you want to say something about yourself, but it's something that people would want to say about themselves whether it was true or not, so you have to say it in a way that is difficult or impossible to fake. A good signal is one that is highly visible (in the context where it matters; clothes are good for in-person signaling, profiles or photos are good for online signaling), and either cannot be sent without having the quality they're supposed to signify (you can't afford expensive things to show off if you don't have money), or are much easier to send if you have that quality than if you don't (it's easier to get a high StackOverflow score if you're good at programming and communicating than if you're not).

If you're giving employees extra stock to signal loyalty and trustworthiness, it's "cheaper" to do that if you actually value being loyal and trustworthy (rather than just wanting others to think that of you), because then you get value from being the sort of person you want to be and being thought well of by others. At least, that's the theory; you could just want other people to think you're a loyal person really, really badly.

Awesome, this is how it´s done. Finally some real founders start to be out there!

It comes down to trust, really. What goes around comes around.

Someone should mention Steve Wozniak here

are there any such pre-exit companies out there?

They gave up some money to reward valuable employees. That's not, per se, being magnanimous or generous, it's being smart businessmen. All of these founders made out just fine, financially. When they start their next big thing, they'll be remembered not only as the guys who had a successful exit, they'll be remembered as the guys took care of their people along the way. That's about the smartest way to recruit top talent you can come up with.

I don't think you are giving these founders enough credit. Startup acquisitions, not unlike fundraising, can be very emotional. Acquirers can go from hot to cold very quickly if they hear the wrong thing or get the wrong vibe. The founders went to great lengths to structure the deal in a way that compensated their employees like this. It's likely that they put the entire deal at risk to do so. That, in my mind, strongly shows generosity on the part of the founder.

I definitely agree with you, but I also like a term from the article: the founders were long-term greedy rather than short-term greedy. They were willing to give millions to their employees in exchange for what I can only assume to be life-long loyalty and an unbeatable reputation. For someone who wants to stay in the industry for the next 10-20 years and found more companies, that could very well end up being worth far more than the money given up in the deal to employees.

FWIW, one of the founders in the article phrased it as being "long-term greedy." I'm sure it felt good to make millionaires out of employees (having been part of an acquisition where only ~10 people out of nearly 300 became millionaires, I can only imagine the parties we would have had if the majority of the people had gotten life-changing exits), but there was definitely an awareness of the long-term benefits among the founders in question.

per se: by or in itself or themselves; intrinsically.

I understand that some (most) of these guys are, in fact, doing this because it's the right thing to do and they are, in fact, that invested. I merely wanted to point out, counter to the tone and implication of the article, that's not the only reason to do this and they were still handsomely rewarded for the risk they took.

Conversely, I want to point out to anyone who thinks not doing the right thing wrt your team so you can pocket a few extra percentage points can have a negative consequence.

Sure they're smart businessmen (and women), they built awesome companies and successfully negotiated substantial exits. If they weren't smart then neither of those would have happened in the first place! But in the article there are some very good examples of situations where most C level teams and founders would have happily made off with the loot without sharing any of it with their co-workers, as one CEO in the article put it 'the ones they went to war with'. And there would be nothing or nobody to stop that from happening, and because this is 'normal' nobody would have likely even said anything about it beyond some grumbling at the watercooler and a maybe slightly higher turnover directly post acquisition.

So I read their generosity as the first driver to do this, and that there maybe is another reason is possible but I've yet to see a repeat successful team which would allow the conclusion to be that the second reason is also a motivator.

They're doing good, and good by their people, and that's about it. No need to search for an ulterior motive.

And there are very few if any negative consequences to not doing 'the right thing' with respect to your team, because that - unfortunately - is business as usual. These are the exceptions, definitely not the rule. I hope it becomes more common though.

That's a pretty cynical worldview. If a founder doesn't have to share his wealth because of a bunch of paper and decides to do it anyway that is generous first and possibly good business second.

After all there is no obligation on his part to ever do another start-up, there is no obligation on those rewarded to join in the future and the incidence of 'repeat teams' is low enough that I don't think it is a factor at all.

Wait...I'm cynical?

> That's not, per se, being magnanimous or generous, it's being smart businessmen.

It's being both.

I think this is generous but it really should be the norm. People who join start ups suffer a huge opportunity cost--hundreds of thousands of dollars in RSUs

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