[module0000]

> I don't see why an employee should be entitled to ANY equity just because they happened to show up before anyone else

I understand what you are saying, but there is something extra you are doing as employee #1. You're taking a huge risk not working for Cisco, Oracle, Google, etc...any of the players you know won't cease to exist overnight. The equity is offered because a skilled employee is taking a risk on you(the founder), and investing his time that could be better spent at an established company. That's how I view it at least - if you offer me equity at your FaceAppInGram startup, plus the salary I would expect from other fortune 500 offers - I might be tempted to work for you. Otherwise, there is no sane reason any engineer worth their salt would take the risk.

edit: typo

[CalChris]

You're taking a huge risk not working for Cisco, Oracle, Google

No, this is not risk. This is opportunity cost.

  When referring to finance or economics, risk describes
  the possibility that an investment's actual and projected
  returns are different and that some or all of the
  principle is lost as a result. Opportunity cost concerns
  the possibility that the returns of a chosen investment
  are lower than the returns of a necessarily forgone
  investment.

http://www.investopedia.com/ask/answers/041015/what-differen...

A VC can lose their cash money investment in StartUpCo. That's risk. An engineer choosing between StartUpCo and Cisco faces a choice between two opportunities. The cost of choosing one opportunity is the other. That's an opportunity cost.

[barrkel]

I think you're being pedantic. Let me explain why.

Given a choice between two alternatives, one with high variance and low median return, and another with low variance and high median return, it is perfectly sensible to use the English language (as opposed to investment jargon) term 'riskier' to describe the first alternative, if maximizing return is the goal.

[shostack]

The risk comes in from the fact that a startup has a decent chance of flaming out and ceasing exist in less than a year in which case you are out of a job.

While you could still lose your job at a big company, they are generally more stable with billions in the bank.

[morgante]

Sure, and if my opportunity costs exceed your offer then I won't work for you. BATNA is what drives compensation, and the risk of you ceasing operations definitely factors into that.

[module0000]

Good point, opportunity cost describes it perfectly.

[jwebb99]

> You're taking a huge risk not working for Cisco, Oracle, Google, etc...any of the players you know won't cease to exist overnight.

Hmm. I hadn't thought of it that way. Thenagain, from what I've heard, A players don't hang around any particular company for more than 3 years since they are always looking to bump their paygrade. And despite what startups may ask for in job ads, they are not exclusively hiring superstar code ninja warriors.