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Comment by jsjohnst | Hacker News Reader

> I have a drawer full of stock option paperwork from various start ups I’ve worked with over my career

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.

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This.

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.

As an early employee, I have taken less than market (like a third less) along with a 0.1% equity option. That aligned my interests with those of the company. If starting a company I would offer the same.

0.1% isn’t much. You’d need a billion dollar exit to make that 0.1% turn into something super significant.

At .1% you're roughly employee 100. Yes, everyone involved at that point should be looking for a billion dollar exit.

Would you offer those as preferred shares, with a non-dilution clause in there? Otherwise I don't see how that's just pushing risk onto the employee for no gain.

Neither founders nor employees ever get an anti-dilution clause, or at least, I've never heard of this. VCs would simply hate it. Founders and employees get common and are last on the liquidation preference list.

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.

"VCs would simply hate it. Founders and employees get common and are last on the liquidation preference list."

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?

For your first question, there's a market out there. Startups aren't for everyone and ISO + less money isn't for everyone. But startups competing on price with Google+Facebook isn't going to work. Consequently this isn't done. So startups attract a certain sort of person and established companies attract another.

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.

Startups may be about risk, but your scheme puts a disproportionate amount of that risk on the employee.

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.

Define "early employee"? If you are in the first ten or so employees, as others have said, 0.1% is below market as an equity offering.

I'm fortunate that I recognized early the negotiating position I had, and each one of those worthless pieces of paper came with what I would consider a generous, above market salary.

But I worry that many new to the industry are selling themselves short with an "or" and not realizing that an "and" is possible.

Agree completely. I got bit early in my career, which is why I try to help as many as I can who are early in their career now.

Well, an "and" is possible to the extent that there isn't a sufficient supply of people thinking "or" competing for the job.

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.

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