The details all matter, but they all matter far less than that fact.
People shouldn't lump all startups together and should have a long think about whether they actually believe in the startup they're joining.
In the most common positive case (i.e. sale price is <100% of invested capital), or negative cases, the three collapses into into preferred holders vs common holders.
If you're in the lower class, you should assume your equity is worth zero. No matter what startup you're joining. You're here for the cash comp and to be surrounded by a growing cast of ambitious, upwardly-mobile people.
If you're in the "middle" class and highly value future wealth over present matters, you should act "like a founder" (sacrificing your life to, one day, make 1s or 10s of millions) if the company is on the ups, and you should act "like a mercenary" (leaving to some place where you can resume acting "like a founder") if the company is permanently plateauing or on the downs.
If you're in the "upper" class it's a different game entirely. That's not really the subject of this thread (valuing equity from a typical prospective employee's POV), so I won't go there.
Whether a "good startup" (great founders, great business, great investors) results in "a meaningful outcome for holders of <1% of common shares" involves so much luck and non-determinism that's beyond your influence as a <1% employee that you would be foolish to write it off to anything other than zero. The same is not true for >=1% and founders, of course, so they should value their equity differently.
Edit: the "magic" that many startups try to get away with is convincing people in class X that they're actually in class X+1 (even X+2!) and that, you should therefore act like it!! Be wary.
As an employee you don't have the same profit structure in play -- you can only work at one startup at a time. You cannot spread your bets around and let that one winner make the math work. You have to be 10x better at selecting a startup than the experts, probably 100x better if you expect to beat a big tech salary.
Incredibly lousy way to make money though, odds you will hit jackpot are none unless you're one of the founders and even then odds are still small.
YC manages truly incredible returns, and you can just... join those companies after they have gotten the YC seal of approval (or any other signal you like).
Unlike a VC, you do not have to "return the fund", so you are excited about a much wider range of outcomes than just the top outliers, and you are not locked in and can leave.
It is also much easier for an employee to get into a hot startup than an investor.
You also don't have to deploy a certain amount of capital or join a startup if you don't see one that you think will be successful.
Particularly in the b2b space, I think it's quite straight forward to see if the company is doing something valuable or if their idea is dumb and bad.
https://www.lennysnewsletter.com/p/pulling-back-the-curtain-...
Of those 10% exits, 50% are acquisitions. Acquisitions are rarely lucrative for rank and file employees. But even at 10%, you need to have a crystal ball as an employee. YC is not an especially strong selector. And unicorn is baseline success these days (the data is from 2025), so we at the 5% level not 10%. Maybe you aren't aware of typical equity grants beyond, say, employee 10. You need at least a unicorn exit to match a big tech salary.
I mean you're right, you don't have to return the fund. You have to match (risk-adjusted) the opportunity cost of a big tech salary. Incredibly hard and luck is the most relevant factor. Meanwhile, if you job hop out of the startup after startup because they mostly go nowhere, your resume quickly becomes uninteresting (ye olde 1 year of experience 5 times problem). So you do have to stick it out.
> idea is dumb and bad.
the idea rarely matters. ideas are free. execution is king.
If you look at the early batches (which are the only ones where all the companies are dead or exited), then more than half of them got to an exit.
And looking at all the companies, only 13% have failed so far, compared to 10% with exits. And failures generally come way before exits, so the data is incredibly biased if not taken on a cohort basis.
I disagree that acquisitions are rarely lucrative. I have been part of several and they have both been good for rank and file (me).
> the idea rarely matters. ideas are free. execution is king.
This is true at the earliest stage where the idea is very fungible. And execution always matters, but there are people out here working on the 50th Travel Booking Assistant who you should not go and work for. If the idea didn't matter, YC wouldn't ask about it.
> your resume quickly becomes uninteresting (ye olde 1 year of experience 5 times problem)
Nobody is forcing you to spend your entire career doing 1 year stints.