Open guide to equity compensation

As our 30 person startup has grown, I made a conscious decision to stop pitching stock options as a primary component of compensation.

Which means the job offer still includes stock options, but during the job offer call we don’t talk up the future value of the stock options. We don’t create any expectation that the options will be worth anything.

Upside from a founder perspective is we end up giving away less equity than we otherwise might. Downside from a founder perspective is you need up increase cash compensation to close the gap in some cases, where you might otherwise talk up the value of options.

Main upside for the employee is they don’t need to worry too much about stock options intricacies because they don’t view them as a primary aspect of their compensation.

In my experience, almost everyone prefers cash over startup stock options. And from an employee perspective, it’s almost always the right decision to place very little value ($0) on the stock option component of your offer. The vast majority of cases stock options end up worthless.

So would you trade your founder equity for a fixed salary? My guess is probably not.

Equity is an extremely important factor for many candidates, especially more senior ones and executives.

I would not pitch it as future value, and instead pitch as % of company. If it's a minuscule amount that doesn't move the needle in offer conversations, than perhaps you are not offering enough, or you're identifying candidates who value more predictable income than investment in the company.

Exactly. If I'm joining a 30 person startup it's not because of the size of the paycheck. Any larger company will obvioulsy be able to easily beat the offer. I want a significant amount of equity. I want to see the cap table. I want to see details about funding rounds, finances, available runway. I want to see MRR/ARR, recently closed deals. If founders dance around these questions and say "equity is not imporant, see how much we are paying you" then I'm walking out the door.

Reading through the thread, the point is the startups arn't providing transparent accounts of what the equity is and how it can be diluted and reduced over the life time and sale of the company. That's all the debate.

Many people have seen those options become worthless because of legalistic maneuvers and violate what's said in the initial options.

So this tangent isn't really clarifying anything. Some people would simply want larger salaries and options be valued as 0$ for evaluating compensation because how easy Capitalists have made it to screw over classes of options/share holders.

Nothing wrong with wanting a guaranteed salary and job stability, but people in this situation should simply not be working at a VC funded tech startup. “Boring” software companies exist. Banks, government, aerospace, manufacturing, consulting Countless mid-large software companies of all conceivable types. Practically all of them will be able to beat a tiny startup on salary. Go work at them instead.