[tomp]

> If the company is truly successful, you're looking to make over $1 million. Even if you're underpaid by $50k, that's 20-years worth of difference, which you'll see in under 5 years.

You can't evaluate the "equity" part of compensation like that. The chances of that happening are very low, and you're most likely to get diluted further. E.g. the chances of >$100M exit are 10% (which is a huge overestimate), it takes 5 years, and you get diluted 50% (so you end up with 0.5% of the company): you get $1M, which is $200K per year, with a probability of 10%, so the expected value is $20K. Sure, the exit might be an order (or two) of magnitude higher, but the chances of that happening drop even more rapidly.

Of course, you might be risk-loving, accept the equity not for the expected value, but for the variance, but then again, I don't think it's (usually) worth it.

[methodover]

If the engineer does an excellent job, proves his value to the company, etc., he should be able to push for more shares as the shares get diluted, right?

[artemk]

I agree that the risk is high and isn't for everyone.

[ef4]

It's not even a question of risk tolerance.

If you're willing to lose $100k, that's your risk tolerance. Some of the bets you can make with that $100k are much stupider than others, based on expected value. If you just want the thrill of high variance, buy lottery tickets.

To put it another way: VCs take risks too, but they spend all their professional efforts trying to figure out which risks are worth it. If you can get the same terms that they get, then you at least have some validation that the terms aren't deliberately screwing you. Forgone salary is just dollars, same as the money the VCs put in, and just as useful to the company. If you're going to forgo $250k in salary over five years, you should expect to end up with equity equivalent to somebody who put that in as cash over the same time period. If you end up with less equity, or less senior equity, you're probably getting screwed.

[aioprisan]

The risk is high for a very low return. A best case of $20k? That difference is very small for a very large risk, and the pay cut from an established company it obviously not worth it.

[tomp]

No, $20K is the expected value. Best case is $500K or $100K/year (for a $100M exit).