I tell every engineer always to maximize their cash comp and every founder and investor always says "No, that's such a bad idea! Get more equity!"
Yeah, because that is in your interests, not the engineer's.
Yeah, because that is in your interests, not the engineer's.
They offered to sell me more shares
I countered that I'd been trying to dump the shares they already gave me and if the shares are truly worth X dollars they should buy them back from me
Anyway glad I quit
I always offer companies pushing equity hard to trade for cash at 10% of the highest number they try to get me to value it at. Nobody has ever taken me up on it, even when they really should have.
Early stage investors know that even the best startups have a fairly low chance of success, which is why they diversify by investing in a lot of them. The many failures are paid for by the few successes.
As an employee, you are only given stock in the one company you work for. Even if you think it will be a success, it isn’t smart to put all your eggs into that one basket. No investor would do that, and no employee should either.
If you are working at a startup, a lot of your eggs are already in that basket; your ongoing salary is dependent on the company continuing to succeed. If you take less cash for more equity, you are putting even more eggs into that same basket. If it fails, you are going to lose all the equity AND your salary.
You don’t want your investment risk and your salary risk to be that correlated.
Then there are non-unicorns. These may even start as maybe unicorns. But as soon as you know it's never going to be a unicorn, you can leave. Or stay, prospects depending. If you know it's never going to be a unicorn before you even join, you can think of it as glorified contracting. Done that too. Maybe lean on compensation rather than options because a whole lot of nothing is, tap-tap-tap, nothing.
BTW, VCs think along similar lines.
I always take more equity. I wouldn't work for you in the first place if I didn't believe in your equity.
If you’re an employee you can’t look at this like an investor would. Your risk profile is completely different. The write up is correct in that it’s basically a call option, correctly point out there is no market for it and then ignore the fact that zero liquidity means you can land a 747 between the bid and ask (if you get anyone to buy from you at all).
This a feel good number generator.
Sure, if you don't want to take a risk then look for a higher salary, and probably at a more established company because even if you have mostly salary and little equity a startup is still risky (and you're making it even more so by putting cash pressure on the company at that stage).
On the other hand, if you want a chance at a bigger payout, you'll want more equity. And yes, you may well not get that payout.
That's exactly why it is true. If every person who held early stage stock walked out of those events happy then no one would recommend they focus on salary.
Even if each risk is a good one to make separately, it isn’t always good to make both risks.