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Comment by pjhyett | Hacker News Reader

When did 5% of 50M stop being a lot of money?

edit: I think something far more deceiving is employee #75 receiving 10k shares and the impression they're walking away with gobs of money after a big sale.

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Someone who comes in for five is a potential founder anyway.

At 1 you have another fifty percent dillution from follow on financing, and the odds of any exit at all.

Exmployee 75 is making market, and a 75 man shop will not sell at 50. They are shooting for 500 or more, or failure.

A 5 person startup might sell for 5 to 10 direct, in which case your 1 just bought a nice car, after tax, but not a really nice car, and less than your risk adjusted forgone salary vs. Being a soulless corporate drone in defense, or maybe number 75 at a well funded tech company.

5% is unrealistic. 1% is.

50 million * .01 * .65 (tax) / 4 years = 81,250

considering opportunity cost and time spent. likely not worth it.

It's also often not even 1% of 50m, but 1% of (50m minus liquidation preferences).

Liquidation preferences are wacky -- I would have never understood them without several patient explanations on HN. I'm curious: is modeling their effects just common Valley knowledge that you'd do effortlessly during a job interview, or would most candidates be as unknowingly ignorant of their effects as I was a year ago?

I sit with people with a googledocs spreadsheet and we plug in numbers for various scenarios, so they can see what happens if there is a quick sale vs. multi round and then later. And show how cash comp to engineers affects this too. I believe in total transparency for at least the first 20 or so employees wrt budgets, salaries, equity, etc.

If you "trick" someone into working for less, you have screwed yourself more than you have saved money.

Right..when your best case is less than salary differential, before factoring in working 3x more, and the ten percent or less odds of getting the 50 exit! Something is irrational about participating.

That said I would work with certain people or on certain projects as an early employee. With some, it would be economically rational, with others then entertainment value would be worth it.

GitHub's first employee owns more than 1% of the company, so I'm not sure why it's unrealistic. Maybe in the world of businesses letting VC's tell them how to run their company this is the norm, but it doesn't have to be.

Name one company in the USA which didn't take outside funding and exited for more than 30mm usd?

I'm somewhat sure that would describe National Instruments (IPO'd at a $380M market cap)

Wow. I was secretly trying to get you to find an answer to one of Keith Rabois questions on quora. I forgot he qualified it as post 1999. Can you do that too?

National Instruments is an amazing company...I was fortunate to get to use their products on some projects as a teenager.

I'm not 100% positive on NI. I just recall that claim being made when I interned there and can't find any info suggesting otherwise.

They IPO'd in 1995, btw.

The first few hires often happen before VC funding is raised, right? And 2-3% for the first few employees isn't unusual amongst companies that later raise VC funding and make it big.

Sas. Still private no funding, founder is worth 8 billion.

Yeah, and how much of those do the employees get? Right.

SAS has a profit sharing programming. That's often a better deal for employees.

In SAS's case they pay up to $70,000 as a bonus, in Canada anyway: http://www.eluta.ca/top-employer-sas-canada. Averages seem to range from $9000 to $32,000 (http://www.glassdoor.com/Bonuses/SAS-Institute-Bonuses-E3807...)

GitHub also brags about not taking outside funding, so it's a potentially better deal for them: http://news.ycombinator.com/item?id=1454597

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