Employee Equity Is Broken – Here's Our Fix | Hacker News Reader

Employee Equity Is Broken – Here's Our Fix

amplitude.com

84 pointsBIackSwan100 comments

I dunno about anyone else, but I pretty much ignore equity when considering a new position. Worrying about equity as an employee is like worrying about what kind of Christmas gift you'll get from someone you know. It might be something awesome, it might be something dumb, but more than likely, it's a pat on the back and a "Happy Holidays" -- nothing you can take to the bank.

I also think it doesn't really matter how much your valuation is, because the options are effectively worthless until there is a qualifying event. If you're already public, then you might have a case for it, but for most startups, it's as good as monopoly money.

Salary + benefits + culture is what gets me in the door every day. Equity is just a bonus.

I once interviewed with a YC company and got an offer that was significantly under my current salary. When I tried to negotiate, the founder insulted me and basically told me I was an idiot for ignoring the equity component which was "worth far more than the salary." Pretty glad I didn't take that position, but it still bothers me how misguided he was about the whole situation.

I can't pay rent with equity. My landlord won't accept "I have stock options in some startup you've never heard of" as payment.

There are a lot of posts about equity around here, and I just think it's overrated in general. Kinda wish we'd talk more about salary and other benefits and a little less about what basically amounts to a crapshoot. For instance, my hearing aids are very often not covered by health insurance... now that would be a nice perk for someone like me.

Equity has no intrinsic value and I'm glad you recognize you can't pay rent with it. Founders who try to claim otherwise are being deceptive and I wouldn't work for them either. Much worse if you get insulted and called an idiot for trying to negotiate.

However, equity is a significant form of compensation, not just at startups, but at large companies as well. You're missing out if you don't take some time to understand it in early stage startups.

I understand it. Obviously, I want more equity. But it doesn't act as a replacement for salary, like some people seem to think. It's a bonus, like free snacks and ping pong tables. It might pay out, but it probably won't, and you shouldn't base your life around it.

This seems a clearer statement of your position. Absolutely, don't base 100% of your life on a 5% shot at an exit. That is indeed a common failure mode. But your reaction to this observation seems too extreme. It is possible to work these things out probabilistically. Treat your career as a portfolio, spend 80% say of it in relatively safe places, spend the remaining 20% in multiple places, don't stay too long if you stop believing in a place. Do all that, and the 5% probabilities add up. 5% here, 5% there can add up to real money.

It seems sub-optimal to assume that probabilistic money isn't money, it'll close you off to lots of opportunities for wealth.

I'm not disagreeing, but you can't just look at the odds of a successful exit when it comes to figuring out the probability that your equity will someday become valuable. There are several other factors that can effectively leave common employees' equity worthless, some of which the article describes. Rarely do companies seem to be willing to provide the information needed to weigh the risks.

Yes, absolutely. My % examples were sort of assuming that preliminary analysis. You have to do it for yourself and be comfortable with the conclusion. And avoid like the plague companies that won't give you enough information. Usually if I have to ask more than once that starts to seem like a red flag. I might lose interest really quickly at that point.

In your experience, how often do startups try to play these sorts of equity games? My feeling is that it's overwhelmingly common, but this is based only on interview experiences with 2 startups and on previous HN discussions.

Yeah that's hard to say since nobody has a global view and new companies hang a shingle everyday. The best places tend to know what they're doing, so this makes a good signal for startup quality. Even if it causes you to miss out on a good company it's unlikely you would have had much upside with them anyway. Life's too short, lots of fish in the sea.

On a related note, what is the legality around sharing liquidation preferences with (non-founder) employees?

Much equity does have intrinsic value. I think the lifelong work of both Benjamin Graham and Warren Buffet have been focused on acquiring equity (and other assets) with intrinsic value.

A lot of equity, especially with startups, lacks intrinsic value or it's hard to do accurate fundamental analysis on the total intrinsic value. (Berkshire does not buy high tech for this reason.) Moreover the utility value of the equity to you or the limitations on your ability to sell or transfer may make any existent intrinsic value negligible to you as an employee.

"because the options are effectively worthless until there is a qualifying event"

That's like saying a lottery ticket is effectively worthless until after the draw. It's not true. The expected value (weighted average of all possible future outcomes) might be low. The chance of the long term value being non-zero might be 1% or less. But, that doesn't mean the equity has no value.

Yes, people on both sides fail to do to the right calculations, or don't have access to the data or tools to do those calculations, but that just means the value is difficult to measure, not that the value doesn't exist at the time.

If the equity part of your compensation is effectively worthless (to you) then I'll happily buy you a beer today, in exchange for rights to all future cash flows from those shares/options.

It makes sense to be conservative in valuing equity, but if you think it's never worth anything, you shouldn't be considering startups in your job search.

(Your criticism still partially stands; it's common for founders to over-value the equity they offer employees. Way past the last funding round, for example. It's invariably a short-sighted decision. Used wisely, equity can be a great motivator.)

> It makes sense to be conservative in valuing equity, but if you think it's never worth anything, you shouldn't be considering startups in your job search.

I somewhat disagree. Valuing startup equity at $0 doesn't mean that other aspects of startup environment (or the environment of particular startups) -- such as the working environment, and kind of problems you get to work on -- can't be valued sufficiently to make the non-equity portion of compensation sufficient.

I didn't say it's never worth anything. I said it's not worth anything until a qualifying event has occurred. It doesn't matter how much your equity is valued if I can't cash it out.

Good luck getting equity in a 'startup' after a qualifying event like an IPO.

Nothing wrong in wanting certainty. But certainty on the downside matches certainty on the upside. If you don't care about the upside then why would you join a startup?

Are you asserting that stock options are the only reason to join a startup? Because that's fallacious at the very least. (And by the way, this "Why would you join a startup?" question is exactly what that founder said to me when I tried to negotiate on salary. Not exactly a great way to win people over.)

There are plenty of companies that have IPO'd that offer stock as compensation, by the way. I've worked for a few. That stock directly translates into cash once it vests. (Well, assuming the stock price goes up -- but at least cashing out is an option!)

You also seem to be asserting that I'm rejecting equity completely. As I've said in my parent comments, I'm certainly not. I'm simply placing a premium on salary (cash) over stock options (not likely to become cash). Of course I want equity. I don't not want it. But it doesn't replace salary, and I can't pay my rent with options.

The whole point of equity from a startup's perspective is to save on cash when you're small, so why would you get equity if it won't replace salary?

Yes I'm aware of things like restricted stock units. But you shouldn't really think of them as the same thing as private startup stock. Just like small-cap stocks need different strategies from large-cap, or stocks from bonds. You don't want to assess one category by the standards of another.

Salary and stock are separate categories, sure, but choosing an employer is nothing but an exercise in comparing apples and oranges anyway. You have to decide how much liquid cash you need for rent or a down-payment on a house. Once you account for such scenarios the rest is just an investment riding into the future one way or another. Past that point things get fungible.

It sounds like the bad experience you had may not have had enough cash to cover liquidity needs. The founder should have just expressed regret that they can't afford the salary a larger place can. It's another common mistake startups make: assuming (in the course of a hard sell) that there is one rational choice for everyone regardless of their circumstances.

> If you don't care about the upside then why would you join a startup?

For some people, money is what allows them to take a job they desire for other reasons (since, you know, you have to pay for necessities somehow), without financial considerations being the sole motivation for choosing one place of work over another.

That's fair, dragonwriter. I saw your comment above as well. In the context of this thread I'm only thinking about things from a harsh economic perspective, but if you loosen that constraint of course you gain a lot more options.

Equity paid for my house, gave me enough money to have a substantial retirement buffer and will pay for my kids to go through school.

Yes, more often than not its been worth "nothing" (negative if you took a lower salary to get it), but when it's worth something, it's worth something...

Selling hot air (or stock options) is a big business.

Of course RSU grant from publicly traded company is a sign of respect and appreciation from both sides.

I agree with your general sentiment and I too pretty much ignore equity when considering a new position.

However equity becomes very important upon leaving a company. I think extending the exercise window to 10 years is an excellent idea as it reduces the amount of gambling that a former employee needs to engage in.

No arguments here!

Rich people are allowed to borrow against their equity options. Why can't we?

I'm sure you can, at a discount. You probably won't find many/any banks willing to do that, but I imagine you can find private parties who are willing to give you $0.05 on the dollar for some options.

I imagine the reason that "rich people" can borrow against their options is because they aren't common share options, or they have some sort of control over the destiny of those shares. For common shares there are several ways for them to become worthless, some of which people on this thread have mentioned (dilution & preference are the two big ones).

If you're holding on-paper $100k worth of stock options, you probably couldn't get $10k for them except in very rare cases. If you were an early member of Uber, you can probably find institutions that want to buy shares, so maybe you can get money from them. But remember, that on-paper $100k has tax implications along with it when you buy them/sell them, so don't forget to set aside enough money to pay that.

They have better judgement.

You don't need your prospective new employer to adopt the second policy. You can simply demand it of them when they tell you what your grant will be. I think the best way to handle these kinds of questions is to bring them back to dollars; never haggle over percentages, but instead get a "low", "medium", and "high" scenario for what the equity will be worth when the company is sold, then ask what the company's revenue is in each of those scenarios.

Serious question: Is that information you're going to be able to easily get (or calculate) if you're interviewing for Employee #1? #5? #50?

Yes. People I've worked with regularly ask me for advice negotiating new jobs --- I have no idea why --- and this is my standard answer.

There are three kinds of cases where I've seen this information being hard to get:

1. Equity isn't a major part of compensation, and salaries are market-competitive. The employer says, in essence, "equity is not an important part of your compensation; let's concentrate on making sure you're happy with the salary and bonuses".

2. It's a relatively large company that is constantly hiring people, and they have a strong BATNA.

3. They simply don't know the answer, and the person hiring you isn't in a position to work with you to generate the answer (that work being "make three wild guesses at where revenue will be in 5 years, do a little research on what multiples companies are acquired for in their space, and figure out how much runway they have now"). If you know the % of the company you're getting, the dollars invested, and what the liquidation preferences are, you can come up with a somewhat decent guess here on your own.

If you're a key hire and equity is a significant part of your compensation, you should be able to get this information.

If equity is a significant part of your compensation, then, no matter what, you should be able to get:

* The number of basis points you're getting in the company

* The dollars invested in the company so far

* The company's revenue target for the year

* How much runway the company has at current headcount

If you can't get all of these, value equity at zero.

From the perspective of an employee, I completely agree this is the correct method of getting an idea of what equity is worth. I've had exactly 0 new hires ask me all those questions. Maybe 10% have asked me how many shares outstanding we have. The number of people with the experience to ask the right questions is really low, even for senior hires we've made with 10+ years of experience in startups. I think the onus is on startups to start proactively sharing this information with new hires- not just employees.

If no one's willing to give you that info, at any of those stages, it's a good sign that they're not going to be up front with you about equity at all.

Look at it another way: If the employer is willing to share information about what options might be worth in different scenarios, it's a signal that the employer is negotiating with a "win-win" mindset. Employers who don't share this information are signaling that they're negotiating using a "win-loose" mindset. Adjust your negotiation tactics accordingly.

My view is that any equity compensation that rewards people more for how early they were hired than for how much they contributed to the company's success during their stay, is inherently broken. I'm not saying that taking the risk as employee number 3 at a startup should not be rewarded. But you should be substantially more rewarded for what you've done, regardless of your employee number.

You're looking at it the wrong way. For better or worse, people are made an offer when they first start. Stock in a company that is "less of a sure thing" (earlier stage) is worth less. So, they must receive more of it to have it correspond to a certain amount of salary they might be missing out on. What happens later is in the future. It's like the employee is an angle investor.

I always thought that part of the reason early employees got more equity was not only because of the risks involved, but also because early employees usually have to do all sorts of things aside from their regular duties.

Not saying this is always the case, but personally I always thought this was part of the reward given.

For example, it's not the same to be a developer that, even though might contribute a lot, didn't have to write the framework from scratch when there are so many unknowns, there a lot of tougher decisions, when things are not as clear and straight forward, responsibility is greater, etc.

Of course this depends a lot on the particular startup, but I've seen employees hired to do say, design, end up having to do sales as well, even if they don't enjoy it or they don't have the skill for it.

No, for sure. Early employees should definitely be rewarded for all those things. But it would be nice if there were a better way to structure equity for later employees so that high performing ones can be motivated proportionately.

It must be pretty demotivating to spend your time at a small company busting ass to make the stock go from $20 to $21 while you look across the office at the early birds whose only current job description appears to be "sit around and cash out my truckload of $0.01 stocks at $20 every two weeks".

> It must be pretty demotivating to spend your time at a small company busting ass to make the stock go from $20 to $21 while you look across the office at the early birds whose only current job description appears to be "sit around and cash out my truckload of $0.01 stocks at $20 every two weeks".

It probably would be; if an early employee really is contributing so little, they probably ought to be terminated (if they've got stock from early options, they can keep selling it off for as long as they want, whether or not they are hanging around the office demotivating other people.)

Agreed that it's mainly a function of employee number and secondarily a function of contribution. I'd much rather it be based on contribution. The trouble is that contribution is hard to tell up front but you have to be agreed on baseline compensation. Perhaps there's a way to fix that as well.

Also time is easy to quantify and measure. Contribution across departments though? What % of building a major feature of your product for a key customer goes to marketing/sales/design/engineering/etc.?

I'm curious how this will play out over the long run. How do you reward later-stage employees fairly? A few early employees who leave the company will have an enormous advantage over later-stage employees who might do more meaningful work at the company.

In my personal experience, I joined a company mid-pivot. At the time, the strike price on the options was $75+. People who were leaving the company had strike prices around $1. That was a tricky problem there, because stock is hard to use to incentivize people when the upside is taken by people who aren't at the company any more.

One way to fix that is to issue lots of more shares, basically diluting the old employees out, but ultimately this is what these companies are trying NOT to do (effectively the 90-day window is a way of ensuring current employees' stock isn't diluted by old employees). The board isn't going to allow early investors to get diluted out, so after a few years, you're handing tiny amounts of stock to new employees. I guess the hope would be that you're paying market rate at that point?

It sounds like a good way to attract talent in an early-stage company, but after a couple of years, it's going to be tough to attract new employees (at least with stock).

These are just my opinions though, I'm convinced that unless the company is public or you're a first-20 employee, stock is not going to be worth much, especially considering the opportunity cost. There are other things that are worthwhile (it can be great for a career), but purely money-wise, you're probably going to be net-negative.

"Dead equity" is a tricky problem. On one hand, you've granted ownership and ownership is supposed to have significant upside for exactly the case where the company goes gangbusters like this. On the the other it still somehow feels unfair.

Early stage investors can indeed get diluted but they usually have the right to invest at the later stage.

Why couldn't they simply do a split, in which case the original employee's share would be diluted, but they'd be given more.

> Why couldn't they simply do a split, in which case the original employee's share would be diluted, but they'd be given more.

A split has no effect on the total value or proportion of the company owned versus not having the split, it just changes the "size" of the units you are counting stock in. So the original employee would be in the exact same position with a split as they would be without a split.

Is that how a split works? I've always thought that a split was just that: 1 share now is 2 shares. The total value of holdings becomes the same. When Apple split, that's what happened with my shares there, anyways.

I don't think employee equity is broken - you just really have to pick the right startup, because most startups will have worthless equity. And all of the fixes promoted in blog posts like these are nice, but they pale in comparison to picking the right startup.

Or you can just acknowledge the fact that it's basically a lottery and ignore equity altogether, since it never matters unless you're one of the founders, in which case it's your job to create the right startup.

After decades in this industry, I'm convinced that this is the only rational strategy. Treat equity compensation as "close to zero value" unless it's immediately convertible to cash.

You make it sound so easy. Professionals at picking the right company (aka venture capitalists) get it wrong the vast majority of the time. Nobody has any guarantees about how things will end up.

You really think the 90 day exercise window is fair? It means an employee who just left a company has a huge burden with their vested options- either come up with a lot of cash and take a massive risk or have your equity compensation be worth nothing.

Picking winners is easy: oftentimes they're obvious. e.g. Uber, Slack.

VCs have a much harder job: picking undervalued and not-yet-obvious winners. They need to find the winner first, before everyone else also realizes it's a winner

Those examples weren't obvious when they were still small enough that employee equity compensation would have meant something.

You're misinformed about how much equity employees have been getting then (be it in RSUs or ISOs).

Perhaps I am and perhaps I'm not, but it's somewhat less than helpful to say so without providing information which might correct my apparently inaccurate understanding.

If you joined Uber a year ago, it was pretty obvious they were a rocket ship, and you'd easily be set up to make 200-300k a year with bonuses and equity. Hardly chump change, and definitely more than joining the latest YC winter __ "we're 2 stanford MBAs hiring our first engineer to change the way the world does analytics", here's $130k and .0something percent equity to come join us.

Is that real equity, or is it equity on the rolling-four-years-vesting plan? Because I've only ever seen the latter offered to anyone but the first couple of employees.

I don't think it's easy at all to pick the right company to join. I'm just saying, it matters way more than everything else.

Restated: Pick the right startup, grit your teeth, work there for the 10+ years it takes to go public, and trust it won't steal your equity, a la Zynga.

Even if you do pick the right startup, you should be able to leave to pursue other interests, keeping the equity you earned as part of your compensation. Without a longer exercise window, employees can be trapped.

Couple years ago I was considering joining a company. It wasn't a normal hiring situation, so I had some leverage. My lawyer suggested that we could try negotiating a shorter vesting period or longer exercise period. The company didn't go for the shorting vesting but the said ok for the longer exercise period.

Their employee stock plan was in ISO with the standards 3-month period, so their lawyers basically changed one line there, saying "You may exercise this option for xx months after termination of your continuous service status". After the 3 months the option just changes to NSO.

That was it. It was such a simple thing that I don't understand why companies don't do this more often.

The crazy thing to me is: 1) the fact that employees are granted options instead of shares is an artifact of tax law, and 2) the fact that there's a 90 day exercise window is also an artifact of tax law. Yet, companies constantly come up with post-hoc justifications of why only giving a 90 day window is fair. There is big resistance to change on this point. Even Ben Horowitz and Sam Altman don't think it's a clear decision! http://genius.com/B-horowitz-lecture-15-how-to-manage-annota...

If you were to derive how to think about employee ownership of a company as a form of compensation from first principles, you'd never come up with options and you'd never come up with a 90-day exercise window on top of that. Those are both artifacts from tax law yet it's become the standard form of compensation!

Do you how a company would you give employees shares directly without them being taxed on the grant?

One way I've seen this is with RSU double triggers: you are granted RSUs but you don't own them until the stock is actually liquid. However, at that time, you will have to pay taxes and you don't get long term capital gains.

Update: Just read your link, it's crazy how on this topic, Ben goes on a rant about random things, and whether it's fair to give 10y exercise period, because the person working there doesn't somehow get that benefit. Even if you have a money, employees are not investors, they can't just throw $10-100k on one startup, without knowing liquidation preferences or anything else, and which may or may not have some kind of liquidity in the next 10 years. It's useless to give equity if most people get screwed.

It's obvious why companies don't do it: it removes the so-called golden handcuffs.

People keep pretending an employee's inability to leave a successful company because of the strike price and tax issues is a negative rather than one of the highlights of this compensation strategy from management's perspective. Oh, and employees not exercising and returning shares to the option pool doesn't hurt any of the people with the power to make decisions about it either. viz various CTOs on here defending this practice (not in this thread, but I've seen them on HN. I'm not linking one in particular because I don't want to call anyone out and I appreciate his honesty on here.)

My experience is that there are some "weird" effects of equity comp once one gets into the calculus of incentives:

1. Payoffs are too small to be consequential. If you own 0.01% of a company and are personal-profit-maximizing, then you are indifferent between (a.) Increasing the company's valuation by $1M and (b.) Getting $100.

2. Growth makes "rest and vest" a reasonable strategy. If a startup does well, then an employee's initial equity grant typically dwarfs all subsequent compensation; does it make sense to work hard for a $5k raise when your equity is worth $500k?

Once you get to 0.01% per employee it's not a strictly profit maximizing decision. It's more of a way to align people and make them feel they have ownership. Agreed on the second point.

The second fix might be good for amplitude, but it's probably bad for employees. Potential employees are highly likely to over-estimate the chances of the higher buyout scenarios, and to under-estimate the effects of dilution and preferred shares. By spending time going over the spreadsheet with them you're increasing their confidence in the numbers, making them more likely to make these mistakes.

Without the second change, potential employees are much more likely to go with the more accurate heuristic that options are worthless.

Longer exercise windows and more info are great and all, but if you are still expecting employees to take less than market rate salary in exchange for options, you should be giving people the same equity and terms (e.g. liquidation preferences) that investors get for the cash that you forgo.

Founders I've talked to are sympathetic and see it as fair, but none have the courage to try it.

Not sure that giving liquidation preferences to common stockholders would be fair- the idea with a 1x liquidation preference is that money into the company at least first goes to repaying the principal on the investment first before rewarding any upside.

What's wrong for asking for the same terms as the latest round?

Let's acknowledge that there is an opportunity cost for early hires.

I really like the concept of progressive equity by Andrew Mason. IT helps align the interests of founders and early employees to achieve a "shared destiny mindset"

http://blog.detour.com/introducing-progressive-equity/

I hadn't seen Andrew's post before writing this but I think it's awesome. Will try this out at the next company.

Amusingly your article states, "As far as I know, this is the most progressive take on equity compensation that I’ve seen." Now that you've heard of progressive equity, maybe you should tweak that sentence?

Me too! I plan to setting this up at my new company :). I really believe in being a small part of something big vs being a big part of something small

This is really great! The 90 day window is bad for employees. I'd like to see this become the new standard. (and I hope the IRS doesn't give any trouble!)

ELI5: "IRS tax artifacts" wrt to the 90 day window and how Amplitude is getting around it.

Employee stock options are designed to comply with the IRS rules for Incentive Stock Options (ISOs), which allow employees to receive and execute options without being taxed on their value; tax is assessed only when the stock is sold. To qualify as an ISO, options have to be exercised within 3 months of an employee leaving the company.

The alternative seems to be to use NSOs, or (maybe?) ISOs that turn into NSOs; NSOs have tax implications at the time of exercise, but the point of giving employees NSOs is to allow them to defer exercise, perhaps to a point where the options are liquid (remember: most options aren't liquid; that's the problem with requiring them to be exercised --- it requires employees to spend money to receive illiquid speculative options).

Honestly, we should just lobby Congress to remove NSOs and make them ISOs by default.

More than that - they actually describe what those shares mean, rather than just throwing a number out there in a vacuum. I dig this.

Dilution can also happen through a reverse-split prior to IPO to hit a target share price. (In this case, the bankers effectively dilute everybody else, although C-levels will probably get big new post-split grants to stay on after the IPO). The number of shares (rather than the percentage) might be more important given an IPO will probably require $10-15/share, and the share price will probably be no more than 2x-3x that after 6-month lockup.

IMO telling an employee you have x% of $n billion is very misleading, as dilution can be rather unpredictable. You're really showing the employee the /max/ upside in 2-7 years, which IMO is a very weak sales position.

Dilution is unpredictable and what's worse is you have the principal agent problem where employees who are affected don't have a seat at the negotiating table. You're definitely counting on upper management/the board not to do things like that. Not sure on the solution but agreed that it needs to be solved.

These side-letter deals and exits optimized for founders are probably not legal since they are often not in the best interests of shareholders, but I've never heard of them being investigated.

Could you explain in more detail how a reverse split (in which value should not change) is an indication for the bankers delluting everyone else? If there was no reverse split the delluting was any different?

Even if you are an early employee you can still get hit by a later stage series that gives a high valuation but with a preferred ratchet if you IPO at less than a specific price. It is almost impossible to get information on the specifics of the deals. I am not sure if you vest at least 1 stock option if that will qualify you to see the docs and/or if companies have other ways to prevent that or if they will in the future.

It appears this domain (for whatever reason) is blocked by my work's firewall. If there happens to be a mirror or cache link I would greatly appreciate it!

Google cache: http://webcache.googleusercontent.com/search?q=cache:EjpQDst...

https://archive.is/0PYHv

Everyone who comments that equity is worthless until the day you can actually turn it into cash is completely correct. That said, presenting potential outcomes in an easily understood table, and in particular, extending the exercise window is really a fantastic idea.

Can't believe form 83b wasn't even mentioned... Truly the best way for any early stage employee to deal with options from a tax perspective.

How do they describe something that's working spectacularly well as, "broken". Sure, maybe it's not optimal or has some problems. But, broken? Really?

But I do like what they're doing. Extending the option period makes perfect sense. I think they might have gone a bit far on the value sample. I think current % ownership + internal/external valuation should be sufficient.

Is it really working "spectacularly well"?

Or, is it just something that has kinda worked out because the workforce wasn't communicating how they were getting screwed to each other?

I expect things to get more difficult for employers as employees wisen up.

Well, it's a key driver of Silicon Valley success over the past 50+ years.

The employee equity relationship today is, I would suggest, quite different than even 20 years ago.

EDIT:

I refer you to the "The three-class society" section of this essay: https://michaelochurch.wordpress.com/2015/11/06/y-combinator...

Is it? How so?

Equity compensation is probably the biggest difference between a startup and all other companies. Silicon Valley is probably the epicenter of startup success and that equity compensation has been a key driver of such success.

You're gonna need more to back up that statement. Especially given how much people get fucked over with options, and how many startups just fail.

Just worked 3 years at a gig, from the "sharing a tiny office with another company" phase to significantly larger. Moved on, and had to let a lot of vested options go because it just didn't make financial sense at the time to buy them, given the risk factor. Were it not for the 90 days limit (which sure isn't in my favor), I'd have been able to hold on to what I earned, rather than see it evaporate.

If anything, the system works spectacularly well for the founders, and investors. Not so much for the people they need to bring on to help their vision move forward.

Defend "Working spectacularly well".

First, you would need to consider Silicon Valley startup activity to be successful (I do). Next, you would need to understand that equity compensation is almost the only difference between an SV startup and pretty much every other type of company (I do).

The second part is actually insane. Are you saying that if stock options were removed from Startups, then the entire tech sector would come crumbling down?

If it impacted investor/founder equity, then, absolutely. If only founders, most probably. If only employees, probably.

"Next, you would need to understand that equity compensation is almost the only difference between an SV startup and pretty much every other type of company (I do)."

Except that is completely false. When I worked at Western Digital, which is decidedly NOT a startup, they still gave me plenty of stock. Amazon, which is also decidedly NOT a startup also gives out lots of stock. So your differentiator is not really a differentiator.

has someone done a survey of tech equity that gives us an idea what the expected value of x points is worth? even so, its a lottery ticket to me, and i never consider it when considering an offer.

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