CEO Aaron Levie Will Only Own 4.1% Of Box When It IPOs, Investor DFJ Owns 25.5%

It's obvious that founders prefer to keep more of the company, however tortured of a phrase you use to express it.

i.e. Zuck has majority control over Facebook: http://blogs.wsj.com/deals/2012/02/01/at-facebook-governance...

In the best realistic case, you are looking at 3-5 years of engineering pay as a one time exit after years of putting in extra hours and probably being underpaid. That's been my experience at least as well as everyone I personally know who has worked in the Bay Area the past decade.

(My apologies, nilkn, this isn't aimed at you. I object to the near-religious startup belief that risk = reward. Real life is so much less supervised than that. :) )

Depends on if it's $200K while working at market rates, or $200K vested over 5 years while working at 50k under the highest market rate you could have had because, hey, you had equity.

Depending on the time, $200,000 over 4 years is not a really good reward. In the mean time you have forgone: - better healthcare (if you have a family this ups the cost a lot) - lower stress job - better bonuses at 'big companies' - better options at public companies

Remember, that a great sr engineer, the kinds that startups allegedly hire, tend to be getting $30-80,000 a year in options at companies like Google, Apple, etc.

So now your $50k/year is looking like... well it's looking like a loss frankly.

For example, Mike Davidson (founder of Newsvine) describes in a blog about building a $1.1M home after he sold to MSNBC (http://www.ahousebythepark.com/journal/archive/category/fina...):

"My credit is great and I have a strong cash position, but even so, getting a jumbo loan is seemingly 10x more difficult than it has historically been."

"Then, a whole two months into the process, they wanted me to go to my HR department and provide written compensation guarantees using language my HR department was not comfortable with (and neither was I, to be frank)."

"All this for someone who has perfect credit, a comfortable salary, plenty of equity in his property, and the ability to pay off the entire house tomorrow if necessary."

You are not allowed to comment further on this until you read this article: http://en.wikipedia.org/wiki/Opportunity_cost

So, here's how to read startup and employee equity. Compare it to Wall Street. Yes, Wall Street.

Forget whatever negative image you have of banks or hedge funds. Whatever negative thing you might say about those also applies to most VC-funded startups. (After all, most VCs are ex-finance guys, MBAs who didn't do well enough in school to get into stat arb.) 95% of startups have worse hours than IT or quant or S&T roles in banks. (Analyst programs are a different mess.) 95% of startups have no moral edge in terms of mission or management ethics. 95% of startups fire more quickly and with less severance (sometimes zero, plus a ruined reputation because shit happens when arrogant kids fall into power) than any bank. 95% of startups aren't giving more interesting work to non-founder engineers than large companies (being CTO or first engineer might be cool, but a typical engineering role is inferior) do. 95% of startups don't have the prestige for their more liberal titles/promotions to actually carry durable weight.

So, there's literally no good reason to choose the startup ecosystem, unless you have a rare informational advantage, over Wall Street. Are there excellent startups out there? Yes, there are. I would argue that very few people have the skills necessary to tell the good few apart from the worthless many.

In the successes, the typical employee equity payout, vested over 4 years, is the kind of bonus banks give when they're looking to fire someone nicely (i.e. the "we'll disappoint him out" bonus).

Also, acquisitions are generally terrible for regular employees in terms of position, rank, etc. So you should literally think of liquidation as a severance, because the odds are high that the acquirer already has someone doing your job and he has the political edge. And $200k after taxes is really rare for an employee startup payout. That might be 98th percentile. I've seen lots of zeros in acquisitions considered "successful" by Techcrunch.

It really is a fucking scam, but it's not just a problem with startups. Software people are terrible at looking out for their own interests. Engineers either need to become savvy and self-interested like hedge fund quants and get what they're worth, or bring back the out-of-fashion but powerful concept of collective bargaining.

I'm not saying it's nothing, but remember that we are talking about this being one of the rare startup equity "success stories" that you hear about so often in the media.

Of course, I'd take a $200k windfall and be happy for a few days, but it's hardly a life-changing amount of money. I save that much money every 18 months (remember pretax). I wouldn't consider myself wealthy unless I had 50x that amount in the bank

"I didn't miss a thing. When a company raises hundreds of millions of dollars I would have been diluted to nothing. But the bigger issue is that I'm not a fan of situations where you have to raise hundreds of millions of dollars to do tens of millions in sales. It's a lesson learned from the tech bubble

It was one thing when the valuation as a multiple of sales was in stock. It's a bigger thing when that multiple is my cash."