At this point I feel like anyone who chooses stock options over cash is naive, delusional, or misled.
Ditto, but I’ve also had two good success stories in my career too.
> At this point I feel like anyone who chooses stock options over cash is naive, delusional, or misled.
Why does everyone think it’s an either / or scenario? I’ve negotiated to have both more than once, salary at where I feel I should be and options/RSU where it might be a very nice bonus at a future date. Don’t be afraid to say no and keep looking if a company is taking advantage of you. I realize it’s hard sometimes, but the folks on HN generally can have the upper hand negotiating as tech employees are in such demand.
But I worry that many new to the industry are selling themselves short with an "or" and not realizing that an "and" is possible.
There are a number of self-imposed mechanisms that put downward pressure on compensation for developers. Willingness to take what are effectively lottery tickets and rationalizing it as discounted or future potential earnings is one of them.
Your salary should ALWAYS be the highest possible salary the market can support.
Equity or options compensation at a startup should be used to defray the risk of the company failing in the near and midterm.
So if Google is offering you $100k, then you should be asking Startup X for $100k plus equity.
Anti-dilution is usually for A or B rounds against a possible later round. A cap (I hate caps) is a form of anti-dilution. None of this is available to employees at least that I've ever heard of. As a founder I'd never expect it from a VC nor would I ever give it to employees.
Founders can get something called Series FF that grants them a supermajority of voting which allows them to retain control even as they give up their majority. You have to do really well in the seed round to get it in A. I think Larry+Sergey got this.
That's what should be changed, especially if you're asking someone to take a below market salary for something that, statistically won't make it.
"As a founder I'd never expect it from a VC nor would I ever give it to employees."
Why? Why should the people who are actually doing the work not receive that protection? Why should the value of their compensation go down over time, while the value of what they're doing goes up?
About anti-dilution clauses, imagine yourself as a founder. You have a patent on a hyperistor which will make transistors look like warmed over MySpace. Awesome. You and a couple of grad school buddies raise a $3M Series Seed round and run through that. Damn! It works! You've proved your thesis and now you need to scale. For that you need more money, another funding round.
This is where everyone wants to be. This is a success scenario but it is not success. You need more money, say $20M to scale your technology.
Someone has to give you that $20M and they will want something. If the founders+employees all had anti-dilution clauses, the VC who wrote the Seed term sheet would have to suffer. A lot. A lot a lot. So they would never agree to this in the first place.
Instead, everyone, founders, employees and VC, all dilute but then the company also gets the $20M. Anti-dilution clauses show up when a startup really needs money and the VC can force them to accept it as a term. It's not a good sign.
Sharing dilution is in its way, very equitable. This is in fact, the way things work. Startups are about risk and anything structural which you attempt to engineer out that risk will come back and bite you.
And, quite frankly, if you're not willing to imagine yourself as an employee that is getting their hard earned equity diluted to hell and back, I'm not interested in what it's like for founders.
> At this point I feel like anyone who chooses stock options over cash is naive, delusional, or misled.
People consistently make irrational decisions with money all of the time. The reality for many people is taking the stock option route makes them emotionally more vested in the success in the company. Companies know this and regularly exploit it.
Lastly - it is OK to join a startup early on to "mint" yourself professionally (e.g. "I was employee #4 at Google" or "I was employee #4 at a company that was bought by Google"). People's eyes perk up (in the Valley especially) because they assume that because you were an early employee you were more likely to contribute to the successful exit of the company. Thus, "minting" yourself in the job market. Whether that's true or not in reality is another point...
>I have a drawer full of stock option paperwork from various start ups I’ve worked with over my career, all of which were “confident” in their growth prospects and none of which exist anymore.
>At this point I feel like anyone who chooses stock options over cash is naive, delusional, or misled.
First let's assume you're a 10,000x engineer who was also able to change the course of small startups through your personality. Then if this has happened once or twice it might be bad luck. But a drawerful of times, and we should perhaps revisit the assumption that you are a 10,000x engineer who is able to change the course of small startups. Maybe this is about you.
You conclude:
> I feel like anyone who chooses stock options over cash is naive, delusional, or misled.
But there is a hidden assumption there that if you are not a 10,000x engineer, then nobody is. Do you think this is a fair generalization for you to make? If the startups you picked and joined failed is it fair to say had anyone else been the one to pick and join startups (not necessarily the ones you picked and joined) they could fare no better? That you're the best there is, at the task of picking a startup to join and lighting its boosters on fire?
Basically it is like dating: if someone says every single person has left them severely disappointed, that says more about them than it does about dating. To stick with the analogy: we know people enter happy successful and long-lived relationships.
We know there are successful startups whose destinies early hires helped set.
If every one of the ones you've tried with have failed, a drawerful over the course of a career - could this be more about you than them? Are you not perhaps the "truly excellent" husband who has given up on marriage, after 5 divorces.
If so, then perhaps it is not fair for you to generalize and say that anyone who gets married is delusional. Because you've been married 5 times, you know how to pick 'em, you know how to make it work: and it just does not work.
I tried to be a bit polite but I hope you can see the analogy. I get that it doesn't work for you.
But is it really fair to generalize your experience?
>anyone who chooses stock options over cash is naive, delusional, or misled.
What you've written also applies to founders. Why not write: "any founder is delusional. Unless they succeed, in which case they're just lucky."
But if that is true, nobody should admit being a founder during the delusional phase. If they succeed, they should never give advice.
Except that 10,000x multipliers exist, and the reason I listen to successful founders is to learn from them.
The gp poster isn't a 10,000x-er. That says more about them and their career than it does about startups.
This is also ignoring the fact that most companies will dilute the hell out of your options, so even if the company does make it, odds are you'll just have broken even from working for a regular company.