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Comment by alecbenzer | Hacker News Reader

I hope that eventually as more and more people realize how much more they could make at big tech (IME a lot of people just straight up don't know, esp. when a lot of the comp comes as equity grants), startups will have to start paying more/offering bigger slices of equity. But seems we're not there yet.

I also wonder how much of this is driven by software engineers who couldn't (or, probably more realistically, don't think they could) get a job at Big Tech?

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Oh I agree— big tech is fantastically lucrative! I wouldn't dissuade people from spending some time there.

Separately I also agree that there's a big problem of credentialism in software engineering. We meet lots of amazing software engineers who didn't go to the right schools— that's a big reason why I funded Triplebyte.

The other big thing messing up startup comp right now are super-high valuations for mid stage companies. When you’re getting options based off an inflated evaluation your upside is low, and the probability your options become worth $0 even if the startup does moderately well (eg if it raises a round at $4b right before you start and goes public for $3b). Doesn’t matter how many options you got, they were pegged to an inflated evaluation

Agreed. People are madly in love with working at companies like Stripe and Airbnb right now, but I'm not convinced the risk is worth it. They're giving out equity as if it's liquid, but it's not. So if I can get $200k per year in equity from Stripe or $200k per year in equity from Google, why exactly would I choose Stripe or Airbnb? Just in the hopes that the $200k will end up worth $400k or $800k? I mean, maybe it will, but that feels pretty speculative. Put another way, if you already worked at Google and had the opportunity to invest cash into those companies, would you put all your equity comp in Stripe or Airbnb?

In the example where you have equivalent equity packages available at Google and Stripe/Airbnb, I think you're right -- it's hard to see how equity that has an uncertain liquidity horizon is equal in value to Google's, which you will definitely be able to sell in a year. However, I've found that offers from these companies compensate for that -- Stripe/Airbnb will offer more in equity than Google precisely because of the liquidity premium. Then it comes down to, how much of a liquidity premium do you demand as an investor?

Google at least is insanely profitable. Are Stripe and Airbnb?

Seems to me that there's less risk in the Google stock than the others, because the others need a lot of potential future upside to justify their high valuations absent major profits, and if that upside fails to materialize the valuations will tank (as we're seeing with, e.g., Lyft).

RSUs are the solution to this problem. With a double trigger a pre-public company can offer them without employees suffering a tax liability on illiquid equity.

RSU will make you pay tax at the marginal rate though instead of long term cap gains on options.

NQSOs have the same issue and ISOs are increasingly difficult to issue as startups get to mid and late stages.

Valid points

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