Everyone's risk tolerance is different. Sometimes, you need to get paid. This will get you in the door at an already funded startup where you'll get a salary and still have the potential payoff of a big exit.
Simply out of curiosity, what range equity stake would a programmer get? More specifically, if there is a $10mm exit, what would a programmer stand to make? How about $100mm? I know it varies by company, vesting, additional funding rounds, and a bajillion other factors. I'm just curious as to rough order of magnitude.
While I think it's a great idea to work for a startup because they're exciting environments which offer a lot of learning experiences that big companies do not, "big exits" for non-founding programmers are exceptionally rare and are too easily oversold.
The reason to work for a startup as an early employee is the fun (if you like working 12-14 hour days on cool stuff) and the experience. I'm guessing having a successful startup under your belt makes it a LOT easier to get your own company funded down the line. Also, people can end up much higher in a large organization earlier than they could have without some serious corporate climbing.
Of course they say so. Deloitte says so too, and Wachtell, and Cravath, and every other high pressure professional outfit. Doesn't make it true.
> There has also been research to suggest that working that much is anti-productive.
Yeah but most of those are in different circumstances. It all depends on where the motivation comes from. If you take a wage slave and whip him into working 80 hours, while paying for 40, and not dangling any form of carrot in front of him/her (making partner), of course productivity will go down. If you've got a product you believe in, a vision to make it come true, an innate drive to succeed no matter what, and no personal life, you can work 80 or 100 hours a week for months on end and get the work of 5 or 10 people done in that time.
In a $100m exit you'd probably have been diluted more, because the company would probably have taken VC funding to get that much. So suppose your 10% was diluted by 2/3. Then you'd get $3.3 million.
This is assuming you're the first person hired by the startup, of course. The amount of equity you get decreases by time to a power. Someone who joins the company after 6 months would get way less than half as much as someone who joins after 3 months. It's rare for a series A funded startup to give more than 1% to a programmer.
(Obviously this affects the risk/reward trade-off)
It's best to look at this as a theoretical upper bound, not a likely outcome. Usually the investors, founders and board members fuck around with the corporate structure, option splits and preferred vs. Common stock so that the employee options are worthless, anyway.
That's not common in successful startups. No successful startup would want to alienate their employees this way. It wouldn't be worth it, just to recapture a few percent of stock.
Common stock only gets massively diluted when a company is in trouble. And usually startups in trouble end up dying, or getting bought in a fire sale, so in those cases the equity isn't worth much anyway.
Edit: I think you edited your post as I made mine and made my point for me.
I don't agree that "usually startups in trouble end up dying, or getting bought in a fire sale." I don't know if anyone has a big enough data set to give us the "correct" answer.
But if you talk to thoughtful, experienced VCs and entrepreneurs who have seen many companies through their whole lifecycle (birth to IPO and beyond), I think they'll tell you that a lot of the successful startups get in significant trouble along the way. And if that trouble coincides with the need to raise a round, common stockholders get diluted.
Preferred stockholders have anti-dilution, pro rata rights, protective provisions, and cash reserves to protect them.