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Comment by ryporter | Hacker News Reader

I'm really surprised at how dismissive people are about the value of equity on Hacker News. Would you never start your own company, because then your compensation would certainly be tied to the value of the equity? If you really think that the shares are, on expectation, worthless, then don't work there, because your efforts will be for naught when the company folds.

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Equity, as a VC or a founder, is very important. You also have a good amount of control over where the company goes, your stake only gets diluted on your terms, and the company's behavior can be tweaked to make sure you get a good exit.

As an employee, getting a small amount of common stock, none of those things apply: In practice, if things aren't going wonderfully, it's pretty easy for you to end up with worthless options, even when the founders and VCs end up alright. Even when the company is doing fine, founders rethinking how much equity they really want employees to have is not unheard of. Any calculation you make doesn't matter, as you are at the mercy of other people.

You'd see valuing employee equity very differently we all had not heard of, or been a part of, those horror stories.

Again, if you really think that there is a significant chance that you will get screwed over by the founders, then don't join the startup. Joining a startup is, in no small part, a bet on the founders, and it requires that you take some risk yourself.

Yes, a lot of early employees have ended up with worthless stock. That's the risk they took. There are also a lot who have become very rich.

Most employees end up with common shares, unlike the preferred shares that founders and VC's end up with. This can lead to situations where the VC's and founders make tons of money and employees get nothing.

http://www.businessinsider.com/how-liquidation-preferences-w...

I've never seen a founder end up with preferred shares. Lots of shares, sure, but not preferred.

It could be that founders (many in the community here) have a similar mindset to VCs: I need 10%+ to make it worth giving it a go. Standard equity grants for employees are tiny in comparison.

Founder equity isn't comparable to equity held by employees for the simple fact that employees have no control over the rules governing the equity.

Cash in the bank, on the other hand, is quite straightforward.

First, there's a huge difference between the value of 10-100% of a company's equity and the value of 0.1% of a company's equity. You can make up the expected value of 0.1% of a company via a very meager increase in salary.

Second, if I'm starting my own company and taking venture funding, I'm going to be paying myself and my cofounders a healthy salary out of that funding, enough that we're not constantly wondering why we're not taking a well-paying industry job. If I'm not taking venture funding, I'm doing this because I enjoy it more than I enjoy salary, because I have enough personal funds to cover the venture being unprofitable. Any profit is a bonus, but not the primary motivator. If I'm working for someone else, profit is my primary motivator.

You don't have to take funding if you're starting a company...

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