Comment by jabzd | Hacker News Reader

Comment by jabzd | Hacker News Reader

Parent Full thread

Absolutely and totally agree on all points. Your $50 million is the exact number and breakdown (except on a 3 year timeline) I use for candidates that have made it far enough into the interview process such as having an offer on the table or have asked during the process how we approach equity.

> In today's market, your best employees can probably get 50-100% of that hypothetical annual bonus in real cash just by switching jobs.

I did not mean to imply that is the only bonus plan. Cash bonuses and significant raises generally yield an additional 20% of pay over the course of a year. We absolutely have to combat the switching of jobs yielding that in raises, especially as we are a software engineer heavy organization.

It's more that we don't want to not offer stock grants/equity at all just because they suck or are a lotto ticket. Especially in order to reward long term employees in an additional way. We more or less say "here's this lotto ticket, pretend this doesn't exist for now." The retention aspect may kick in if we appear to be nearing a sale event, but on day one means nothing.

Your startup has fewer than ten people, and the grants are .1-.25%. Let's say it sells in three years for $50m, with no further dilution because you never hired more or took more investment.

He gets $50-$125K. How much equity do you have yourself as founder? 50% ($25 million)?

What do you dream of doing with your millions once you exit? What do your employees dream of doing with their hundred thousand or so?

We are a 7 year old company. I have only ever had one candidate find a problem similar to the point you are making. Most understand that the risk profile makes a world of difference for a profitable company now versus 7 years ago where skipping payroll for the co-founders was common.

Your math is slightly off in assuming that the .1-.25% carries for the bulk of the ten, but your point valid all the same as a potential concern for individuals.

We often struggle with being labeled a startup due to our age and risk profile, but due to our size, we accept it! Ha.

Why even offer equity at all? If you're profitable and able to offer cash bonuses and raises, why not use alternative retention tools? Do you offer a 401(k) with generous company match? Do you have a profit sharing plan? Profit sharing into a 401(k) can be especially appealing.

While I obviously don't know anything about what your company does and what its financials look like, if I was a prospective employee, the fact that you're sub 10 employees at seven years in would lead me to conclude that you're not the kind of high-growth company for which 0.1 - 0.25% equity has any chance of translating to a really big payout. So why pretend? I'd find it far more appealing if your compensation package was realistic/honest about where you're at as a company.

401(k) is something we are planning on early next year, yes.

As for the seven years in with 10 employees, definitely valid point. However, I always make sure to point out to candidates that we were 3 employees 2 years ago and are now getting significant traction with bigger clients. We are in an extremely slow moving B2B industry so it takes significant time to get that initial traction. It is very much a referral based sales process and potential customers like to bucket themselves based on size. Effectively, we've had to work our way up the food chain to get to the bigger fish. We expect to be 20 by the end of next year, so it carries more weight now than it would have 2 years ago. This is the same reason we even foresee a sale event in the next 2 - 3 years with the growth we've had over the last 18 months.

Perhaps that's stockholm syndrome speaking (kidding) :p

Reply on news.ycombinator.com