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Open guide to equity compensation

(github.com)
656 points mooreds | 4 comments | 13 Apr 25 19:13 UTC | HN request time: 0.616s | source
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blindriver ◴[13 Apr 25 23:38 UTC] No.43676682[source]▶
Those equity percentages in this document are EXTREMELY FOUNDER FRIENDLY and I believe this entire document was written to anchor new employees with lowered expectations on equity. I think this entire document is a disingenuous scam to make new startup employees think that those percentages are okay.

I’ve been in Silicon Valley a long time, since the dotcom boom. My first company, the executive assistant got so rich from the pre-dotcom IPO she quit and bought a vineyard. That’s how things used to be. And we aren’t talking about some crazy ipo, it was before those times.

Fast forward to these days, the startup I worked for got acquired. I was engineer < 15. The founders got low 9 figures, I got 5 figures. Almost everyone got fucked for years of loyalty.

But that’s what YC and other accelerators teach founders. Be cheap with equity. And this document just perpetuates that.

Founders can easily make life changing money but the people that do the actual work get fucked unless it becomes a >100B company like a Facebook. That’s not realistic and they know that. Employees need a bigger piece of the pie when things go great for the company and not just when it becomes a Facebook, Uber, etc.

If you want to know how to evaluate equity, pick a total valuation of the company at exit and then multiply by your stake. If the company needs to exit at > 10B for you to make a life changing amount of money, then ask for much much more equity or don’t take the offer.

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1. sgustard ◴[14 Apr 25 00:49 UTC] No.43677058[source]▶
The majority of comments here seem to argue the ideal equity share for employees is zero, since it probably won't be worth anything. That seems like an even more founder friendly viewpoint, no? Mass inequality of ownership is how we end up normalizing the corrupt billionaire class. I agree with you we need an industry desire for better ownership terms, but instead I see people arguing employees should just take a salary, look the other way, and let owners hoard all the spoils.
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2. lotsofpulp ◴[14 Apr 25 02:13 UTC] No.43677470[source]▶
That is not what people are arguing. Labor sellers should assume equity in a non publicly traded company is worth far less than the labor buyer wants the labor seller to think it is, so labor sellers should demand more cash such that the compensation is competitive with other potential job offers that offer more cash.
3. dangus ◴[14 Apr 25 12:09 UTC] No.43680422[source]▶
Earning a salary in cash doesn’t stop you from investing the cash. I have never earned equity from an employer but most of my net worth is sitting in publicly traded companies. So obviously I am not lacking company ownership just because the company I worked for didn’t loop me in.

The other reason this isn’t true is that equity becomes a lottery ticket that is written in a founder and investor-preferred manner and is used to fleece mostly young employees who don’t know better and are romanced by the thought of being a part of the next Uber or Airbnb.

The practical reality is that it becomes “this job is worth $150,000 but we’ll pay you $100,000 and you can have some equity that might be worth hundreds of thousands if the casino pays out.”

But then you have investor preference multiples, valuation fuckery, and other ways that even a successful exited company can pay out less than your fair share.

To me cash is king because I can invest it however I want. Equity is fine if it’s for a public company, as that’s effectively just deferred cash as an incentive to stay longer.

4. drdrek ◴[14 Apr 25 13:31 UTC] No.43681056[source]▶
Don't get sucked into blind rage over nothing. Why do most employees nowadays prefer cash over options in startups? because for every successful startup where the secretary got a vineyard there are 99 when the startup limps along for 12 years and then closes without a sale. Generational wisdom turned into "Dont get suckered for low wage and options, get a high wage and invest in the S&P".

Will there be lucky founders that become very rich? absolutely. Founders are generally very risk aggressive and are willing to go boom or bust. But for an average person that just want a good life why risk lower living standards for a low change of riches?

If you are very risk aggressive you can push for more equity, but expect your salary to be much lower than your peers. Most veteran SE will advise against it.