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Comment by pg | Hacker News Reader

It's not about cooks vs hackers. This is the critical point:

  Charlie didn't make $20M for cooking, he made 
  $20M for taking the risk

The money that founders and early employees make from startups they make as investors. They're getting compensated for risk, not simply for the work they do. Startups are volatile, which is why investors like them. Like other startup investors, early employees sometimes get really lucky. But that is not the same thing as being overpaid.

I can't say much for sure about this particular case because I don't know the details, but I don't like the sound of it. It seems so shortsighted. The amounts of stock involved must be small, and the damage done not just to Zynga but the whole startup world could be big.

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Disclaimer: Only having read the WSJ article and knowing nothing more, I think it’s more or less a form of blackmail—the employees are unfairly being put in a no-win situation.

That being said, my takeaway was that they had thrown around equity so liberally that they’ve exhausted their employee options pool and it’s going to interfere with their ability to recruit going forward. Is that the wrong interpretation?

If it’s not, and given such a situation, do you think it’s fair to say that a startup should generally be trying to allocate its options carefully such that a chef doesn’t end up with $20M worth of equity?

Given that most equity is worth nothing in the end I don't think you're correct. The beautiful thing about equity is that its future value can not be determined and it's not possible to limit the upside fairly. If employers start putting a cap on the upside, it undermines the shoot-for-the-moon lets make this a $100 billion dollar company spirit that equity otherwise engenders. Had Google had a $1B exit, or a $100M exit - both far more likely scenarios when the chef joined - the grant would have seemed perfectly reason.

This has nothing to do with risk and all to do with incentive. Whether your grant is on top of a full salary or not is irrelevant.

  >> That being said, my takeaway was that they had thrown around equity so liberally that they’ve exhausted their employee options pool and it’s going to interfere with their ability to recruit going forward.

They can issue more stock to incentivize new employees, which is fair in that it dilutes everyone equally (preferred and common together).

What is unfair is to assume that the preferred stock allocation must be a constant, and that you have to claw back existing stock options in order to pass on stock in the existing options pool to new employees.

  >> the damage done not just to Zynga but the whole startup world could be big.

They have already added a new verb to startup vocabulary - to get Zynga'ed.

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