[stan_kirdey]

Engineers: always negotiate for higher base salaries. In the vast majority of cases—especially during acquihires—your equity will be worth little or nothing. Founders and VCs still get paid; employees rarely do.

Don't just accept promises. Ask for the 409A valuation, liquidation preferences, and pay bands. If a company won’t provide transparency, that’s your signal.

Equity is a lottery ticket. Salary is money in the bank.

[fusslo]

my equity from 2years pre-acquisition: ~$2800. Then the CEO gave out bonuses when everyone threatened to quit. Then after his 3 month vacation to Italy, he came back driving his new Ferrari.

My equity from 4 years ( employee ~60, grew to over 500 ): worthless. No one is able to exercise any options. They also readjusted when the valuation came below the total raised, making the value of my vested shares ~$13k ( down from ~$200,000 ) . They 'made us whole' by giving more shares with a new 4 year vesting schedule.

Startups have found ways to fuck everyone but the investors with equity. It's confederate dollars; funny money. Maybe some people get great deals, I don't know. From my limited experience at very successful startups, the only people who made real money were those able to parley huge bonuses or base salaries.

[supportengineer]

The fun part comes when you put in 20 years doing this, and your dream is to buy a nice house, and you finally get your seven-figure payout, and.... it's not enough to buy a house. Because now a house is 3 million dollars.

[kstrauser]

What kind of house had you been dreaming of? I live in SF, and even here $3M goes an awfully freaking long way.

[chasebank]

I'm in Santa Barbara, CA. Good friend of mine just bought a shithole 3-2 1300sqft for $2.2m. $3M doesn't go very far considering 30 years ago it was retirement status almost anywhere.

[cpursley]

I don’t get it, at this point you move to Baja or Portugal (for similar climate) and live like a king without ever having to work again (unless you want to). Or a cheaper east coast state if you wanna stay in the US on the coast and have access to to all the same fast food and Walmarts.

[waste_monk]

How does medical care factor in to your plans? Do those places have equivalent access to care if you stay in or around the main cities?

Even something like living in the countryside domestically would worry me (that is, longer times between calling for help and it arriving, then time to be transported to a medical centre or hospital, and then probably getting transported to the city anyway for access to advanced medical care).

[rightbyte]

Ye I really don't understand why people don't take their money and run more often. And like, run a convince store somewhere off.

[all2]

I could retire on 3 million right now.

[Thorrez]

Here's a $2M 4-3 2279sqft very-nice-looking home in Santa Barbara:

https://www.zillow.com/homedetails/5436-Agana-Dr-Santa-Barba...

[AceJohnny2]

offtopic, but I love comparing realtor glamour shots HDR'd out the wazoo with StreetView

https://maps.app.goo.gl/2aEXsdH9hU3o4SZw5 (winter, March 2012)

[caminante]

You're making his point.

4br in only 2k sqft? For 2M? Please...

[david38]

His stupid idea to buy in a place that has gotten more expensive than almost anywhere in the country.

I can cry that my dream flat in London is more expensive than I expected 30 years ago but that just shows how stupid I’ve been the last 30 years

[moritonal]

I have to ask, if they have access to get a loan of $2.2m then the friend could likely save for 5-7 years and just retire someplace cheap. Like, spending that much seems wild given the implied access to straight cash.

[zeroonetwothree]

But you can always sell the house later if you want to retire somewhere cheaper. It’s not like you losing the money forever.

You do have to pay interest taxes and maintenance, whether that exceeds the rent for an equivalent property is another question.

[bravesoul2]

Yeah but let's keep the ponzi going people!

[bravesoul2]

Yeah they been printing alot of $

[0x00000000]

anything within 45 minutes of your office in palo alto (where you are mandated to show up 5 days a week). this will get you a 1300sqft piece of shit built in 1964 with asbestos and lead paint and lead pipes and a cracked foundation (also some dipshit realtor had them paint all the original wood beams and paneling inside gloss white and replace the original wood and slate floors with grey vinyl) from some baby boomer forklift driver or mailman who paid 40k for it (you will pay 40k per year in property taxes for it), all for the privilege of “only” spending an hour of your life a day commuting so you can sit in your assigned area of your open concept office with noise canceling headphones on zoom meetings for 4 hours a day surrounded by other people on zoom meetings who also just expended a collective 5000 man hours and countless CO2 emissions to be there.

[frankus]

Every now and then I dream about how much more money I'd be making if I lived in the Bay Area, but then I read something like this and realize that earning ~half as much working remotely from a cheaper (at least when I bought) city maybe isn't so bad.

[kstrauser]

They are greatly exaggerating. One tangible advantage to living somewhere expensive with higher salaries is that anything you can buy online is effectively that much cheaper. An iPhone costs the same in Arkansas as in San Jose, so you'd end up working many more hours to buy one in AR than in CA, on average.

Yes, housing is more expensive. A lot more. Everything else is way cheaper.

[kstrauser]

Or you could spend half that in the heart of SF and have a nice place in a decent neighborhood: https://www.zillow.com/homedetails/1265-Union-St-San-Francis...

It's not that it's cheap here, not by any measure, but it's not nearly so dire as y'all want to claim.

[johann8384]

With $3MM you could just stop working and live in many other nice enough places without ever having to work again.

[nimos]

That is a tenancy in common 2 bedroom apartment not a house. Shared ownership of a 100+ year old building with "leased" parking 2 blocks away. Not exactly the home ownership dream.

[ashdksnndck]

Redwood City is 20 mins from Palo Alto and has a lot of houses for $1-1.5M. $3M means you are paying extra for something optional. It’s not the minimum requirement.

Lots of people are paying millions extra just to live up winding roads on a hill, where the commute is longer, and you need a geotechnical engineer to design your patio.

[dfadsadsf]

Redwood City has terrible schools (relatively) and many people consider excellent schools for their kids as hard requirement.

[0x00000000]

it’s more like 30-50 min with traffic

[sgerenser]

And here I thought I had it bad when houses went from 400k to 800k for the same house pre- vs post-pandemic in Raleigh, NC.

[antonymoose]

I remember being a young junior engineer, my manager had just bought a nice house in the good part of town (Charleston, SC) for about 350k. We had a good “be smart with your money and this could be you too in 5 years” conversation. I think by the time I was ready to buy that house had jumped to 600k valuation, these days it’s close to $1M in valuation.

Only way to get a nice house for 300k now is to work remote in some podunk town for a big city salary.

[zeroonetwothree]

The median income in the Bay Area is around 120-180k. You aren’t buying a 3m house for that, so how is it all those people somehow survive?

[coredog64]

Some anecdotal data points from a guy who lived in the Bay Area when poor people could afford Redwood City and just returned from a family event.

1. The neighborhood I grew up in in San Jose has 3, 4, or even 5 cars in front of every house. My working thesis is that despite being small, these are multi-generational homes, probably with the notional homeowners being the ones that were living there back in the mid-80s.

2. My aunt lives in a much nicer part of San Jose in the house that her husband inherited from his parents. Many of the other neighborhood homeowners are in the same situation, although there has been some flipping going on.

3. Three more boomers at the family event are all living in inherited houses, including one couple that has a pair of houses that they each inherited from their respective parents. They're not renting out the surplus, but instead have turned both into animal rescue sites.

All of these folks are grandfathered in to extremely low Prop 13 property taxes.

[amy214]

This a wonderful summary of the unfair dystopia that is the Bay Area real estate market.

I would also add, the forklift driver who bought the house for 40k in 1971, by state law (Proposition 13), is still paying 1971 valuation property taxes and contributing essentially nothing to local school funding, funding which is mostly covered by you according to a "new guy has to hold the bag" type scheme. In a state obsessed with fairness, a most unfair policy.

Should you wish to modify the property, conventional area wisdom is to just do so unpermitted. Boomers don't like construction because it increases supply and they want no supply, only demand, home price go brrrr. Environmentalists don't like construction because the more nature the better. Others don't like construction because they make it their business to set the vibe of the area as static and frozen. These political interests culminate in a construction permitting process that basically autorejects everything, paradoxically increasing public danger because everyone now does everything unpermitted.

Even the famously wealthy Steve Jobs ran afoul of it and couldn't buy his way out. He had a property he wanted to modify but they wouldn't let him touch it at all. So he just let it sit and rot to make a point. Ultimately the government agreed his plan was better than a rotting house.

[labster]

You should have bought in when Prop 13 went into effect, you’d only be paying $3k in property taxes today instead of $40k.

[gammarator]

Or inherit the Prop 13 rate from your parents.

[dcow]

I think you just illegally accessed my brain…

[paradox460]

I don't think of it this way often, but damn am I glad I left the bay area

[ian-g]

I can’t help but miss it, even though I desperately needed to get out too.

I miss knowing where the darkest place is for 50 miles in all directions. I never got to bike highway 1 from SF to Big Sur. My boyfriend and I would have an easier time finding jobs there. There’s better roads for car enthusiasts.

There was a lot of depressing tech saturation in the Bay Area, but there’s still good pockets of the pre-software culture around there if you’re willing to live towards the edges and look for the weirdness.

[thatfrenchguy]

Are you the kind of person who refuses to go to the east bay or live next to middle class Asian Americans or Latinos? Because there are plenty of nice places for 3m 45 minutes from Palo Alto. Arguably you could get a house on the south side of the city and be 45 minutes from downtown PA by car or Caltrain.

[kortilla]

Pitching a 45 minute commute as as something as acceptable for $3 million is insane. It has nothing to do with class. That’s a shit life driving that every day.

[0x00000000]

i live in RWC

[latentsea]

And those who live in Silicon Valley are the supposed winners.

It just doesn't stack up. This world is cooked. The steak used to be medium rare once upon a time, but now it's pure charcoal.

[supportengineer]

All of this

[socalgal2]

$3m cash will get you a house that you have to still pay $60k-$100k a year to stay in property tax and maintanence

[vkou]

Property tax rate in SF caps at 1.38%, which would be ~$40,000/year. How are you spending $60,000/year, every year, on maintenance and insurance? Are you saving up for a new solid gold roof for every decade?

[zeroonetwothree]

My average has been around $30k/yr but my house is worth well under $3m so I could see it being closer to $60k. I do include some remodeling in that figure, but things wear out and you aren’t going to want to live with a decrepit interior in your $3m house…

[bigmattystyles]

$3m mortgage as well

[lotsofpulp]

$3M is this 2,240 sq ft home on a 5k sq ft lot in San Mateo, and as far as house amenities/quality, this is pretty unimpressive.

https://www.zillow.com/homedetails/221-Woodbridge-Cir-San-Ma...

[jahewson]

One block from the freeway, no less.

[pinewurst]

Convenient for the commute.

[_zoltan_]

for a standalone house in my area (lakeside near Zurich, Switzerland) you'd pay way more than 3M... apartments go for 2+.

[MadDemon]

Intrest rates for morgages in Switzerland are around 1% and for tax reasons most people only pay off a third of their property. The payments are very managable, as long as you have the downpayment. You can't fully compare this with a similar price in the US where interest rates are much higher and people pay off the full morgage.

[_zoltan_]

You can pay off your mortgage if you want to. I know several people who did or set it up like that.

However then your interest rate is not 1%. The best I've seen is 30 year fixed, where you pay off your house is 2.5%.

I'm paying 0.65% right now, thanks to SARON going to 0.

It just does not make financial sense to pay it off even if could.

[seattle_spring]

Couldn't you just not live "lakeside"?

[_zoltan_]

of course that's an option. then you can get a house for a measly 2 million! public transport will only take an hour or more from there .. :)

my wife doesn't drive and we wanted to have access to good public schools and good transportation. this is not a given if you go more rural. The postbus goes maybe every hour or so.

the lakeside communities near Zurich are great and all of our friends live in one of them (on the same side of the lake of course). not living here would have severe effects on my wife's and our kids' social lives.

[anukin]

Maybe OP wants a house in atherton next to andreessen.

[gcanyon]

I'm guessing it's a very select group of people who want a house next to Andreessen...

[seattle_spring]

If I had to, I would pay just to live away from that select group.

[supportengineer]

This is the cheapest house in Atherton at this moment

$4.888

https://www.zillow.com/homedetails/86-Rittenhouse-Ave-Athert...

[BobaFloutist]

$3m is a pretty decent down payment for that.

[charles_f]

That's still a hefty down-payment.

[dehrmann]

At some point, aren't the C Suite and directors failing their fiduciary responsibility? I know they have broad freedoms, but when you're reducing an a minority shareholder's equity by 95%, it's well past "fiduciary responsibility" and looking like fraud.

[fusslo]

I am convinced every executive and wanna-be executive is on the 'inside joke' of funneling money out of the company into their pockets.

I am also convinced that investors believe it's the C Suite's responsibility to tear away any equity from employees to leave the largest pot for investors.

[mikert89]

ive been in these rooms and heard the conversations, employees are seen as disposable liabilities

[toss1]

YUP

Terms and phrases I've heard verbatim from investors and/or founders:

"There's a thousand ways to screw minority shareholdeers."

"Cram-down" (repeatedly, like it is an ordinary thing to do, effectively repudiating or diluting away entire classes of debt and/or equity)

"I hate to lie, but you often have to." (said as if there is no choice in the matter)

"You have to screw the other guy before he screws you."

"If there's a problem in a joint venture and you put out the resources to fix it, you're the chump."

It is a good idea to not do business with people who say these kinds of things.

It is delusional to think you will be the special one who they actually treat fairly and not be targeted by their greed and lack of ethics.

If you are really lucky, you will escape and find an attny willing to take your case and win a lawsuit and still get to chase them for the judgement.

The only winning move is to not play.

(Not to say there are no honest ones, but it is really getting scarce, and many honest ones have left the biz.)

[droopyEyelids]

This is what it means to own

[RamblingCTO]

Can confirm from my experience. Although not everyone is like this. Sent me into burnout that I didn't wanna be a dick and extract as much "value" from the employees by walking over them and fucking them over when the chance arises. It's always empty promises to string people along. From my experience, these people (the resource extraction dicks) are also some of the must unlikable and unhappy people I've ever met.

[mlinhares]

Anyone that doesn't think this is delusional.

[ojbyrne]

Of course. So if you’re the employee, you’re going to sue? If so you’re paying for your lawyer, and the company is paying for theirs. Guess who goes broke first.

[lmeyerov]

Sorry to hear that =/

Work for good people with a history of moral dealing. A family member just had a life-changing payout because leadership was generous. A friend walked away from a company pre-pivot without equity for what became one of the decade's biggest acquisitions.

This stuff is lottery tickets, but real ones. You need to be smart about who you make your limited bets on.

And agreed, big cautionary note here shows that Windsurf having "founder-friendly" investors does NOT mean employee-friendly ones.

[fermentation]

I often see job postings here looking for "top <1% engineer talent" paying $100k and <1% equity and I wonder who is actually applying.

[ageyfman]

they have to say this to safe face. people who're interviewing most of the time can't even tell if it's a 50% engineer

[ponector]

No one will say: we are looking for cheap mediocre talent with no intention to grow, just to process assigned Jira tickets. Even if that is the actual truth in many cases.

[blittle]

Not a 1% engineer

[roncesvalles]

I know this is HN but imo it's rarely ever a good deal to work at startups as an employee instead of a cofounder (with actual cofounder equity not just the title i.e. within the same order of magnitude as the largest-shareholding cofounder), over a bigger established company.

The only good reasons to do so are if you want to learn or make contacts so that you can found your own startup later.

In my pensive moments, one of the things about humans that makes me go "god damn" is how little money it takes for insanely talented people to just come and work for you.

[marssaxman]

The other good reason is that you might enjoy the experience more than you would enjoy the stultifying, oppressive, slow-moving environment of a big corporation. That's why I keep doing it: I'm not expecting to get rich, I'm just trying to live a good life, and it's proven to be much easier for me to do that when I work for a startup.

I value startup equity at ~$0, but if the salary is enough to live comfortably, that's fine.

[DSingularity]

I don’t think that’s entirely correct.

You need to work with good people. There is no substitute for ethics.

Also you need not go for roles where they offer .3 % and make a big deal about it. Don’t take less than 1% minimum and as soon as two years pass by and you have carried your weight start looking for a new job. If they value you they will bump you up. It they don’t you will bump yourself up by going for a new job. And don’t be afraid to go for competitors if you believe in the value of the space.

[freeone3000]

The startup I work for keeps my employment because they keep bidding competitively with the investment banks I would otherwise work for.

They have the cash, if you have the leverage. Use it.

[Hikikomori]

Paid more taxes on RSUs than I'm going to get post IPO. Company took investments on insane COVID valuation and then needed more money posts COVID which tanked it.

[cornholio]

The basic idea is that you either have stock, preferably founder levels from 10% up (which is itself a lottery ticket), or you hold retiree bingo cards. The retirement home provides the cards for your entertainment, but the real owners of the establishment, the founders and early investors, know the only way you can earn the big prize is at their expense, so they have a vested interest to see you fail - and they are the ones printing the bingo cards and setting the rules.

[ivape]

Then after his 3 month vacation to Italy, he came back driving his new Ferrari.

Hey, at least he’s taking his LARPing as a douchebag ceo seriously. Easy vip invite for DND nights.

[jongjong]

I worked for an ed-tech startup as employee number 4, joined when it was obscure; not even in the Alexa top 4 million rankings and almost no revenue. The founder was really good though and gave everyone shares instead of options. I got a bit under 0.2% equity in the company. The company grew (slowly and steadily) to $6.5 million USD revenue with about 10% net profit margins but its last valuation (over 10 years later) was like $8 million USD. They charge like $15 USD PER YEAR PER student for their product so very cheap; I feel like they could easily increase the prices given how widely used they are in my country (over 30% of students in my country use the app).

I had the option to sell some equity recently but it would have only been like $16K USD so I held... I had about $9K taken out of my salary to pay for those so it doesn't make sense to sell given the massive growth the app and not that much dilution... The financial gain barely covers the inflation.

It feels like both revenue and profits have been kept artificially low. $6.5 million per year revenue, still growing steadily, with a loyal customer base with 10% profit seems really good... A valuation of $8 million seems ridiculously low... Not even 2x revenue, for a tech platform with good lock-in factor (they sell a lot of licenses to schools)!

It's kind of amazing how bad a deal it is to work for someone else as an employee. Even if the founder is good and generous in many ways and the business side (which you have little control over as a developer) happens to work out pretty well, they can still pull all sorts of levers to make the deal bad. With this one, I'm going to wait it out 20 years if I must. A lot of the game is just timing, you gotta wait it out, sell at the top... Some people see a peak opportunity to cash-in multiple times in their lives, some people never see it! In my case, I haven't seen the top yet.

I never had any opportunity to make serious money ever. Never had an opportunity to pull the trigger and make even $100K. The best I ever got was in crypto, my crypto was worth $100K but I was earning like 100% annual yield and required a 1-month unlock period. So I made more than that by holding it for 3 years anyway...

I think my career story so far is quite interesting. Probably more interesting than 99% of the classic SV startup stories (at least what they say publicly). I've done some things nobody else has done. Made money in truly adverse environments where a lot of people hated my guts. I've seen people behave in strange ways. At times, I felt like I was almost breaking through the membrane of 'the matrix'; almost transcending my social class. But all I got for it was 3 years of passive income. I never had the opportunity to cash out big.

It's tough out there, so tough, it often feels fake/artificial. Often, it feels like you have to be 'chosen' and that's all that matters. Your work doesn't matter, how talented you are doesn't matter, how lucky you get doesn't matter (besides the luck of 'being chosen').

At the end of the day, money is like a river and people upstream from you get to decide whether or not the river will flow in your direction. When you understand that new money is created constantly and, just like the river, the water cycles between the mountain and the sea, you start to understand the value of positioning and 'being selected'. The people upstream will keep telling you that they don't control the flow of money; that the river flows naturally through the lowest valleys... It's your job to put yourself in that low valley... But really, they've built massive dams up there directing the water almost arbitrarily. You may be at the lowest valley but they're redirecting the water elsewhere artificially because it suits them better. Reality is that they can easily alter the path of the river anywhere they want and it has little to do with 'building something people want'. It's about building something the people upstream want... And sometimes they just want to help their existing friends; unfortunate for you if you are not their friend.

It's a catch-22; you need rich friends to get money but you need money to get rich friends. But I suspect it's way easier for a poor person to get rich by befriending a rich person than it is for a poor person to get rich without rich friends. The second approach feels like you're piercing through 'the matrix' because of all the weird almost conspiratorial resistance you might get (tech feels like one big club).

Sometimes you might accumulate some dirt on some rich people and that gives you some leverage over them but it's the kind of leverage where you have to keep coming back to them to get crumbs. I feel like you can never break through that way due to regulatory capture. You can only do limited damage to them and it's always costly to you. They still have the balance of power.

[CaveTech]

Sorry to break it to you but 10% profit on 6.5M rev is very low and will absolutely not fetch a high multiple, especially considering this is a mature 10 year old business. This is not a high growth business and you may have grown overly rose colored glasses by thinking it could be priced as one.

[grepfru_it]

So much more. What assets/patents do they own? How much money is in the bank? What does their liability sheet look like? How “hot” is their industry right now?

Some time ago I found a good formula to plugin numbers and get a valuation multiple. The questions above were the ones that really moved the multiplier. A major lot of “startups” are in the 1-2x range. The hot ones will peak at 7-12x.

[jongjong]

I suppose the industry is not hot right now. EdTech was never really very hot. It was 'luke warm' at best, a decade ago. They own a lot of software, also, they publish their own math textbook (both digital and print). They have licenses with thousands of schools across multiple countries. I don't recall they have any debt.

I feel like they could easily bump up profits by $2 million just by letting go of people... But they could probably double the license cost per student. Although schools don't have much money, they are kind of slow and bureaucratic; set in their ways. It's a small cost for them anyway, once a system is part of the curriculum, they'll probably pay extra to avoid reorganizing the lessons.

[CaveTech]

As you describe this is largely a cash flow business and the bulk of the value should be extracted via dividends to the benefit of major shareholders.

A tech enabled business needs gross margins north of 70% to be attractive from a leverage standpoint, unless revenue is scaling very rapidly. Without these there’s no attractive exit opportunities.

[yard2010]

This is one of the best things I have read today. It resonates deeply with my realizations and experience working in early stage startups.

[wanderlust123]

Why are the margins so low?

[jongjong]

They have a lot of employees. I think over 50. Probably more than they need and they re-invest a lot in the business. Also, the cost of $15 per user per year is VERY LOW.

[cornholio]

50 employees generating 6.5 mil in yearly sales means the business would barely cover payroll and basic expenses in a first world country. In a lower income country, they can be profitable by taking advantage of cheap labor, but that usually does not scale well to international markets in services.

0.2 % of that is nothing.

[andy99]

Yes - equity should be an incentive to contribute the the company's success, and partial compensation for the risk of going to a startup. One should value it at precisely $0 in terms of life planning.

This becomes truer and truer the more of an employee and the less agency over the company's choices you have, but generally if you're not a co-founder (founding engineer doesn't count) equity traded off against salary is someone scamming you.

[neilv]

> equity should be an incentive [...] and partial compensation for [...] One should value it at precisely $0 in terms of life planning.*

Not very good incentive or compensation, if you have to value it at $0.

[baq]

Still better than a lottery ticket.

[KingMob]

Given opportunity costs, you could easily argue that it should have negative value.

[daniel_iversen]

Not if you live in a country where you can end up paying more taxes than the equity is worth! Be a little careful with Options and RSUs depending on where you live, and even more so for certain companies etc

[parpfish]

> equity should be an incentive to contribute the the company's success

the much bigger motivation is "keep the company afloat so i can keep drawing my salary", so just boring old non-equity paychecks provide plenty of motivation.

if you're an employee that thinks your contributions are so great that you are single-handedly juicing the stock price or valuation, you're probably wrong but if not... you should probably take those skills and found your own startup.

[gsibble]

I've tried to ask dozens of companies that wanted to hire me just for how many shares were outstanding and/or authorized. They almost always refused to share.

You can almost never get any info on equity until it's too late and you realize it's worth nothing.

[georgemcbay]

> I've tried to ask dozens of companies that wanted to hire me just for how many shares were outstanding and/or authorized.

Those questions are certainly worth asking but employees should also keep in mind that even if they do share that information your equity can still later be diluted away to worthlessness.

[mgfist]

There's other gotchas too. Ratchets, liquidation preferences, restructurings (recapitalizations) etc etc

There's many opportunities for VCs and founders to screw you over. And that's assuming things go well enough for that to be an option lol

[dilyevsky]

My 2c is these are almost always a consequence of the company not being a good business. Well, sometimes you get asshole founders/board members too that's not as common as the company just being an absolute money pit. So instead, I'd focus on asking about business fundamentals/strategy - if the company is money printer, everyone is likely going to do well financially

[mikert89]

nope, it happens in "good businesses". once real money is on the line, everything is a dog fight. no one talks publicly because of the reputational repurcussions

[dilyevsky]

not ime. you're also much more likely to get sued for this when real money is involved. cases that i know personally (and myself) either did ok and got pay out or everyone went to zero (below or close to strike price) but founders got secondaries (which screws VCs not the employees).

[drmath]

> I've tried to ask dozens of companies that wanted to hire me just for how many shares were outstanding and/or authorized.

"Wanted to hire me" as in they made an offer, or an earlier step? At offer stage, I've never had a company refuse to answer these questions. I don't have "dozens of companies" worth of experience though, maybe one dozen if that.

[busterarm]

Every time I hear this I think experiences and expectations are vastly different between SV and the rest of the country. 30ish years of working in New York and I haven't encountered a single company that isn't 100% opaque about their equity to employees until time of exit/IPO. And I keep a large network.

That said, everyone here treats equity of non-public companies as if it's toilet paper. Some of my coworkers got very lucky and very rich when our company went public, but that was also a long time ago now.

[umanwizard]

I worked at one for five years: Materialize. Based in NYC. Everyone knew how many shares they owned, what percentage of the total equity that represented, and what the rights of the preferred share classes were.

[busterarm]

Glad to see this data point. This is a company founded relatively recently and I hope this means that some kind of change is happening regionally.

[gsibble]

I tell every engineer always to maximize their cash comp and every founder and investor always says "No, that's such a bad idea! Get more equity!"

Yeah, because that is in your interests, not the engineer's.

[01HNNWZ0MV43FF]

I remember when my old employer was doing another round of funding

They offered to sell me more shares

I countered that I'd been trying to dump the shares they already gave me and if the shares are truly worth X dollars they should buy them back from me

Anyway glad I quit

[debatem1]

> if the shares are truly worth X dollars they should buy them back from me

I always offer companies pushing equity hard to trade for cash at 10% of the highest number they try to get me to value it at. Nobody has ever taken me up on it, even when they really should have.

[CalChris]

There is another variable. Find better companies to work for. If you don't think this is a unicorn, don't work for them. If this is another stablecoin startup leveraging quantum AI then you deserve what you get, cash comp or no.

[cortesoft]

It doesn’t matter if you think it is a unicorn or not, it is about risk management.

Early stage investors know that even the best startups have a fairly low chance of success, which is why they diversify by investing in a lot of them. The many failures are paid for by the few successes.

As an employee, you are only given stock in the one company you work for. Even if you think it will be a success, it isn’t smart to put all your eggs into that one basket. No investor would do that, and no employee should either.

If you are working at a startup, a lot of your eggs are already in that basket; your ongoing salary is dependent on the company continuing to succeed. If you take less cash for more equity, you are putting even more eggs into that same basket. If it fails, you are going to lose all the equity AND your salary.

You don’t want your investment risk and your salary risk to be that correlated.

[rgavuliak]

If anyone knew how to spot unicorns, the industry would be very different.

[CalChris]

There are certain unicorns; I've worked for one. There are maybe unicorns; I've worked for a few.

Then there are non-unicorns. These may even start as maybe unicorns. But as soon as you know it's never going to be a unicorn, you can leave. Or stay, prospects depending. If you know it's never going to be a unicorn before you even join, you can think of it as glorified contracting. Done that too. Maybe lean on compensation rather than options because a whole lot of nothing is, tap-tap-tap, nothing.

BTW, VCs think along similar lines.

[usaar333]

Not everything is adversarial. More cash pressure on the company itself can be bad for the company which is bad for you too.

I always take more equity. I wouldn't work for you in the first place if I didn't believe in your equity.

[baq]

This may work for you, but in general isn’t good advice. You shouldn’t be confusing beliefs and risks. Risk should be managed - you should be comparing cash invested into the public market (or treasuries, or bitcoin, whichever you prefer) with equity in the startup, not with a savings account.

[usaar333]

Startup equity is worth a lot:https://www.amafinance.org/startup_comp/

[baq]

Maybe useful for VCs who have a portfolio of companies and need to put stuff in their presentations to LPs.

If you’re an employee you can’t look at this like an investor would. Your risk profile is completely different. The write up is correct in that it’s basically a call option, correctly point out there is no market for it and then ignore the fact that zero liquidity means you can land a 747 between the bid and ask (if you get anyone to buy from you at all).

This a feel good number generator.

[usaar333]

An employee can repeat jobs over and over. Assumption is an exit eventually occurs - same thing VCs feel as well.

[tensor]

There are more than enough stories about employees complaining that they didn't get a big enough payout on an acquisition or IPO to know that this isn't true. It all comes down to your risk reward preference.

Sure, if you don't want to take a risk then look for a higher salary, and probably at a more established company because even if you have mostly salary and little equity a startup is still risky (and you're making it even more so by putting cash pressure on the company at that stage).

On the other hand, if you want a chance at a bigger payout, you'll want more equity. And yes, you may well not get that payout.

[tedivm]

> There are more than enough stories about employees complaining that they didn't get a big enough payout on an acquisition or IPO to know that this isn't true.

That's exactly why it is true. If every person who held early stage stock walked out of those events happy then no one would recommend they focus on salary.

[cortesoft]

The problem is that your risk is compounded because your equity risk is correlated with your salary risk - if one fails the other is likely to fail, too.

Even if each risk is a good one to make separately, it isn’t always good to make both risks.

[tlogan]

This is a brilliant move by Google: it makes joining any AI startup even less appealing.

Stock options were always a lottery. But this takes the shenanigans to a whole new level.

[toomuchtodo]

Additional resource:

Ask HN: How to negotiate stock options? - https://news.ycombinator.com/item?id=28401655 - September 2021

[djoldman]

Indeed. Likewise with non-guaranteed bonuses (gotta love the "plus a discretionary bonus!" commentary during offer discussions).

It's always worth offering to take equity as long as they agree in writing to not ever dilute your shares and vest them immediately. However, it's unlikely that any company will agree.

It's best to imagine compensation as exactly one's salary. Then (virtually) all surprises are good.

[tyre]

> It's always worth offering to take equity as long as they agree in writing to not ever dilute your shares and vest them immediately. However, it's unlikely that any company will agree.

Well, yes, because that’s insane.

[djoldman]

I think it makes perfect sense. It's a guaranteed incentive for a potential employee to increase the value of the company and act in its best interest.

Absent those guarantees, it's smoke, nothing, kaput: 1.5% equity or whatever % can become approximately 0% and there's nothing the employee can do about it.

They could structure the agreement in other ways to incentivize the potential employee: if additional shares are issued, pay a dividend to the employee.

[chii]

> pay a dividend to the employee.

the whole point of equity compensation is that it replaces cash, as the startup rarely has sufficient liquidity in cash.

But equity is often used in ways the employee does not understand and get screwed over. It's also why there are accredited investor requirements for VC/startup investments - so that only those who can afford to pay for a lawyer and such can partake in these deals. Unfortunately for an employee, the loophole is that they don't get this regulatory scrutiny, and also don't have or earn enough to hire a lawyer (and oft times not even access to the cap tables - it's just a literal number of shares, without context).

No wonder employees get screwed while investors (of the accredited kind) don't.

[djoldman]

> the whole point of equity compensation is that it replaces cash, as the startup rarely has sufficient liquidity in cash.

Understood and it makes sense. Offering equity to a potential employee is a way for the employee to benefit potentially on future growth in the company.

I'm proposing that if there is a future funding round, pay the employee a dividend from part of the proceeds. Or maybe give them more shares or a combination; but put it in writing from the start.

[baq]

And yet they agree to pay salary immediately.

[yibg]

No one pays 4 years of salary immediately.

[azinman2]

I don’t see how a company could promise this. Everyone gets diluted for every funding round, for example.

[munksbeer]

I don't know how this works, but my question is, on a funding round, couldn't the C suite just allocate themselves additional equity in proportion so that their total value remains the same?

[Xylakant]

They could, but the shares represent value - and that money needs to come from somewhere. Simple, but extreme example: A company is valued at 10 million gobbledoks, and the C-Suite holds 10%, representing 1 Million valuation. Now the company takes 10 Million gobbledoks Investment that end up in cash on the companies bank account. This raises the the valuation to 20 Million.

Under simple dilution rules, the Investor takes 50%, and the existing shareholders are diluted to 50% of their stake - the C-Suite owns 5% of 2 Million, 10 million as before.

If the C-Suite demands that their equity proportion remains at 1%, they’d suddenly own a stake representing 2 million valuation. That difference needs to come from somewhere.

[djoldman]

They can easily, they just don't.

[gwd]

There is actually a sense to the dilution. If I have something I think is worth $10m, and I'm asking someone else to give me another $10m, doesn't it make sense for that person to own 50% of the company? Why would any investor give you $10m wile receiving no ownership of the company? How are you going to give these newer investors ownership, if you don't reduce the ownership of everyone else?

The claim in the tweet was that they got 1% of the value of the diluted shares: e.g., on paper they should own 1% of $100m, but somehow they only got $10k out of it. There does seem to be a culture of this going around now -- the VC version of "Hollywood accounting". In a lot of situations it doesn't make much sense to me -- is it really worth poisoning the well of startup talent for the VCs to get $95m instead of $85m?

[djoldman]

I don't think I understand.

If the value of a company is $10m and the company asks an investor to give $10m in exchange for equity, the investor should own 100%.

If the value of a company is $20m and the company asks an investor to give $10m in exchange for equity, the investor should own 50%.

[gwd]

> If the value of a company is $10m and the company asks an investor to give $10m in exchange for equity, the investor should own 100%.

That's not investing, that's buying. Buying means the buyer gives $10m to the previous owners, at which point as you say, the previous owner owns 0% and the new owner owns 100%. But the company is in the same position as it was before -- the same amount of cash on hand as it did before.

For investing, you're putting cash into the company's account, which raises the total value of the company.

Value of the company before investment: intangibles + pre-investment cash - debt = $10m

Suppose I own 10% pre-investment; 10% of $10m is $1m of estimated value.

Value of company after the investment: intangibles + pre-investment cash - debt + $10m == $20m

Now I own 5% of $20m, which is still $1m of estimated value. The investor owns 50% of $20m, which is still $10m of estimated value.

In practice of course, there are different classes of shares which end up being paid out differently.

[Xylakant]

Legally speaking, it’s probably possible. Practically speaking it almost certainly a guarantee that the company will never see outside investment. On every round someone would need to pony up the cash to fill that employees stock. Anti-dilution clauses exist, but they never work like that.

Such a privilege is also likely to be almost worthless - if the company succeeds and the round makes it worth more, you’ll win even with dilution. If the company doesn’t, then other clauses such as liquidation preferences will make your stock worthless, regardless of how much you own.

[djoldman]

The difference is that if the company succeeds, an employee afforded this provision is guaranteed to make $X.

Without this provision, it's possible in many ways for the employee to be left with far less than $X, even if the company succeeds. In some ways <<<<<<$X.

[makk]

Yes, maximize cash and use it to acquire a diversified portfolio.

[closeparen]

Working at a startup pretty much always involves trading off money in the bank for other things. That’s the industry’s whole deal. Which is why I stay in Big Tech with liquid RSUs.

[jjice]

I had some RSUs from a previous company (likely will not be worth anything) and some options at another, but I have no idea how to understand how dilution like this works. My understanding is surface level of that scene in The Social Network.

I feel like I understand _what_ an RSU is and what options are, but are there any good resources for me to learn from?

[baq]

RSUs are much better than options, they’re actually properly shares, will go to zero when the company is bankrupt and even then not necessarily.

Options go to zero much more often.

[fragmede]

Dilution is where things get fucky.

So you're working at this startup. Lets say it's worth $10 million. To make things simple, in this company, there are 2 people, the fucker, the CEO, the guy that started it all. He holds 90,000 RSUs, each worth $100, so $9 million, and the fuckee, you, who holds 10,000 RSUs, each worth $100, for a cool million.

Here's where the fucker fucks the fuckee, ie you. The company does a round, and then creates, out of thin air, a billion shares (1,000,000,000), and issues them to the new investors. Lets say the company reached unicorn status this round, which is to say a valuation of a billion.

Holy hell a billion! But wait now there's 1,000,100,000 total shares out there, and the valuation of a billion, divided by the new shares, means that each share, of which you only have 10,000 of, is now worth just under one dollar.

That's right, your $1 million just turned into $10,000. Which isn't nothing, I'd love to come across a random $10k I didn't know I had. But that's just, like, one really nice vacation for you and the kids, which you haven't seen enough of because you've been working so hard at this startup, and not, like, a college fund for the kid that's showing aptitude at engineering and that you were hoping was gonna go to MIT.

Dilution is inevitable, there's no avoiding it. The scenario I presented is just to show you an example of how dilution fucks you. If things go well, would you rather have 10% of $1 million or 0.1% of $1 billion?

For more, it depends on how you like your information. ChatGPT's got stuff like ISOs vs NSOs pretty well covered, Investopedia's got a lot of good stuff if you'd rather it that way.

[Xylakant]

You are misrepresenting how dilution works - and dilution usually is not what fucks you. Dilution is fairly straightforward - someone ponies up money and gets a share of the company. The valuation that gets handed around is usually what’s called “post money” - how much is the company worth after investors have paid in their money. In a simple example, matching your numbers, a company that is worth 10 million, with 10 million shares, each valued at 1 dollar with a 90/10 split finds someone who invests a billion dollars at 1 dollar per share. These shares are created as part of the acquisition. The value of the shares doesn’t change - the company, post money, now is valued at 1 billion 10 million and has 1 billion 10 million shares, each worth 1 dollar. It also happens to have 1 billion in cash at hand. No change in value for anyone here, but dilution happened - the person that owned 10% of the company pre-investment now only owns 0.1% - but the value of each share is still the same, which means they still own the same number of shares, each at the same valuation with the same total value.

The problem tends to be elsewhere - as part of the deal, the investor asked that his share get preferred treatment in the next round - a liquidation preference which grants them the right to first take their investment of the table and then, whatever is left is distributed. The company gets sold for 1 billion. The investor takes the billion that they invested off the table. There’s nothing left to be distributed. Your shares are suddenly worthless - just as the founders.

[bravesoul2]

If you are gonna do that just work for a FAANG really right?

[myrandomcomment]

I would like to understand a bit here about what you are saying as having been involved in a few startups and I do not quite understand what you are getting at. My understanding based on experience (successful exits, small exits and crash and burns) follow.

First a 409A is generally engineered to keep the lowest value possible in order to allow the employees to exercise their options at the lowest value via an 83b election so at an exit they can be taxed at the long term capital gains rate. When someone joins a startup and is issued options the value of the stock is set via the 409A (which has to be renewed every year). The lower the number the more likely an employee can afford to write the check. 100K shares at $0.01 vs at $0.25 is a major factor for anyone to consider. Any startup worth their damn will make sure the facts in any 409A fit a low number for that reason. The reality of an exit where you are acquired will be based on other numbers that optimize for forward earns and value of your team and tech.

The questions you need to ask are:

What is the total authorized shares? What is the required process to raise that number? How are we funded? Does funding include preferred shares? What is the preference on those shares? On an exit what is the payment order?

I agree about the salary bands and at my current company we provide them, as well as answering all the questions above upfront to any candidate with an offer.

The reality of windsurf is that the founders are scum and this is going to end up in court for years. Google should be ashamed.

[jahewson]

Pro tip: do both.

[usaar333]

Under any normal circumstance I've ever seen, you should be taking the higher equity/lower salary combination and should focus on equity rather than salary.

The only time it ever makes sense to push for more salary instead is if you literally cannot get a job at a public company (or even a near IPO unicorn). Plenty of startup employees can, so clearly they believe their startup equity is worth something.

Financially speaking, startup equity is actually worth a lot as an employee (https://www.amafinance.org/startup_comp/). Yah, over 50% it's going nowhere but expectation needs to consider how huge the win is even if it is lower probability.

[gjm11]

If I'm understanding your logic correctly, I think it's flawed.

It seems like you're saying: if you choose to work for a startup rather than a bigger company, it must be because you think their equity is valuable, so you should prefer to take more of your pay in the form of equity if you can.

But there are plenty of other reasons for choosing to work at a startup.

You might have chosen to work at that particular startup because the work interests you. You might prefer startups to bigger companies because they have less bureaucracy and can do (some) things faster. You might prefer startups to bigger companies because there are fewer layers of management above you and so you have a better view of why you're doing what you're doing.

Even if you're only in it for the money, I don't think your argument is valid, though this is more of a nitpick: it might happen that a startup particularly wants you or at least your skillset and is willing to pay more for it than any bigger company you've found. You might think the startup is likely to fail, but still prefer being paid twice as much. (This is kinda nitpicky because I don't think this situation is super-common, unlike the other ones I mentioned above.)

[cortesoft]

First, your stock has a much higher than 50% chance of being worth less, even at the best startups. This is why early stage investors invest in so many companies… a vast majority are worth zero, but the few that make it big pay for all those and more.

This is why you would never see an early stage investor invest in only one company. They need volume to be able to survive the high risk/high reward nature of startup investing.

Now, maybe you think you are a better judge of the probability of success for your startup than an investor, so the risk is lower. You would be wrong; if there was a way to reliably predict which startup would hit it big, then investors (who spend all their time trying to predict exactly that, and have a lot more data and history to use in their evaluation than you do as an employee) would have a much higher success rate.

So even if you have a very promising startup, your equity is a huge risk. Your company probably won’t hit it big, and if it does you have to hope you aren’t screwed out of your equity by the millions of tricks they use to screw employee shareholders; dilution, preferred shares, etc.

Even worse, you are taking double risk. Your startup is risking both your equity AND your salary. You want to diversify your risk, so you can use your investment when your salary fails and use your salary when your investment fails. In this case, those both will fail together if your company doesn’t make it.

Look, equity and stock options are great, but you REALLY have to discount its value as an employee because of the way the risk shakes out as an employee.

[usaar333]

I didn't claim my risk is lower, but as my link notes I can quit and recall my investment while the investors cannot.

[tylergetsay]

How does quitting "recall" the investment?

[almostgotcaught]

> Yah, over 50% it's going nowhere but expectation needs to consider how huge the win is even if it is lower probability.

yes that's literally the definition of expectation value...... so

    ev = 1 bagillion * 0.0000000000000001 = ~0

hence you should absolutely not be taking higher equity/lower salary ever. hell i wouldn't even take that at a publically traded company if given the option.

[doctorpangloss]

The interesting thing going on is, stars align. The kind of person who has to think about this problem should take equity. The kind of person who would choose to take cash isn't going to be hired at the kind of VC backed business that will end up being worth something.

[Dayshine]

Yes, a company will do very well if it fills itself with naive employees who think that if they work insane hours and sacrifice their life for equity (which they'll never get an exit event for) will do very well.

But you don't want to be that employee...

[almostgotcaught]

Man what level of weird delusion is this? Windsurf was an app for code completion not interstellar space travel lol.

[cortesoft]

Man this is a ridiculously naive take.

[zdragnar]

I've long preferred working for startups over big companies, but my equity has rarely been worth more than a day or two's salary equivalent.

I know a few people who did well working for unicorns, but that isn't most startups, and pretending that any given startup will be one is selling yourself short.