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Comment by pm90 | Hacker News Reader

Founders should be willing to give a lot more equity to the first employees. I don’t get the logic of not doing this. You want your engineers to feel as if they have ownership in the equity that you’re building. It’s such an easy way to keep engineers engaged and productive that it baffles my mind that it’s not done more widely.

I hate working for BigTech. Startups expect too much and compensate very little. The sweet spot for me has been medium sized public companies that offer great compensation but need solid engineering to grow their market share.

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We usually encourage folks to give at least 10% of the equity to the first 10 employees. That's what Stripe did and it worked well.

That number is going up over time, so I can report at least a little bit of improvement, though certainly not fast enough.

Honestly I think 10% should be a floor for this, and considered completely separately from the usual 10%+ option pool (for the ones that come after the first approx 10).

For that matter heading out of a seed round with very roughly 1/3 founders 1/3 employees 1/3 angels/whatever seems pretty sane to me, although a bunch of that first 2/3 should not have vested yet. Your second tranche their would hold a largish option pool for growth, and a bunch of "founding employee" equity. You are all going to get diluted to hell, but however it eventually shakes out I think that collectively those starting key employees should see roughly the same outcome as individually a founder does....

Equity or options? If options, what happens if they leave pre-liquidity? If it's, "they have 90 days to exercise", see this comment on the counterpoint thread: https://news.ycombinator.com/item?id=21868797. To summarize: screw that. If it's actually straight equity you recommend, how do you recommend the dilution work? Is it tied to the founders' own dilution? If not, what incentives do the founders have to not throw their early employees under the bus in future rounds? Even if all of this is done right: 10% seems likely to be too low for the risk.

It's the math again. Go do a spreadsheet and simulate a company as it grows and you see treating your first 10 employees in line with big tech expected value outcomes is a really, really big hit.

I know this is totally super optimistic, but can we change the perspective from

> is a really, really big hit.

> really amazing payoff for the early engineers/employees

My very limited understanding of the growth of the SV tech community is that its a generous cycle of people creating wealth, and then using that wealth to fund the next generation of tech. So it seems completely logical for SV founders to want to do more of this.

Whether it's a big hit or an amazing payoff are actually irrelevant, there is a going rate for engineers who are willing to accept startup risk (in a job market where anyone can get hired right after it fails this is not a lot of risk), and that's the price that will be paid.

When I was young and naive, they paid employees the "risk bonus" in stock shares, not cash. I asked for more cash, and they said, "nobody takes cash, stock shares are the thing". They were the dud thing.

Especially when you consider the diminishing returns on wealth. And presumably you should be able to attract higher quality employees who are more incentivized to work hard. Resulting in faster and more efficient growth. So you may never even take a “hit” to wealth. Unfortunately most founders and VCs have resorted to exploiting the social dynamics of the engineer class instead.

Which will be attrited away over funding rounds

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