Hacker News Reader

Comment by Blackthorn | Hacker News Reader

During my last job search, I was contacted by several companies with seed funding (not even series A). They wanted to lowball a salary and then give 1% or less equity to "make up for it".

Hahahahahahaha. Haha. Ha. Are you serious? For an early non-founder employee, startups might as well be scams.

View on HN

How does on balance the lower salary with the increased equity in making a decision?

Pretend the company is valued at $1m. Pretend you consider a standard programmer's salary to be $100k. If they offer you a $75k salaray, you are saving them $25k/year. Assuming you'd be there for 4 years (because that's how often most vesting periods are), you are saving them $100k. $100k of the company's $1m comes from your substandard salary. So you should get $100k in equity. That's 10%.

If they try to convince you that you don't deserve that much because the value of the company will rise in the future, ask them where the signed term sheets for the next round are.

A company today is worth however many billions it will be worth if it succeeds, discounted by the risk that it won't succeed. That's an incredibly difficult calculation to make, but fortunately you don't have to do it if the company recently had a funding round, just use the value the other investors decided on.

So if the company raised money at $10MM and you're being offered 0.5% equity, then treat it as a $50,000 bonus that you get for being a loyal employee over the vesting period.

Reply on news.ycombinator.com