Hacker News Reader

Comment by ryandrake | Hacker News Reader

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.

View on HN

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.?

Reply on news.ycombinator.com