I knew enough then to discount options to 0, but I'm permanently jaundiced in retrospect by just how many outright lies I was told at interviews, and saw being told to my colleagues.
Its just all a lottery ticket...
It's just that this information is often not provided or explained. Why companies think it's ok to say "you'll get X shares" when X is a meaningless number without more information, is beyond me.
e.g. When the company I co-founded went public there was a ratchet agreement in place (amusingly, which we'd tried to get removed at the time of the first round of VC investment) that gave us large amounts of new share options that was much larger than the employee share option scheme. Things like liquidation preferences also can also have a huge impact and as an employee your are probably not going to get visibility of all of these and I'm pretty sure none of this will be in Companies House!
Instead they sold a part of the company (out of everybody's share) and with the money that brought in, they eventually succeeded. I don't see anything unfair in it.
Don't defecate where you eat; don't invest where you work.
> "Don't defecate where you eat; don't invest where you work."
That sounds pithy, but I don't see why that's good advice. If you work in a role where you can have a significant impact on the success of your employer, that can be a very advantageous situation compared to being a random investor in a venture you have no agency within. You also potentially have a lot more visibility than a silent investor. These are reasons one might choose to take equity over cash.
Had you argued that it might not be a universally great idea, from a portfolio management standpoint, to trade a lot of upfront cash for illiquid, volatile stock option, I'm with you.
If you don't have a contract (you are "at will"), don't invest in your employer, ever. If you do have a contract, but can be fired for any reason that is outside your control, don't make an investment that is not completely liquid. If you can make the stock price move unilaterally, perhaps you should consider shorting it, quitting, and airing all the dirty laundry in public? That would be a dick move, but so is diluting all your employees into oblivion so you get a bigger share of the payout.
If one cannot raise enough capital to execute on the business plan, I question the value of the investment. In any case, the market is not homogenous. If you can't afford the market wages in Silicon Valley, move your startup to the Rust Belt. If you can't afford those wages, hire remote from Britain, Australia, or India. If you can't afford that, try your hand at lowballing freelancers. Or maybe hire one 40+ developer at 120% median pay instead of two 25-year-olds at 80%. Tricking your employees into thinking you're paying them more than they're actually getting is not a viable way to conduct business in the long run. Believe it or not, there is value in not being a scumbag employer.
People on HN sometimes talk a big game about negotiating job offers, but in my experience, most software engineers are terrible at it, and are not equipped to go up against enormous companies with a lot of resources dedicated to paying them as little as possible.
Forget negotiation. Just saying "I want $XXX" when interviewing for a position is a simple thing to do. What's the worst thing they can do? Not hire you! What's the best thing they can do? Give you what you asked for.
Is it really that hard to say "I really like the position you're offering, but unless you can meet my salary requirements, it's a non-starter?"
http://www.kalzumeus.com/2012/01/23/salary-negotiation/
We should all read this once a year. Even if you can't take it all to heart, whatever you read will help, and getting your colleagues to negotiate better will raise your rate, too.
I see nothing but unfairness in this.
Except that every dilution I've witnessed has come with re-upping the people who really Matter. Current employees we want to keep, and people sitting the board room.
Not everyone takes an equal hit from dilution. Some don't get hit at all. Some can get hit but handle it. (A founder diluted from 10% to 5% still is sitting on a huge nest-egg. An employee diluted from 0.01% to 0.005% may see her 200K payout changed to 100K.)
Of course that kind of insight would lead to employees jumping ship when there is trouble...
And don't say "they get to keep their jobs", cause if that's all that's needed for benefit, we might as well devalue the options to 1 cent, cause after all, they still got to keep their job.
It's often abused, and easy to abuse, but you are making the story too pat by saying it exists only to screw over employees.
If the employees didn't win in that case, then there's some fundamental, structural flaw in American laws.
As an extreme example, I watched a startup in a private sale issue new stock to those on the board such that all of the other early (0.1-0.5% stock ownership) employees were diluted to $0.01. The total valuation was in the $100M range. It was a good way to make a few enemies and retire at 30.
In the end the acquiring company ended up having to hire some of those employees back for consulting... I believe several of them received >$1k/hr. Most of those employees suspect that the acquiring company tacitly signed off on the issuance of new stock.
Unfortunately in this messed up world and rollercoaster economy the answer is often yes, it is better to put yourself first. Not that I would, but I can see how those who do justify it.