[cpks]

1) I really like this, for transparency, clarity, and design.

2) The actual numbers there are a little bit scary. 0.03% equity grant? That's tiny. It's basically worthless.

When did startup equity get so tiny? I'm not singling eShares out here -- just broadly speaking. That means that if eShares exits past a billion dollars, those shares won't even buy a house in the area....

[patio11]

When did startup equity get so tiny?

Non-technical line employee past Series A. See also the top 25% salary of $64.5k, which is roughly half of what new college grads get offered in engineering at AppAmaGooFaceSoft.

Fundamentally this is driven by one number which is an iron law in the Valley: the employee options pool gets 20% of the company. This is 2000 basis points. It will never, under any circumstances, suddenly have more than 2000 basis points in it. That's 2000 basis points you can issue to every employee from engineer #1 to social media marketing intern #6 in year 8.

What's the average equity allocation going to be when you have 400 employees? Well, it can't be 6 basis points, because 6 * 400 is greater than 2000. Is 400 employees a reasonable amount of a company at IPO? It's actually on the low side, particularly as companies are waiting longer and longer to IPO.

This means that, as companies get de-risked by succeeding investment rounds, equity available to employees drops sharply. Engineer #1 might get 200 basis points out of that pool, for giving up a sleepwalk-to-$300k offer from Google to take a flyer on a company paying $80k which needs to, ahem, build a CRUD app. (Not casting aspersions on any company by calling them CRUD apps. CRUD apps make the world go round.) That's still a low number relative to the amount of risk that engineer is taking and their opportunity cost.

I've heard on the grapevine that the iron law might be relaxed. Investors are pretty in favor of this, as long as the extra basis points come out of founder pockets rather than investor pockets.

[x0x0]

Don't forget those options aren't just lottery tickets; unless your employer is giving out options with 10-year exercise windows, they're rigged lottery tickets. viz the CTOs on here talking about using them as retention leverage.

You can find a (very small) list maintained by Zach Holman here: https://github.com/holman/extended-exercise-windows

I assume Zach got interested because he discovered after he was fired from github that he was close to losing all the money he "made" on options when github became a unicorn -- he probably had 90 days to exercise a very high priced illiquid security with horrid tax consequences if he fucked up. That's the thing about cash: it's not rigged. If you get cash, it stays in your bank account. Paper gains can disappear.

[poof131]

Definitely agree that the iron law needs to be relaxed. You can give special voting rights to founders stock to make sure they maintain control of the company, but currently the risk/reward ratio between founders and early employees is way out of whack. Glad to hear investors are keen on this since I think it should make startups stronger.

Equity is a key component of modern compensation with better tax implications and more upside.[1] The “built in the garage” myth needs to die and doesn’t justify 100-1000x payouts when early employees are taking a significant risk too in opportunity cost. The main issue currently is information asymmetry as most early employees don’t see the cap table, don’t realize how much others own, don't understand how little risk most founders take, and don't know how much they are truly giving up in total comp from more established companies.

[1] https://medium.com/the-wtf-economy/what-paul-graham-is-missi...

[tptacek]

I wonder, if you do the math on equity compensation versus compensation in the job market as a whole, if returns from equity aren't just a tiny, insignificant sliver of overall compensation that we happen to take seriously because of availability bias.

Either way, I do not believe it to be a "key component" of "modern compensation". Tech companies can pay strong salaries just like other companies. They choose not to. That could change, and I think should.

[rabidrat]

Relaxing that 'iron law' would be a significant blow against capitalism itself. That's what Occupy* wants, and not what VCs want. But VCs write the rules and there's no real pressure to write them differently.

[jonesb6]

How many years until the record setting number of C.S. grads start revealing the shocking truth that they aren't actually getting thrown six figure entry level salaries which sensibly reflects the relatively low number of hires FaceGooBoxSoft make relative to the population of educated western developers?

[akavi]

That's true. A lot of people aren't getting thrown six figure entry level salaries and perhaps won't be able to find one, modulo geography, skill, personal preferences, etc. And it looks like we're seeing the market soften, so perhaps soon they won't be that easy to find.

But as it stands right now, if you:

a) Are in SF or NYC

b) Have a CS degree from a well-reputed university.

c) Are working as a programmer.

100 k$/yr is not only achievable but practically the minimum.

That said, the linked offer isn't for an engineer, it's for a financial analyst, so perhaps 65 k$/yr is in fact market rate or better.

[pluma]

What gives you the idea that those qualities make anyone actually worth 100+ k$/yr?

The only factor in that short list actually providing any indication of worth to the company is "has a CS degree from a well-reputed university" and that still doesn't indicate being able to perform in a job (rather than study).

I wish our economy could move beyond grading employees by degrees. They're proxies for the things that are hard to measure. Sadly I don't think they can easily be replaced (if at all).

[jonesb6]

Point c is interesting and very insightful (whether it was intentional or not). In order to qualify for a $100k/yr position you must already have a job. This by definition would exclude true entry level candidates, though entry level candidates today seem to be required to have significant work experience as a form of validation.

[infinite8s]

Point A also adjusts the offer rate upward given the high cost of living (independent of all the other factors)

[hkmurakami]

Great answer. I'll just add an anecdote where I was in a fairly similar role/situation as this fictional example of Robert.

The equity grant # was about #350 at a post Series B startup that would exit for about $1B later that year. My stake in the company was 1 basis point (0.01%).

Equity grants loosely follow an exponentially decaying pattern.

[w1ntermute]

So your 1 bp grant was basically a year's salary for a junior engineer in the Bay Area. What is the advantage of joining such a large post Series B startup (which could still face a down round or layoffs before the exit) instead of AppAmaGooFaceSoft?

[landryraccoon]

There isn't one. If you want to join a startup and do well you have to be willing to join when they're paying lower than market salary, desperate for help and nobody's more than 50% sure they'll be around in 2 years. If you can't handle that then a startup isn't a great proposition for you.

[abalone]

It's probably a lot less than even that because, having joined less than a year before exit, the strike price would be far from nothing.

Having said that, you can only say there's no advantage in retrospect. If it had become a $10B or $100B company, 1bp would be substantial. And if the exit was a stock swap then perhaps the potential is still there.

[hkmurakami]

1) This was back when the economy was much worse than it is today.

2) I was a young desperate 20 something who didn't know better. ;)

[djb_hackernews]

Hmm I was actually thinking 0.03% was high for the role and position of the company.

Startup equity has always been tiny. Even for critical engineer hires 1-10. Engineers in general are poor negotiators and, in my experience, the employee pool is preserved for later executive hires that are brought in to bring the company and product into the fold of the industry trying to be disrupted.