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Comment by Harj | Hacker News Reader

Rather than treating predicting startup success as an intractable problem, I think anyone considering joining a startup should act like a startup investor making a bet on how much the value of equity in that startup will grow over time. Startup investors do this for a living and that's essentially what you are too. You're investing your time and they are investing money.

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Hrm, the parallel feels really forced to me. You can invest money in multiple startups at the same time, to hedge your bets. You can't do that with your time if you plan on working full-time.

Sure, you can't diversify in parallel but you can in series.

Considering how long you would have to stay to get anything from an equity event (4-8 yrs?) you realistically can't work for 10 startups. If you luck out and work for one that does have some success, you will probably find that, unlike a VC, you don't have "2X preferences" or an anti-dilution arrangement so you get nothing or next to nothing.

In the meantime you may have traded your youth for magic beans - putting off things like getting a house, a girlfriend, etc because you are working long hours for sub-market pay. That is the real tragedy.

>Putting off things like getting a house, a girlfriend, etc because you are working long hours for sub-market pay. That is the real tragedy.

Just wanted to repeat this for emphasis ;-)

Its not even about hedging but about diversification. If you are in a position where you can't diversify fully, you should require a higher return on investment in order to take on the risk.

For example. If you could bet on a coin flip 100k times at $1 a bet, you might be willing to accept getting paid $1.01 per win. But if you had to bet $100k on a single coin flip, you would likely need the payout to be much greater before you were willing to take the bet.

Both are viable strategies. You diversify when you spend time working for startups across different sectors in the hope that some might succeed in their own area. You hedge when you work for several competitors in the same area in the hope that one of them will win in the end.

If you look at total comp as a function of preferred investment price - exercise price, startup employees are underpaid left relative to big company / deck orb employees (or in other words, are overpaying for shares relative to investors). This is of course not considering any risk premium that employees would have due to inability to diversify.

Do you believe prospective employees, often with little experience in the startup world, can do a better job of picking winners than VCs can?

Actually, what startup investors do for a living is convince rich people that they can accurately bet on the growth of the equity value. This is different from actually accurately betting on the growth of the equity value. VC firm profits can come from fees -- they don't necessarily reflect the performance of the underlying investment.

Place multiple bets over the years

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