[Agebor]

> current equity compensation is far too low and tricky

Of course, we can imagine various ways in which the situation can be improved, like getting equity directly instead of options, increasing the amount of equity, etc.

But that's beyond the main point of stocks. The point of them is to align employees with founders more, get them excited and motivated about the future.

> workers, and especially new workers, should not be optimistic about the benefits.

But the same argument can be made about founders and starting new companies. Of course most startups do not succeed, but should that discourage people from creating them?

I think there is a bit of confusion in that generally it's believed that these aspects of startup industry are much different - one is a 'unavoidable state of the world' and the other is 'unwillingness of certain people to make the situation better'. But perhaps both of them are in fact state of the world... There are many variables that go into selecting the values for employee stock grants and could be just as much hard to change.

Maybe they ultimately end with 'smarter people are able to control those less smart', but that's another discussion.

[lostdog]

A founder's situation is very different from an employee's situation. The founder will immediately purchase their stock for peanuts, where employees usually face all the hazards of the 90-day exercise window. The founder starts out with 40%ish of the startup, which is tremendously more upside than the <1%ish of even early employees. Founders typically have a board seat and negotiating leverage over all future equity rounds, where employees are powerless and need to hope that their founders are ethical enough to protect their interests in future raises.

I'm not against founders getting these benefits. I think VC's are the ones getting too good of a deal here. Roughly, if they pay $10 million for 10% of a company, and an employee gets 1% to offset $1 million of their reduced compensation (over 4 years, vs working at Google), looks fair, right? But oh wait, we forget the many many downsides of the employee's position (not preferred shares, had to ALSO pay to exercise them, risk of AMT, 90-day exercise window, etc). Seems to me that the VC got somewhere between a 5x and 20x better deal here.

[zenlikethat]

But the VCs pony up the cash up front and they are likely to lose it in most cases. The VCs and LPs have an opportunity cost too, they could be investing in other things, including a public market with a great track record for large caps.

There’s no easy answer but founder equity seems over weighted to me. If the founders want to align the interests of the company with the interests of the employees what’s wrong with having 15% instead of 30% and doling our dramatically more options to everyone else? No doubt founders take more risk and work harder but do they work 300x harder? (Usually by employee 10 or so grants are at 0.1% or less)

[lostdog]

As an employee, giving a startup a discount on your compensation is pretty similar to a VC giving the startup cash.