This. It seems that it's acceptable in tech culture to use "you have too much stock" a reason to even underpay founders. This is busted logic, as the company could explode at any time, not to the fault of anyone in particular (but sometimes yes).
So far, I think I've been in 3 decent startups that all of which failed and do not exist anymore. None of them exited cleanly. Some might, but you might not want to stick it out that long, and those are often hard commitments to make depending on the work environment.
New grads and skilled developers alike should never be seduced by "we can't pay more , because we are startup, because we'll give you more options". Not only is the probability of success a factor, but so is dillution, and so is the chance that you won't see that money for 8-10 years even if things go well (long after a company is acquired).
Many sales can end in a net-loss, or only VCs get paid out. Sometimes the CEO nets a really nice private deal to run the new company (and has also been extracting a nice salary all along, probably).
Stock is free to give out, so a company is going to try to give you that instead of money. While it can be nice, possible payouts for most are going to be low, and often enhanced salary over that N years would have been better - and especially from an expected value calculation perspective.
Obviously, there are exceptions, but I'm a big believer that companies should share profits, and probably evenly, without regard to title hierarchy instead. I'd also scrap or outlaw 'executive' bonuses when the employee bonuses are not along the same lines in terms of flat value (not % rate).
Amen. Not such a good notion to trade salary for options, when that extra salary could have been invested all that time. $10k in 2005 is equivalent to $17k in 2015, $21k if you consider dividends reinvested.
The options are an investment. It's just that they're "out of the money" when issued. Modal payout is zero, the maximum possible has been tens or hundreds of millions; what is the expected value? Hard to say.
Giving out stock has potential tax implications for the employee. She could be on the line for taxes for that stock without actually having any increase in liquidity.
Stock is not free. Equity is expensive if you're working for a good company. As a founder I would much rather pay out cash , but that's generally not what people are after (esp director, vp level)
I stopped taking options given away by startups seriously on November 10, 2011 [1]. Maybe stock is not "free", but employees should discount the nominal value a lot more than they seem to. What's a good ratio, as a rule of thumb? 1:10? 1:100?
At any rate, employees should not take them seriously in comp negotiations until they are well into FU money territory, should they ever pay out at a reasonable valuation after accounting for underhanded shit like excessive dilution and claw-backs.
It's pretty free. Hacker News loves the corrections. All good.
I founded and ran a good part of an A-round startup for a while.
I'm aware what stock does to equity, but it has minimal value to employees if it's not going to be a thing, and for a startup watching burn rate, it's pretty freaking free.
Are you going to give it all up and waste the option pool? Of course not. To me, I'd rather have employees with a good chunk of the equity because they were all doing a good chunk of the work, but I also want to see them treated well in stock. And you know your thing might not work out. Being stingy to employees with stock doesn't feel right.
I don't believe in founders hording stock when everybody working for them built a good chunk of what they sell. They should keep a decent chunk, but sharing stock well is basic ethics and costs nothing on the burn rate. It's the same reason I don't believe CEO's should make 50x of what an employee makes in a given year.
Stock is pretty cheap to give away in a startup. It's not cheap in a private company. I do especially object when it's used in lieu of market-rate compensation on the hope of future gain, with "we're giving you lots of stock" and then expecting the long hours and then it doesn't pay off for folks.
So far, I think I've been in 3 decent startups that all of which failed and do not exist anymore. None of them exited cleanly. Some might, but you might not want to stick it out that long, and those are often hard commitments to make depending on the work environment.
New grads and skilled developers alike should never be seduced by "we can't pay more , because we are startup, because we'll give you more options". Not only is the probability of success a factor, but so is dillution, and so is the chance that you won't see that money for 8-10 years even if things go well (long after a company is acquired).
Many sales can end in a net-loss, or only VCs get paid out. Sometimes the CEO nets a really nice private deal to run the new company (and has also been extracting a nice salary all along, probably).
Stock is free to give out, so a company is going to try to give you that instead of money. While it can be nice, possible payouts for most are going to be low, and often enhanced salary over that N years would have been better - and especially from an expected value calculation perspective.
Obviously, there are exceptions, but I'm a big believer that companies should share profits, and probably evenly, without regard to title hierarchy instead. I'd also scrap or outlaw 'executive' bonuses when the employee bonuses are not along the same lines in terms of flat value (not % rate).