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Comment by prostoalex | Hacker News Reader

Paying significantly above market is not all it's cracked up to be:

* top-notch technical talent tends to value equity over W2 income (of which the take-home portion doesn't amount to much in states like CA or NY), people won't give up an equity position at growing company for a higher salary but questionable growth

* for employees that do get a sweet way above market salary package, this creates an incentive to cement their position at the company as much as possible, Yahoo! is probably prime example of that - very little usage of open technologies, all custom-built, all requiring immense institutional knowledge

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Do you have any data that top talent tends to value equity higher than salary? All the smart guys I know favor the latter. Too many companies use it as a tool to trick the less intelligent guys that they'll make bookoo bucks despite being given a joke amount of equity. Plus, you as an engineer rely upon your C team and potential investors to be competent enough to not screw things up. I also live in a state with lower taxes, which could be part of it, and a weak startup scene.

Equity will cost you at least 25% in taxes, should you get something out of it and needs to be accounted for. Additionally, you need either a lot of equity or a large exit to come out ahead of a higher salary that allows you to invest the difference, netting you at least a 5% return normally. On top of that, if you have 401k matching based on salary percentage contributed, you'll net a larger 401k, which is even more money. Further, to get that equity you have to remain at most places for 4 years, which seems to be pretty atypical nowadays.

If someone offered non-trivial amount of equity for a lesser salary that is a completely different scenario.

I've ran the numbers for a startup that just made me an offer and it is pretty absurd how much smarter a larger salary would be at a 200 million or smaller exit.

No data unfortunately, just anecdotal evidence as well. Perhaps it's the income tax rates is respective state, but when somebody has had a previous exit (YHOO, GOOG, FB, YouTube, WhatsApp, etc.), their portfolio (and whatever they diversified into) produces enough income to cover the everyday expenses, which puts diminishing value on the salary dollar.

You're right about the taxes, as I've noticed early stage startups eschewing 83(b) elections and moving towards stock grants in general, which devalues equity significantly.

> On top of that, if you have 401k matching based on salary percentage contributed, you'll net a larger 401k, which is even more money.

Most of the time with average engineering salaries the problems center around exceeding the maximum contribution limit, but I agree that's a consideration. I've never seen early stage (post-A or post-B) offer generous matching, but they certainly can.

How many people come from companies with large exits like that? We're talking what a total of 200, 300 people tops? It seems pretty unrealistic to expect most "top talent" to be in the situation you describe.

I wouldn't estimate it that low - TWTR priced at $26 produced 1,600 millionaires http://www.mercurynews.com/business/ci_24486370/twitters-ipo... and that was at lower valuation with lower vesting numbers compared to where Twitter is today. And Twitter is fairly minor league.

You also don't need a big exit - every single big name out there keeps issuing stock and it keeps vesting in someone's account. E.g., considering the stock growth I'd be surprised if any AAPL or NFLX engineer who spent 5+ years with the company is not a millionaire.

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