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Comment by tptacek | Hacker News Reader

Joel gives a better answer than I do; note that his plan gives 4 developers 2.5% of the company each, but 1%-5% seems like a typical range. The commenter says they were only able to improve their salary by ~20% by taking a BigCo job, so the rest of comp doesn't seem to be too far off the market.

I don't think it's an amazing offer, but then, amazing offers can be red flags too.

http://answers.onstartups.com/questions/6949/forming-a-new-s...

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Thanks, the answer is great. However, with that plan, wouldn't the first layer employee has ~ 100-200 times more equity than the last layer? Would this cause some sort of division within the employees in the company?

Equity compensates risk. Earlier employees take more risk.

But, exactly what is the risk that employees take (no sarcasm intended)? I mean, let's say an early employee takes 20% less salary than a later one for the first year or two. Additionally, take into account the fact that the company is more likely to fail at an earlier stage, and the earlier employee might need a couple of months to get a new job, I still can't see the risk of an earlier employee being a degree of magnitude higher than a later one.

Again, thanks for your time in answering such silly questions. For a kid trying to figure out those things, I'm much appreciated that.

Part of it is that as the total value of the company rises as the company matures and it removes various sources of risk. The dollar value of 1% of the company could easily rise from $1 (idea on a napkin) to $2000 (early prototype in seed stage) to $250,000 (business model proven and many customers secured). As that happens, a smaller and smaller percentage of the company is required to make up a given disparity in cash compensation.

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