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Comment by rokhayakebe | Hacker News Reader

Would you rather work for a startup (vs. established co.) that pays you 130% market salary without equity or take 90% with the possibility of great upside?

Edit: I am asking because I think startups should be paying more than established companies because of many reasons: 1) the work environment is usually shitty (nice, clean offices are nice), 2) no financial security because they are not established, 3) no one outside the startup world wants to hire someone who failed numerous times before, 4) it is much easier to go from Big Co to Small/Tiny Co, then the opposite. (4) is particular true and quite dangerous for recent grads. Young recent grads are better off founding their own company or joining Big co instead joining fresh startups.

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This is really a spreadsheet problem. Figure out the expected value of those stock options. Consider:

1) The odds that you will work there long enough to fully vest. This depends on you, but there are a lot of factors outside your control such as layoffs/crappy management/etc.

2) The odds that the company will be sold at a high enough valuation to convert everybody to common stock. If it isn't (and it probably won't be), your exit money will be less (perhaps much less) that whatever it would have been on a fully-diluted basis. This would be explained in the term sheet the founders signed with the investors and really should be shown to you before you get hired.

3) The odds that the company will have any kind of exit.

Bottom line, unless google is the one who buys you out, you ain't gonna be driving a Porche after the startup you work for gets bought out. The odds of you even breaking even and getting anywhere close to "100% market" is pretty small. Either tell the startup you want market rate and no options or take the 130% company--stock options are a suckers bet.

That would be an interesting cultural change.

Maybe startups would fare better if they exchanged "passion" and sleep-deprivation for competence, even with having to pay extra for said competence?

What prevents them from doing this (or do we just not hear about it here)? Do VCs not approve of the shape risk would be distributed in (even if their share ends up smaller in absolute terms)? Would it never work because of a culture clash with the sort of people who found startups (if you've convinced yourself you've "got religion" over some business idea, will you want to work with people who are openly just in it for the money)?

Your criteria discuss the demand-side of the equation as a prospective employee, but not the supply-side as the employer, which can't pay a higher salary due to a highly-constrained or non-existant budget.

Such an employer might do well to reconsider whether his product is worth what he thinks it is, then, if he can't muster the budget to pay employees a market (or above market, given the risks) rate.

First I think the 130 vs 90 aren't necessarily standard...that being said:

  * Work environment can often be a tossup.  You'll find just as many open floor plan bullpen situations outside the startup world as within it from what i've seen.
  * Largely agreed on the financial security; however, larger companies are more beholden to the market (so they might have to lay off N% of staff as a cost-cutting measure)
  * "no one outside the startup world wants to hire someone who failed numerous times before" - hyperbole.  Plenty of banks and established companies want to hire good engineers.  If the company you were with failed, it's not simply because you were a poor engineer.
  * "it is much easier to go from Big Co to Small/Tiny Co, then the opposite" - hyperbole.  I wouldn't say it's necessarily much easier one way or the other.  If you're moving from Big to Co, you might not deal well with the new expectations of not being able to say "that's not my job" or the long hours (for example).
  * "is particular true and quite dangerous for recent grads. Young recent grads are better off founding their own company or joining Big co instead joining fresh startups." - Why?  All of them have pros and cons...sorry.

Why make this offer when there are plenty of workers willing to both be underpaid and absorb the risk. (not to mention, no longer even get a payday IF there is an exit due to clawbacks etc)

This is the basic cynicism VC's have injected into the valley now. Why play fair at all, when I should just play the greedy strategy and optimize all behaviors for my optimal gain.

130% without equity in the vast majority of cases.

90% with equity if my equity is significant & I believe that the probability of payout is > 50%. There would probably be a lawyer involved to minimize risk of clawback to boot. I've spent some time as Mr. Gullible; I don't need to be taken again. :)

130% of market. When you're working as an engineer at a startup, too much is out of your control. You have to have a lot of trust in the people steering the ship to take on that risk.

130% every time. A stock option cert is a lottery ticket.

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