Those equity percentages in this document are EXTREMELY FOUNDER FRIENDLY and I believe this entire document was written to anchor new employees with lowered expectations on equity. I think this entire document is a disingenuous scam to make new startup employees think that those percentages are okay.
I’ve been in Silicon Valley a long time, since the dotcom boom. My first company, the executive assistant got so rich from the pre-dotcom IPO she quit and bought a vineyard. That’s how things used to be. And we aren’t talking about some crazy ipo, it was before those times.
Fast forward to these days, the startup I worked for got acquired. I was engineer < 15. The founders got low 9 figures, I got 5 figures. Almost everyone got fucked for years of loyalty.
But that’s what YC and other accelerators teach founders. Be cheap with equity. And this document just perpetuates that.
Founders can easily make life changing money but the people that do the actual work get fucked unless it becomes a >100B company like a Facebook. That’s not realistic and they know that. Employees need a bigger piece of the pie when things go great for the company and not just when it becomes a Facebook, Uber, etc.
If you want to know how to evaluate equity, pick a total valuation of the company at exit and then multiply by your stake. If the company needs to exit at > 10B for you to make a life changing amount of money, then ask for much much more equity or don’t take the offer.
It's crazy how "founder friendly" and "investor friendly" (read: "employee unfriendly") the norm has gotten. I would never work for someone else's startup these days. No way, no how. Four orders of magnitude difference between the founders' exit and the early employees' exit is totally unacceptable.
Yeah, I've been burnt badly by that before.
Which is part of why my founder co-matching profiles mention that I'm looking to spread the equity wealth around among early hires, more than is usual.
If a prospective co-founder is turned off by that, without a really compelling reason, then we'd probably clash on other values as well. And I'd also think there's a good chance they'll backstab me when they think they can.
Ah selection bias is the best shield when being used correctly.
I don't think your complaint/experience actually lines up with the numbers here.
In the Post-Series A numbers, the lowest numbers are in the ~0.5% range. This is at most 2 figures off what the founders could get together. In a world where founders together got 9 figures, a senior engineer would get 7 figures, not 5 figures like in your situation.
The majority of comments here seem to argue the ideal equity share for employees is zero, since it probably won't be worth anything. That seems like an even more founder friendly viewpoint, no? Mass inequality of ownership is how we end up normalizing the corrupt billionaire class. I agree with you we need an industry desire for better ownership terms, but instead I see people arguing employees should just take a salary, look the other way, and let owners hoard all the spoils.
That is not what people are arguing. Labor sellers should assume equity in a non publicly traded company is worth far less than the labor buyer wants the labor seller to think it is, so labor sellers should demand more cash such that the compensation is competitive with other potential job offers that offer more cash.
Don't get sucked into blind rage over nothing. Why do most employees nowadays prefer cash over options in startups? because for every successful startup where the secretary got a vineyard there are 99 when the startup limps along for 12 years and then closes without a sale. Generational wisdom turned into "Dont get suckered for low wage and options, get a high wage and invest in the S&P".
Will there be lucky founders that become very rich? absolutely. Founders are generally very risk aggressive and are willing to go boom or bust. But for an average person that just want a good life why risk lower living standards for a low change of riches?
If you are very risk aggressive you can push for more equity, but expect your salary to be much lower than your peers. Most veteran SE will advise against it.
Earning a salary in cash doesn’t stop you from investing the cash. I have never earned equity from an employer but most of my net worth is sitting in publicly traded companies. So obviously I am not lacking company ownership just because the company I worked for didn’t loop me in.
The other reason this isn’t true is that equity becomes a lottery ticket that is written in a founder and investor-preferred manner and is used to fleece mostly young employees who don’t know better and are romanced by the thought of being a part of the next Uber or Airbnb.
The practical reality is that it becomes “this job is worth $150,000 but we’ll pay you $100,000 and you can have some equity that might be worth hundreds of thousands if the casino pays out.”
But then you have investor preference multiples, valuation fuckery, and other ways that even a successful exited company can pay out less than your fair share.
To me cash is king because I can invest it however I want. Equity is fine if it’s for a public company, as that’s effectively just deferred cash as an incentive to stay longer.
Came to write this same comment. The first 10 employees of a company are so critical to success and they tend to be drastically underpaid. A founding engineer (often employee 3 or 4) would be lucky to get 1.5% at most places while the CTO has 30-50% and they probably have very equal impact on the company in the early days. And engineers do well by comparison. The first customer-facing roles often get barely any equity at all while they hustle to actually make an idea into a business.
The VCs have convinced the founders that they are special people and they deserve 10-100x the rewards of their best employees. They do this to create room in the cap table for themselves of course. They also give the founders early liquidation opportunities to keep them on their team.
It’s disgusting, and the founders wonder why some people don’t want to grind as hard as they do.
> I believe this entire document was written to anchor new employees with lowered expectations on equity. I think this entire document is a disingenuous scam to make new startup employees think that those percentages are okay.
Have to love the HN crowd. A guy goes out of his way to write a very detailed, high-quality guide demystifying a very complex and consequential topic, open sources it so it's free, and immediately people suspect the entire document is build just to make startup employees think lower percentages are OK?
Disclaimer: I know the author personally, so can definitely attest to the motivation behind this guide. I'll also say I've used this guide both as a founder and as a startup employee and it's been immensely helpful.
Both can be true!
The fact that you are a founder that agrees with these extremely low equity percentages for early employees confirms exactly my point. It's to anchor lowered expectations for new employees coming in.
I stand by exactly what I wrote.
Genuinely curious. What percentages do you think are fair and why? As both a founder and employee, I anchored to the market. But maybe the market isn't fair. So what is?