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Comment by novok | Hacker News Reader

The reason why is the math changed. The gap between startup and tech giant is much larger now than it was in 2010. Also, unless you have insider access and join a very risky angel stage company, the likelihood of getting a good package that makes sense is low, very low. Also public companies have shown to get +3x gains, which can make the math even worse.

Example from personal experience that is very lucky in startup land:

I'm an unwise jr, who gets a 25k (with 25k stock units) purchase price stock plan for a series A company valued @ 5m. 4 years later that same company has 200x in valuation to $1b and I get 5k more stock units as refereshers over 4 years 'since the value of the company has gone up so much'. The value of my stock is not 6 million, but 600k because of dilution. So even with this very positive case situation, I broke even +/- 100k or 200k compared to big tech co with promotions, but whats worse, I can't sell my stock. The company later dies and all of that stock is only sold for about $40k total in secondaries that happened before the last $1b valuation round.

Considering that is the good case, why would I work as an early employee at a startup? With capital being so abundant and being employee #1-5 at an angel startup, I might as well become a founder and start my own at that point, or join the obvious next big tech co, which was facebook back then.

We also only have so many years to go on startup expeditions, maybe 5 total before we are 50, or more if we are able to fail fast.

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>The reason why is the math changed.

Very true. Making it even more unbalanced is that a startup exit may not be profitable to non-founders. I spent the first 17 years of my career at 3 different startups. Two were acquired and one is still chugging as a lifestyle business for the founder. The net value of my options (> 1% even after dilution in two of them) amounted to a $2000 capital loss due to there being no money left over after debt and liquidation preferences. I did get $350k payout for one of them since I was an executive.

I recently started at a FANG, where the new grads make cash and stock comparable with my startup exec compensation and it won't take long for them to eclipse it. I'll be making multiples of my previous compensation.

That said, I wouldn't change my path one bit. I learned so much in those startups that I wouldn't have learned anywhere else. I had a level of scope and responsibility that apply to nearly any tech job. It also lets me appreciate the benefits and stability of a large company. When I joined those companies, I was also not even thinking about making bank on an exit. I just wanted to work with nice people and build cool stuff.

I'm interested in your transition, how did you go about the move from Startup Exec to working in a FANG?

The startup I was an exec at was acquired by a large (>$100B market cap) company. Going through that process and adjusting to life as a much smaller cog in a much bigger wheel was definitely educational. I was no longer "the boss" and had to work very closely with people that I had no authority over, possibly had different goals than me, and who were thousands of miles away. The startup skills of being lean, problem solving, leading people, etc. still applied, but building the skills to work in a bigger company environment was very important. Going through that experience definitely helps with my life here at a FAANG.

I think this is a really good argument as why graduated corporate taxes really need to be increased in the US. I'd be curious how productive you felt at each position and if you think the FAANG job is more difficult and stressful.

I'd like to think that no matter which of these paths we chose - the more stressful and risky life or the more secure and corporate FAANG one - we'd all have a chance to live a decent life. I really enjoy working at a small company and we make a notable impact on society, but the money will never approach FAANG levels.

I think you need to reform employee stock options - in the UK there are far less possibilities to screw employees over stock options.

Absolutely, stock options in the US are super strange, they can be performance tied and for non-qualified shares. The thing I'd actually like to see is a better default governance for companies - companies are wholly owned by founders and I think there is just something fundamentally wrong with treating all employees as contractors by default until it's decided to grant them options or actual ownership.

A bunch of people gather together and build a thing - why is the first person to the table the person who takes home all the profit? Sure employees are technically signing away their rights by agreeing to work without being compensated with a portion of their work, but it'd be really hard to actually pursue proportional ownership in the current labour market.

This. There is really no reason a founder deserves as much equity as they generally give themselves (I know the investors also have a say in what an acceptable cap table looks like so it’s not just on founders). If early stage startup founders split equity more evenly I think the numbers would start to make more sense. Maybe like 10% founder, 5% first 5, 2.5% next 5, and then 15% equity pool as you grow from 10 to 50. And that still leaves you with half your company left to raise capital with.

Then there’s advisors and execs. You can enter into an A stage startup as an exec or an advisor and generally expect ~1% equity post dilution. This easily eclipses all but the first few early employees who have been working their asses off with much less comp for a much longer time. Maybe really good execs and advisors are game changers but I haven’t seen it play out in practice. More often than not success of the early few hides failure of the new leadership to do anything remotely resembling what they’re paid so preciously to do.

So in the current market the only valuable part of working at a small gig becomes the alignment of risk profiles and consequential networking, and the do or die environment that accompanies an 18 month runway. I think these are good experiences for anybody to have at some point in their career. But since most people are rational they look at the numbers and it just doesn’t add up.

"deserve" doesn't really mean anything. As for why founders get the most equity, it comes down to the most risk. They have the most to lose and are usually are paid last compared to employees who get cash and benefits. It's easy to claim the profits and yet ignore all the risks and losses incurred by founders.

I've yet to see someone who thinks otherwise actually go out and start a company. Perhaps it's because the calculus changes when it's your business and livelihood on the line.

“Deserve“ absolutely means exactly what it means.

I’m talking about the equity distribution sub-10 here. What sub-10 employees are getting any more benefits than their founder(s)? Maybe marginally more cash but it’s all still below market so it doesn’t really matter. But most founders I’ve encountered are actually paying themselves more than their early employees because they have to in order to maintain their lifestyle in big city. But they also have remarkably disproportional slices of equity.

If a founder is investing large sums of their own cash it’s because they have that luxury. And I don’t think that’s actually very common. More often a founder drops some sweat and cash to incorporate and then maybe isn’t getting paid much while they pitch for seed capital but they’re doing so because they can’t afford to take no salary for very long. Even if you occasionally do see founders who’ve “killed” themselves for their cause, most of the founders I’ve encountered actually come out of cushy jobs where they essentially moonlit as a founder until they met someone willing to blow a few MM their way. In my opinion this type of story does not justify such disproportional equity distribution.

At this point I honestly think telling founders that they take on so much risk and should retain such a large portion of their company because they did all the hard work is a somewhat subversive tactic used by investors who want to retain control over their investments. It’s a lot easier to reason with a single founder than 5 large equity holders.

I think founders deserve a lot. I don’t think the typical founder deserves 10 times the equity of sub-10 employees. I think you’d see more people willing to join early stage companies if the attitude around equity shifted.

It doesn't mean anything because its a completely subjective moral judgement. There's no global arbiter of what people deserve.

And again, if you think founders should take less equity then you're free to start your own venture and show everyone how well it works. I've yet to see single example of this though. If it's so easy to start a company without risk and get rich then what's stopping anyone else?

Do you realize VC companies are less than 1% of all the small businesses out there? Most entrepreneurs are not well-connected wunderkind raising millions, they're just normal people busting their ass and risking everything they have to start and grow a business. Reality is much harsher than some wishful thinking.

I don’t understand the “if it’s so easy then go do it” argument. Personally I’m interested in founding something at some point in my life. And I’d much rather do it with a group of people who I’ve shared more equity with. But that’s not the point at all.

In this thread we’re talking about what stops people from leaving their cushy jobs at big corp to join a small gig where apparently the talent is sorely needed. My response to that is, “if it’s so needed then speak with equity and more favorable comp strategies that are more likely to pry those smart people out of FAANG’s grip”. If the world needs a few principle engineers for some incredible new idea then surely the world can find the capital to fund the equivalent of a few 500k salaries for a few years—whether it’s with more cash or more generous equity or both.

It’s a two way street. Every time I hear someone lament about the dying startup scene my response is generally that humans are acting rationally and the industry has realized that the ~0.2-1% equity offered for positions 4-10 at a small gig is not really worth the sacrifice required unless some other stars align (mega exciting domain, super unique opportunity, write off as professional development).

So either the startup industry is dying and all the good talent is locked up in FAANG. Or maybe startups don’t need principle engineers and 0.1% talent in the first place. It’s probably some of both.

And I’m certainly not sitting in a pile of my own self entitlement at FAANG thinking, “if you want me pay me more because I’m hax0r”. I’ve made my own sacrifices to be a part of growing a small company. We’re in a specialized domain where finding the right talent is especially difficult. I’m unable to fault anyone for rationally biasing towards more comp and stability and less stress. So when the topic comes up I like to remind people that the status quo equity/comp strategies that you see at most places are a little dated and despite it being (as it seems) somewhat presumptuous of me, suggest that founders might be biased towards overvaluing their own contribution to the cause. If the cap tables were a little looser I think you’d see the scene perk up again...

My replies are regarding your statement that founders "deserve" less, especially the rather extreme quote of 10%. That's nowhere near viable considering the effort and risk involved, and why I suggested you try it and show us.

And if most startups fail, why is equity worth so much to employees? Who wants to be paid in worthless options? This is the other common fallacy I see. Startups can compete by offering cash and better benefits like work flexibility. Equity rarely moves the needle and doesn't suddenly make people better workers either, regardless of all the hype leadership blog posts about ownership.

Some people respond to the increased responsibility and will always work at startups. Some people always want the big corporate gig. Neither will change much based on equity. What startups are competing over are the mostly average workers in the middle that could be swayed with the right offer, but there's not really a global shortage, just with hype FAANG workers (who are no longer 0.01% quality or anywhere close). You can get great people anywhere and plenty of startups have figured that out.

> And again, if you think founders should take less equity then you're free to start your own venture and show everyone how well it works. I've yet to see single example of this though.

This topic was covered in Episode 3 of Gimlet Media's "Startup" podcast[1]. He ended up do a 50/50 equity split. They seem to have done well for themselves[2].

[1]https://gimletmedia.com/shows/startup/8who49/gimlet-3-how-to...

[2]https://en.wikipedia.org/wiki/Gimlet_Media

(And why this reply is not properly indented is beyond me.)

They're both founders and equity is split evenly between them, which is extremely common with any startup.

That's not the same as founders giving up majority to their employees.

I'll have to go back and re-listen but IIRC the other guy wasn't a co-founder, he was employee #1.

You are free to found your own company and do this.

Of course I am! But I don’t want to found a company just to found a company. We’re talking about attracting talent to small companies. I’m offering my perspective on why joining a small company doesn’t make tons of sense with the status quo equity packages and sub-market salaries offered. There’s some good discussion on another post about this exact problem and it seems, at least, that VCs are starting to come around as well and there is productive discussion about alternative early stage plans/strategy for capitalizing in a way that can attract top talent from big companies. I’m not founder bashing please don’t take my comment the wrong way.

Employees get cash, that's the compensation like any other worker.

Why should equity be a default option? Most startups fail so that's like saying workers should get something that has a high probability of being worthless while suffering all the tax implications. If anything equity should be decreased. Startups are better off competing on cash and other benefits like work flexibility and increased responsibility.

That would imply that they make revenue, which is somewhat unfashionable.

You need cash to run a business, wherever it comes from. Otherwise you don't have a business in the first place.

You need engineering talent to run a tech business. Otherwise you don’t have a tech business in the first place.

Money comes from anywhere, tech talent is fixed in supply.

A business needs cash to operate. It doesn't matter what talent you have if you can't pay them. Startups die when they run out of cash, not because they couldn't hire anyone.

Startups offering more cash has no implication that they must generate revenue (although that's obvious to building a good business). The point is that operational costs exist - and so a business must already have cash to exist - and increasing costs for better salaries and benefits is a better trade-off than increasing equity which is mostly worthless anyway.

Also global tech talent has more supply than demand once you get past the SV/HN bubble. No serious startup has failed because they didn't get the perfect engineer.

That’s an interesting point of view. Do you think engineers are much more “interchangeable parts” than most HN folks seem to believe?

Customers care about solutions to their problems, not the engineering behind it. Many VC funded startups with the latest AI tech have failed because they never actually served the customers. Meanwhile there are millions of profitable small businesses running with simple boring tech that works enough to provide value to their clients.

Engineering talent is in oversupply across the US and definitely across the globe. You can easily hire PhD level talent from Brazil or India. Also FAANG companies have long ago exhausted the best talent available. Most of their hires at this scale are no better than engineers elsewhere, it's more about the interview process, benefits, location and internal politics than raw quality now.

Are you confusing "contractors" with "employees"

I really think the issue is that many startups don't offer alternative compensation and don't play to their strengths. You can be compensated in other ways, but often I've found much of the work at startups can be no more interesting than their Big N counterparts. Your career growth might also be similar. In theory, for startups, you sacrifice pay for other facets. The reality is quite different.

The work might be similar but you're paid 50-75% of your peers. That was my experience in startup land, at least. Few good challenges or career growth and half of what I felt like I was worth.

I’m intrigued by your idea of alternative compensation. Care to expand?

Are you thinking like bonuses for growth? Deferred bonuses?

Not OP but I've been thinking about this as cofounder of a "hard tech" company. If we live long enough that we're in a position to hire real talent we can't compete on total yearly comp. The business just won't be able to afford a 500k a year engineer for years.

However right now FAANG companies generally do not offer either the following:

- Reduced work weeks

- Remote work

I've talked to several staff and principle engineers who've told me that for the right company they'd take a massive paycut to work remotely 3-4 days a week. I've had the opportunity to work a 3 day week while making enough to support myself and I have to say, it's incredibly freeing. I don't think this is a sensible offering for anything below a Staff engineer, but it could be a promising path to get truly top talent.

I work at one of the FAANGMs and my group of about 700 engineers are all allowed to be 100% remote if they want to be. It’s actually promoted by our leadership.

I'm curious: which FAANGM? And where could I find the job openings for that group?

I think the benefit of working at startups is similar to the benefit of working for smaller companies in general. With a small team you'll get to touch more of the stack, and maybe even parts outside of your job domain altogether. In my first job I was the 2nd developer, the first was the CIO. In addition to writing most of the code for this project, I set up the entire production network including load balancers, database replication, firewalls, etc. I even picked out our hardware and physically installed it in the rack we rented at a local ATT data center. Now that's an extreme case obviously, but you will never get anything close to that broad of a base of experience working for a BigCo.

No it’s a good argument for eliminating corporate tax- no matter what the level it hits entrepreneurs the hardest.

This. In my experience, the burden of taxes and regulations are most felt by new entrepreneurs and smaller organizations.

> I'd be curious how productive you felt at each position

I definitely felt "more productive" at startups since my work felt like it had a bigger impact to the company.

> and if you think the FAANG job is more difficult and stressful.

So far, it feels no more difficult and is stressful in a different way. With a startup, there's the stress of worrying about the company going under. At the FAANG, there's the stress of performing at a high enough level to justify the compensation.

> The reason why is the math changed. The gap between startup and tech giant is much larger now than it was in 2010.

This is true but also kind of depressing. With the means of software production cheaply available to everybody is that stable job at a tech giant really the pinnacle of the software engineering career? I understand that everybody's got the bills to pay, kids to raise etc. and maybe I'm a bit naive but it just feels... wrong. And yes, working at BigCo can provide some interesting technical challenges, opportunities to impact millions of users and shield you from unpleasant interactions with the outside world. But it still feels like you are being paid premium to sit on the sidelines.

I find a lot of joy in smaller, industry niche companies. Like 1-20 employees small. Not VC funded startups, but long running companies with proven value in an industry outside of the startup bubble.

There is a lot of them, and they can be very rewarding to work at. While they'll have less compensation, it's in real money and they're often located in smaller cities with lower cost of living. You get to work directly with clients/customers to provide value to them with your skillset. The pace is steady, and what you work on can have a lot of longevity which is nice. Software can feel somewhat ephemeral at times, written one month, thrown away the next. Working on a long term project means it feels worthwhile to go the extra mile.

Just curious can you give examples of this?

A few examples of ones I have worked at or friends have:

A company that created a novel commercial solar estimation algorithm, and ran a B2B SaaS with it.

A small platform specific agency, 10-20 people specializing in a specific eCommerce platform.

A company that had been producing IoT software and devices for farmers.

A slightly bigger company that produced backbone software for bank management, I think they had closer to 100 employees eventually but the dev team was still relatively small. Bank software takes a lot of extra curricular activity it turns out!

> This is true but also kind of depressing. With the means of software production cheaply available to everybody is that stable job at a tech giant really the pinnacle of the software engineering career?

Yes, because economies of scale greatly benefit big companies.

Just because software is free to scale, in the sense that a cp command doesn't cost you anything, doesn't mean that making money from software is free to scale.

> Yes, because economies of scale greatly benefit big companies.

I don't think software engineering in itself benefits greatly from the economies of scale. Yes, tech giants have developed some nice internal tooling, but the cost of implementing a feature for a google engineer is probably in the same ballpark as for a startup engineer. User acquisition OTOH seems substantially cheaper for the big companies. So, economies of scale in marketing and distribution?

If they don't then why does anybody use AWS?

Start-ups use AWS because with $20k-$100k in credits you can do a lot for free in the first year, and after that the cost difference usually doesn't matter. It also looks great on everyone's CV.

Big companies ofc have other reasons like flexibility, needing less coordination in the company etc.

If there were no economies of scale it certainly would seem strange that it could possibly be cheaper to rent computers from Amazon than to run your own data center.

Renting servers from Hetzner is a lot cheaper than using AWS. If you get your uplink figured out then running your own servers is also cheaper.

Sure, if you discount the administrative work to keep them up it might be.

Operating AWS and the datacenters involves massive economies of scale. Writing the software that powers AWS - not so much.

Yes, but since most of us (I think, anyways) are working on Web-hosted software that stuff all matters. It also matters that an Amazon or Facebook has whole teams dedicated to developer tools, operations management, and so on.

I don’t disagree with the spirit of your post. Large tech companies are paying ridiculous salaries and generally speaking we’re in a period of early-stage capital glut.

The point you’ve made — that it makes more sense to just start a company — is directionally correct, but for the most part is a logical fallacy. I hear this from competent, capable people all the time, “I might as well just start my own company rather than work at a startup as an employee.”

The reality is that 0 to 1 is an extremely, extremely difficult hump to overcome and most people intuitively know this. Which is why anybody who says, “I’m better off starting my own company than working at a startup,” especially without startup experience, is likely to never actually do that thing. I’ve never actually seen it, though I’ve seen a number of people go from working at to founding startups.

The real insight here is that it is actually more valuable to found — or be a really early employee at — a successful startup. And so the question becomes: how do you put yourself on track to get a $72k check from Peter Thiel at 23? Take risks, prove your competence and grow your network. That means work at startups.

Sure. I’m (currently) a lucky recipient of survivorship bias. There’s a long way to go and my current state is incomparable to most of the people we look up to and respect as a community. But the key word there is, “survivor.” If you look at the start of my startup career — middling ad tech company in Toronto, eng. lead at a failed Series A SF startup, short stint at a biotech company, turned down by BigCos — none of it looks like it could possibly have been leading anywhere. I just used those opportunities to meet really talented folks who believed in me and, one by one, would end up supporting me down the line. I’m lucky and very grateful for that. Some of the aspects of my journey to date are non-repeatable, and I’ll always give thanks for those moments — but a lot of the lessons I’ve learned can apply to any ambitious young technologist.

Keep at it. If startups aren’t for you, fine, but, again — survivorship bias requires you to survive in the face of insurmountable odds. And it does happen. Startups teach you how to survive. It’s OLN on steroids for careers.

TBH the best way to get a full spectrum startup experience is to go start a startup, like many other things in life.

Working at a startup, other than maybe a 1-2 year maximum stint to get a taste, isn't really useful because a lot is hidden from you even when you start the angel stage. And if you wanted to do the stint, I would probably do it as 1 year of PMing and 1 year of engineering max. If you really wanted the full spectrum experience just incase, then another year at a pre-ipo growth company, another year at a big tech co and another year at a VC to understand the full spectrum life cycle for 5 years.

As a founder, the demands of doing a startup induces you to learn a lot. It forces you to do that networking and making friends part and you will eventually get a mentor network via all your investment activities that will probably be way better than observing from a distance as an IC. Other founder friends you make and friends made at a co-working space doing similar things would give you a lot better experience and a better network.

I joined a smallish startup that grew big, as evidenced above. I mostly just churned on pushing out a lot of code and that's about it. I was part of helping create that 0 to 1 and all it gave me is a bit better work ethic since so much was hidden from me as a jr. The friend I made there that joined really early didn't gain much more insight than me and now works at big tech with me. I learned a bunch just through observation, but I think a founder mentor network would of taught me stuff a lot sooner, and a lot better.

Yes — some execution is hidden, for sure. I, personally, try to be ultra transparent with the team: here’s our bank account, here are deals in-flight, here are the VCs and founders we’re talking to.

The value I aim to provide anybody that works with us is all the things I felt I was missing when I was a startup employee. I wanted to understand how deals happen, what personalities are like, how things work. As we grow I can’t share entirely as much — a piece of minor bad news can hit me pretty hard emotionally and it’s not fair to subject the team to me being upset or a hothead over something that will blow over — but I do try to encourage folks to learn as much as they can.

Even if somebody were to be entirely disinterested in founder-level execution, early employees have a super easy, instant warm introduction to any investor on that company’s cap table downstream. You might not be using that aspect of your startup career yet, but it certainly can help you if you wanted to use it.

You are a much better founder than my founder was, and I'm glad you are. My founder was a good business man, kind of slimy, but effective. And definitely not transparent and gave a pretty employee unfriendly options contract. Again, I was an unwise jr and that experience was years ago now. I was also employee ~50, so I don't know if that was early enough to get real warm intros for investments with people I didn't interact with that much.

TBH the pre-ipo company I went on to next has given me a much better network than the startup I went to as a jr. One coworker direct has started a company that I think will do pretty well, along with a bunch of others who have gone on to VC firms, their own startups and so on.

I appreciate the kind words, but trust me, I still have a lot to learn. The most important contributor to our early success so far has been the team, who have supported me in my growth as a founder as much, if not moreso, than I’ve supported them.

Yes — being employee 50 changes the scales a little. You’re a little too far removed from the executive team to have the same level of comfort. We’re still significantly smaller than that, but at my first job I was in the same # range as an employee.

While I didn’t get to build a relationship with the executive team, my boss at the time kept in touch and ended up introducing me to my best friend / confidant in the Toronto ecosystem as a result. So I would still say the network was valuable. :)

Most of the time, startup founders will have been successful elsewhere, or else they’d not have the ability to risk enough to do a startup. That’s why one avoids startups run by executives kids who are “creating” a track record.

> The real insight here is that it is actually more valuable to found — or be a really early employee at — a successful startup.

Sure, and it's more valuable to be holding a winning lottery jackpot ticket than a year's worth of paychecks.

Problem is, most startups aren't successful, and you have to take the risk into account.

>Large tech companies are paying ridiculous salaries and generally speaking we’re in a period of early-stage capital glut.

The salaries are not ridiculous at all. It's the rate the market has decided those workers are worth. If a start up wants to compete they have to change something big because as it currently is I don't see it as rational at all. All the benefits you mention only happen if it works out for you. For nearly all people who try, it's not going to.

> The reason why is the math changed. The gap between startup and tech giant is much larger now than it was in 2010. Also, unless you have insider access and join a very risky angel stage company, the likelihood of getting a good package that makes sense is low, very low. Also public companies have shown to get +3x gains, which can make the math even worse.

Unfortunately, nowadays, the only job titles at a startup that offer greater expected value than working at a tech giant are "Founder" and "Co-founder". The fraction-of-a-single-digit-percentage equity packages out there for Employee #1 adjusted for the risk of failure and the risk of getting diluted are often a very low number. And if you're Employee #10? Forget about it! I'd love take another crack at a startup but it only would possibly make risk-adjusted financial sense if I'm the founder.

I agree with all of the points raised, and share the same experiences. But this one:

> I might as well become a founder and start my own at that point

Great! So, how would you recruit your first 10 employees?

I don’t understand... why is the goal to convince a bunch of naive youngsters to work for you at 1/10 their value? You shouldn’t exist unless you can pay competitively for the same people, end of story. Until then, don’t hire

The fact is that there are a bunch of younger programmers willing to work for a startup regardless of the comp. Founders naturally try to exploit this.

They could be taught ethics in college or find that their peers actually called them out for it? Heh.

That is a big reason why I don't start my own company, because I couldn't really live with doing that.

My current armchair strategies:

* Compete in a way that big tech are not willing to do, which means distributed remote companies. A lot of people don't want to live in $3.5k/month rent SF or other tech centers for various reasons.

* What a lot of startups do, but RDF (reality distortion field) over with 'we only hire the best'. Don't hire the best. Either because they couldn't hack the big tech co interview, have visa issues, are very jr or have personality problems that make them unhirable in big tech cos.

* Go bootstrap, so no VC style business timelines.

* Give offers that basically make them pseudo-founders and match the expected value of bigco with the risk premium of startups. A hard pill to swallow when investors give a lot of money offer similar or smaller dilution terms effectively.

I've never gone out to get investment, so I don't know how much of the above is also blocked by investors in general.

Also crypto style 'startups' (ICO or just a completely new coin) have shown to deliver compared to normal SV startups, but most crypto companies do not deliver actual lasting value and are more pure speculation plays. A big crucial difference is they give crypto coins instead of stock, and those coins are liquid immediately. They are also not restricted to start in the USA.

Founders should be willing to give a lot more equity to the first employees. I don’t get the logic of not doing this. You want your engineers to feel as if they have ownership in the equity that you’re building. It’s such an easy way to keep engineers engaged and productive that it baffles my mind that it’s not done more widely.

I hate working for BigTech. Startups expect too much and compensate very little. The sweet spot for me has been medium sized public companies that offer great compensation but need solid engineering to grow their market share.

It's the math again. Go do a spreadsheet and simulate a company as it grows and you see treating your first 10 employees in line with big tech expected value outcomes is a really, really big hit.

I know this is totally super optimistic, but can we change the perspective from

> is a really, really big hit.

> really amazing payoff for the early engineers/employees

My very limited understanding of the growth of the SV tech community is that its a generous cycle of people creating wealth, and then using that wealth to fund the next generation of tech. So it seems completely logical for SV founders to want to do more of this.

Whether it's a big hit or an amazing payoff are actually irrelevant, there is a going rate for engineers who are willing to accept startup risk (in a job market where anyone can get hired right after it fails this is not a lot of risk), and that's the price that will be paid.

When I was young and naive, they paid employees the "risk bonus" in stock shares, not cash. I asked for more cash, and they said, "nobody takes cash, stock shares are the thing". They were the dud thing.

Especially when you consider the diminishing returns on wealth. And presumably you should be able to attract higher quality employees who are more incentivized to work hard. Resulting in faster and more efficient growth. So you may never even take a “hit” to wealth. Unfortunately most founders and VCs have resorted to exploiting the social dynamics of the engineer class instead.

Which will be attrited away over funding rounds

We usually encourage folks to give at least 10% of the equity to the first 10 employees. That's what Stripe did and it worked well.

That number is going up over time, so I can report at least a little bit of improvement, though certainly not fast enough.

Honestly I think 10% should be a floor for this, and considered completely separately from the usual 10%+ option pool (for the ones that come after the first approx 10).

For that matter heading out of a seed round with very roughly 1/3 founders 1/3 employees 1/3 angels/whatever seems pretty sane to me, although a bunch of that first 2/3 should not have vested yet. Your second tranche their would hold a largish option pool for growth, and a bunch of "founding employee" equity. You are all going to get diluted to hell, but however it eventually shakes out I think that collectively those starting key employees should see roughly the same outcome as individually a founder does....

Equity or options? If options, what happens if they leave pre-liquidity? If it's, "they have 90 days to exercise", see this comment on the counterpoint thread: https://news.ycombinator.com/item?id=21868797. To summarize: screw that. If it's actually straight equity you recommend, how do you recommend the dilution work? Is it tied to the founders' own dilution? If not, what incentives do the founders have to not throw their early employees under the bus in future rounds? Even if all of this is done right: 10% seems likely to be too low for the risk.

> Go bootstrap, so no VC style business timelines.

This is easier to do when you have some money on hand. Which is why working at a well-compensated job if you are not from a wealthy background is quite important in your early career. Also its not that bad a strategy. I mean Qualtrics pulled it off quite well.

We'll be taking some of this approach at our new co, bootstrapped, with very generous share grants for the first employees. We're doing partially remote, but I think full remote might make it too hard to get the core team as tight knit as it needs to be. I don't think it's a good substitute for a few people sitting in a room yet, but I could certainly be wrong about that.

One of the things that keeps me away from startups is how disadvantaged employee equity is. Options become golden handcuffs when they have to be exercised to leave. Execs and investors are not in the same boat as employees due to preferred shares, liquidation preference, and other terms. None of these are disclosed to employees.

I've heard too many stories of start ups being sold where the founders cashed a big check and the employees didn't get anything.

To be clear, I'm not an expert in this, but the startup ecosystem needs to regain trust if it wants to hire more competitively.

Hope that they are not as interested in financial optimization as you? Or just take people who can’t get into top paying bigcos? Or be a good salesman? Same as everybody else who is recruiting for startups these days

Handpick them out of your network and give them not just equity but real control as well. That for the first 5 or so. The others should come from your network and be handpicked by your handpicked first 5 employees. And equity, but obviously less than the first 5.

In my case my first employee, as soon as enough comes in to pay someone, is already recruited. Equity will be around 20%, with another 25 or so for the next couple of employees. That's without outside funding, doesn't seem to be necessary so. If it will be necessary that obviously changes.

Why do you think you need employees?

Yes, I am a little longer on the tooth than some others, but I would love for developers today to dictate the path..

Instead of having this idea: 'We want to work for the next big thing' - Which can be super attactive.

- Instead say: Hey, Im a developer, so I like this product, can I stand behind it.. Can I stand behind my work in it.

Even if you need a job badly, and you're taken on as a developer or someone contributing, I still believe, you should always be able to stand behind your work. Even if the product is shit.

So If you want to work for a startup, you need to really know the company, product and for sure the direction, not all of them are looking for a payout. Some of them are genuinely enjoying changing and hacking things up. - Embrace these - eve if they're not startups!

The best companies I've worked for where well established, but gave the freedom to innovate, play around, make mistakes, and build.

New startups for me always seem to just throw money expecting something good.. I've come to the idea that its 'Startup business ideas people'. and not "Developer playground that turned into a startup"

This assumes all entrepreneurs would want to work for or even be hired by a tech giant.

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