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Comment by rubicon33 | Hacker News Reader

> That startup sold for 200 million dollars and, as the 10th engineer, I made ... 15000 dollars from that exit.

Why so low?

I worked at a company for roughly five years, that sold for 250M. When I was hired I was like 4th engineer, but by the time I left I had 2nd most seniority in engineering. Exercised my mostly vested options when I left.

I got mid-5 figures. In the year following my departure to BigCo, the difference in my salary was more than what my options ended up being worth.

One of the C-level guys who was there for 8 months when the company sold made 100x what I got. He wasn't a founder. He came on late in the game and basically had nothing invested.

That's why working for a startup hoping to get rich is a sucker's bet. The game is rigged against you unless you're a company officer.

What was your equity grant by %?

They were ISO's, I only knew how many shares I was granted, but by the time of the exit, following several rounds of funding, it ended up being around 0.02%.

This is the context everyone needs to share when telling their story of startup compensation.

It very much looks like you got screwed on equity even before dilution.

An early and somewhat senior employee should be getting anywhere from 0.5% to 1%. If the company is high quality, raised funding on standard terms and is actually successful, you'll still get diluted but not down to 0.02%.

Your comp sounds off by an order of magnitude based on what I can infer.

The fact that you didn't know how many total shares were outstanding at the time you were granted your ISO options is more proof that you likely got screwed.

Not all startups are like this.

It depends on how much cash salary you received. If they pay cash a lot, the equity part is not worth that much.

Yeah, that's 0.0075%.

Versus a ballpark of a 10th engineer getting, say, 0.5%.

Even a few rounds of dilution can't explain a drop of two orders of magnitude.

I'm thinking the author either didn't pay attention or care or trusted too much in the initial offer, didn't stay long enough to vest most of it, didn't buy most of their options in the end, or all of the above?

If the Lyft founders are entering the IPO with about 3.5% each, then I don't think it's crazy for 10th engineers these days to have less than a basis point.

That doesn't tell the whole story. There's a dual class share structure and even with the 7.5%, they retain majority control of the company.

When you're talking about valuing their shares, yes, it does tell the whole story. They cannot transfer their extra voting rights, so if they're ever interested in monetizing their investment, they have to convert to limited voting shares to sell. And all we're talking about here is the monetary payout of working at a startup.

> And all we're talking about here is the monetary payout of working at a startup

Fair, I concede my point based on this premise.

That’s (substantially) more than I have as #5 at a startup. Truth be told I didn’t pay attention to this when joining because at the time they hadn’t yet set up their EMIs and I was told that negotiating for share options is pointless since their expected value is close to zero. So, if I had insisted I could probably have gotten more. But it’s neither unheard-of, nor even particularly rare from what I’ve heard (in the UK).

This number makes complete sense. I was a 'key employee' once upon a time - in a startup that had just raised f&f, and I received a FULL 2% (unheard of for Canada).

Fast forward through the (usual) reality of 6 rounds of dilution, and my 2% was worth less than 0.02%. If the startup went from a $2M valuation to $200M (as it did) then my take would have been $40K.

Do with that what you will.

It sounds like your startup was unfortunately an outlier with respect to the level of dilution experienced. 99% dilution over 6 rounds is far from 'usual reality'. More common is 20% dilution per round.

6 rounds of 20% dilution will get you to 74% total dilution from the initial grant.

Which in this case nets you >$1M [0] vs the 80k quoted above. This also assumes no retention grants over 6 rounds.

  [0]: 0.02*0.8^6*$200,000,000 = $1,048,576

It was also an outlier, in the sense that it had a valuable exit.

You've only got one lifetime to pull the equity slot machine, hoping that the reels come up all sixes.

Something I am always curious about is, was your company / CEO open and honest with you about how your shares were doing? If you worked somewhere for 5 years, it could be easy to think you're safe but meanwhile the CEO is diluting your equity to fractions of what it originally was? Don't they have to report that to employees?

Every round of financing, the shares got diluted but the total value of shares should increase. Otherwise, the company is not doing well and taking a down turn.

In my experience both as that employee, and sometimes the executive - they're not. There are frequently legal, secrecy, or other corporate reasons for the lack of disclosure. It kinda sucks - but it's understandable.

To be fair, I'm someone who has never chosen shares over base salary. The equity slot machine is fine, but I (firmly) believe that over the long haul, the only thing that matters is index investing. Benjamin Graham is always right.

I appreciate shares - I work either way. They're just not my motivation. If that works for others - great.

Dilution isn't all that matters. There's also investor liquidation preferences that can drastically change the outcome.

Liquidation pref for investors with preferred shares.

I am the OP.

I think it was because I was an overseas employee and the founders just didn't shell out equity to people who were not based out of US. I saw the equity distribution sheet that was disclosed after the acquisition as part of legal requirements and that was indeed true.

IMO, equity represents ownership in the company and should not depend on purchase parity.

I think you should've mentioned this in your blog post, especially if you're comparing the money you've made from equity to new college grad salary at Facebook

>I think it was because I was an overseas employee and the founders just didn't shell out equity to people who were not based out of US.

Isn't that illegal ?

Why would it be illegal?

Insanely low. Strangest part of the article.

Potentially it wasn't a successful exit? Dirty term sheet or multiple down rounds and $200m wasn't a successful exit?

He's from India, they probably thought 15k would set him up for life.

I'm guessing a bad options grant.

I worked for a bootstrapped company that had some minimal investment and equity. Company sold for ~$12Mil and I pocketed 80K, on top of a market salary

He's from India, I think it's not as common to get a big equity package as some startups in the US.

I was confused too

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