[jbail]

A bird in the hand is worth two in the bush.

If market rate is $105k and you're paying me $55k in cash, then I'd want $100k in equity, not $50k. This is something many startups get wrong. It isn't a one-to-one swap.

Even if you have some sort of reasonable valuation, equity is worthless until there's someone to sell it to. There needs to be an uncertainty/illiquidity multiple applied. Otherwise, I'll take the cash. That has literally always worked out to my benefit throughout my 15 year career in software development (even working for companies that got acquired for 9 digits).

[scott_s]

I think another way to put it is you need to pay them for the risk they are taking. That's why you can't do a one-to-one swap. If they get the same total amount of money that they would in a more stable position, they have no reason to take the risk.

[balls187]

Fair enough. I was paraphrasing the actual formula.

That said, if you think equity is worthless, why are you considering being employee 1 at a startup?

[jbail]

I never said I thought equity is worthless. I said I would choose cash over equity if the equity is not weighted heavier than cash to account for the risk and illiquidity inherent in startup equity.

I am engineer #1 at a startup right now. The equity was very generous and weighted appropriately vs cash.

[balls187]

Sorry, I mistook your earlier statement to believe that you thought equity is worthless, when you were just saying there is no cash value for equity.

And yes, you're correct, the equity should be setup in a way that offers early hires significant upside.

Curious, did your founders use a flat %, or did they figure out some weighted amount?