> "It'd have to be astronomically high to truly "approach zero"."
No, it doesn't. A low failure rate can still work out to an EV of near-zero for the employee. You're disregarding powerful effects:
- dilution between grant and exit
- amount of equity being offered in the first place
- opportunity cost of passing up traditional cash/stock bonus structures at BigCos
The fact of the matter is, a meaningful exit for the founders is almost always an insubstantial exit for the employee. Owning 20% of a company is very different than owning 0.05% of a company, post-dilution through additional rounds of financing.
The culprits here aren't VCs. The VCs are putting in the money the company needs to do its thing. Valuation isn't the problem - the attitudes of founders is. I've found that founders mentally grossly overestimate the value of the equity they're handing out. I've seen people demand 5-figure pay cuts for 0.1%-level equity, and this isn't uncommon.
The amount of equity being handed around by founders, even to early employees, is not high enough for anyone to seriously consider taking a pay cut.
If you want me to take a pay cut, give me an amount of equity that might actually result in a meaningful exit. Of course, at the current salary/comp level of competent engineers, we're talking >1% levels of equity, and no founder is willing to part with that.
No, it doesn't. A low failure rate can still work out to an EV of near-zero for the employee. You're disregarding powerful effects:
- dilution between grant and exit
- amount of equity being offered in the first place
- opportunity cost of passing up traditional cash/stock bonus structures at BigCos
The fact of the matter is, a meaningful exit for the founders is almost always an insubstantial exit for the employee. Owning 20% of a company is very different than owning 0.05% of a company, post-dilution through additional rounds of financing.
The culprits here aren't VCs. The VCs are putting in the money the company needs to do its thing. Valuation isn't the problem - the attitudes of founders is. I've found that founders mentally grossly overestimate the value of the equity they're handing out. I've seen people demand 5-figure pay cuts for 0.1%-level equity, and this isn't uncommon.
The amount of equity being handed around by founders, even to early employees, is not high enough for anyone to seriously consider taking a pay cut.
If you want me to take a pay cut, give me an amount of equity that might actually result in a meaningful exit. Of course, at the current salary/comp level of competent engineers, we're talking >1% levels of equity, and no founder is willing to part with that.