<story><title>Some thoughts on equity compensation</title><url>http://avc.com/2018/01/some-thoughts-on-equity-compensation/</url></story><parent_chain><item><author>jasode</author><text>&lt;i&gt;&amp;gt;And yet we treat it like something that is non negotiable, &lt;/i&gt;&lt;p&gt;Sometimes, it&amp;#x27;s non-negotiable because there&amp;#x27;s &lt;i&gt;no money&lt;/i&gt; to pay Google-style $300k salaries + benefits.&lt;p&gt;Fred doesn&amp;#x27;t make it clear whether he&amp;#x27;s talking about young startups &lt;i&gt;with very little money in the bank&lt;/i&gt; or a mature 8-year old &amp;quot;startup&amp;quot; like Uber that raised $22 billion from investors with $6 billion in revenue.  If it&amp;#x27;s a young 2-person startup that just got a modest $120k investment from YCombinator, a &amp;quot;3rd employee&amp;quot; will not be able to get a $300k salary.  The only monetary recruitment tool left is equity.&lt;p&gt;Fred is also leaving out the game theory aspects of the equity as a &lt;i&gt;deliberate filtering mechanism&lt;/i&gt; to attract employees aligned with the founder&amp;#x27;s vision.   Yes, many workers are definitely cynical of startups&amp;#x27; self-aggrandizing &lt;i&gt;&amp;quot;we&amp;#x27;re going to change the world&amp;quot;&lt;/i&gt; so they only see one (and only one) way to compensate employees: 
 pure 100% cash and fuck off with your options.  An employee certainly has every right to stay rigid to that point of view.  However, it still doesn&amp;#x27;t change the psychology of founders wanting to filter out the candidates with a &amp;quot;mercenary&amp;quot; mindset.  They often have no money to pay the mercenaries anyway so they have no choice.</text></item></parent_chain><comment><author>saas_co_de</author><text>&amp;gt; &amp;quot;mercenary&amp;quot; mindset&lt;p&gt;a.k.a. &amp;quot;professionals&amp;quot;&lt;p&gt;I agree with your assessment that what it really comes down to in most cases is that companies don&amp;#x27;t have the money and so they are trying to hustle something on the cheap.&lt;p&gt;The other factor is that unless a startup happens to have some very talented technical co-founders (very rare, even though they all think they do) they aren&amp;#x27;t going to be able to identify or attract real talent anyway. If they were paying premium salaries the money would most likely be wasted.</text></comment>
<story><title>Some thoughts on equity compensation</title><url>http://avc.com/2018/01/some-thoughts-on-equity-compensation/</url></story><parent_chain><item><author>jasode</author><text>&lt;i&gt;&amp;gt;And yet we treat it like something that is non negotiable, &lt;/i&gt;&lt;p&gt;Sometimes, it&amp;#x27;s non-negotiable because there&amp;#x27;s &lt;i&gt;no money&lt;/i&gt; to pay Google-style $300k salaries + benefits.&lt;p&gt;Fred doesn&amp;#x27;t make it clear whether he&amp;#x27;s talking about young startups &lt;i&gt;with very little money in the bank&lt;/i&gt; or a mature 8-year old &amp;quot;startup&amp;quot; like Uber that raised $22 billion from investors with $6 billion in revenue.  If it&amp;#x27;s a young 2-person startup that just got a modest $120k investment from YCombinator, a &amp;quot;3rd employee&amp;quot; will not be able to get a $300k salary.  The only monetary recruitment tool left is equity.&lt;p&gt;Fred is also leaving out the game theory aspects of the equity as a &lt;i&gt;deliberate filtering mechanism&lt;/i&gt; to attract employees aligned with the founder&amp;#x27;s vision.   Yes, many workers are definitely cynical of startups&amp;#x27; self-aggrandizing &lt;i&gt;&amp;quot;we&amp;#x27;re going to change the world&amp;quot;&lt;/i&gt; so they only see one (and only one) way to compensate employees: 
 pure 100% cash and fuck off with your options.  An employee certainly has every right to stay rigid to that point of view.  However, it still doesn&amp;#x27;t change the psychology of founders wanting to filter out the candidates with a &amp;quot;mercenary&amp;quot; mindset.  They often have no money to pay the mercenaries anyway so they have no choice.</text></item></parent_chain><comment><author>pja</author><text>I think at least some of the cynicism comes from founders offering salaries that are 30-40% of the rate they might get from &amp;#x27;bigcorp of choice&amp;#x27; and then offering derisory amounts of equity in compensation.&lt;p&gt;If the equity you offer is just about enough to make up for the employees loss of income &lt;i&gt;if&lt;/i&gt; you get both a minimum $100million+ exit &lt;i&gt;and&lt;/i&gt; no future dilution, then your offer isn’t going to be very enticing to jaded potential employees who have been round this particular block once or twice before.</text></comment>