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    I had a fair amount of skepticism about compensation in equity before just because most startups fail and you can’t pay for your groceries with lottery tickets, but I think I hadn’t considered this angle as deeply as it maybe deserves:

    [A]s the company raises more money, the value of your initial stock option grant gets diluted by the new money in

    So even the company growing a lot may not help you as much as you’d naïvely expect when they take lots of other investment along the way. As the post emphasizes, that’s common now.

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      Yeeeep.

      For example, two jobs ago, I had a shot at 0.05 percent equity. Any additional rounds would almost certainly have tanked that amount. Similarly, last job was given a fixed number of shares (always find out the outstanding shares in the company before signing anything, don’t repeat my mistakes!) and same thing would’ve happened.

      We’re getting screwed, and yet they wonder why it’s hard to find “passionate” developers.

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      The author of this post is famous but doesn’t get how things work. This is his argument…

      Tl/DR:

      • companies go public later, doing more later stage funding rounds.
      • founders have more control nowadays since VCs started to realize that founders outperform external CEOs
      • being a founder is less risky (not clear why this would be the case, yes, funding rounds went up, but so did the early expenses of starting a company)
      • founders have more upside than employees (he pulls a number from thin air, 30-50 times)

      There is so much in this post that I don’t agree with that it’s hard to know where to start. First of all, founders having more control is a good thing for employees. Founder stock is very close to the deal employees are getting. At the very least it’s better aligned with employees than investor stock. (down round protection is almost always built-in to investor stock). Also the founders work with the employees on a day to day basis. Making them on average less likely to screw over the employees. (seriously does anyone believe that the VCs care more about you than the founders? have a look at what happened to Travis)

      The opportunity cost of being a founder has only gone up. The reason is that nowadays you can get crazy high engineering or management salaries at big tech companies.

      I can only speak from my own experience. Maybe we’re particularly generous, but the difference between top employees and founders is not that big over here.

      The main thing I don’t agree with is the general sentiment of the post. Supply and demand for engineering talent have been more and more in favor of engineers over the last 10 years. Salaries are going up, perks are going up, work life balance is becoming more chill. I have a friend who joined 4 startups and sold his stock 4 times. He can pay his house in cash these days. No other industry has these amazing jobs.

      The one thing that does really need to change is taxation on stock options. That system is obviously a bit broken at the moment.

      What I think is really going on here is that Steve Blank is low on traffic for his blog and decided to write some hipster sounding controversial blogpost.

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        I have to disagree with you on a number of your points.

        First of all, founders having more control is a good thing for employees.

        This is highly situation dependent–if the founder has experience and values their employees, it’s a great thing. If a founder is young and doesn’t understand the career trajectory of engineers (or other people trying to raise a family), this can be bad. If the founder, as a purely random example, comes from a privileged background and tries to treat their employees like pieces of factory machinery, it’s terrible.

        Founder stock is very close to the deal employees are getting. At the very least it’s better aligned with employees than investor stock.

        Founder stock grants are quite often orders of magnitude larger than that for their employees, they have inside information about how the financing and fundraising is going, they have direct control over those aspects in ways their employees do not, and that’s before you even get into the options, voting stock, and other differences Blank touches on.

        I’ve seen a CTO (who is legally liable for the company’s behavior as an executive!) be grudgingly given less than a point share in the business, because of stingy founders! Us poor grunts who build the products have no hope in such cases.

        Also the founders work with the employees on a day to day basis.

        The company I was just let go from had a founder that talked to me a total of like 5 times in the last year and a half, the final time gaslighting me about who had me fired. The previous health IT company I was at, the tech cofounder kept their day job and seagull managed the rest of us, and the biz cofounder/CEO usually was holed up in their office and popped out to ask for asinine product tweaks and failed to make sales and raise investment.

        This is a highly-variable thing.

        Making them on average less likely to screw over the employees.

        VCs are there to make money, if it means sharing with employees they’ll do that. Founders are there, in my observation, to boost their own egos–and even if you write most of their product, their own arrogance will prevent them from ever giving you similar compensation, because you once took a paycheck from them and somehow that makes you not as worthy…even if the paycheck was backed by other people’s money. If it’s backed by their money, God help you.

        The opportunity cost of being a founder has only gone up. The reason is that nowadays you can get crazy high engineering or management salaries at big tech companies.

        That applies double for early employees, right? At least founders get to network with the investing class and can put “I founded ” on their resume and go on podcasts and shit–early employees are usually hired because they’re more qualified than the founders (by definition…if they weren’t, they probably wouldn’t be hired) and they are paid very much below market rates.

        Maybe we’re particularly generous, but the difference between top employees and founders is not that big over here.

        Are you one of the founders? Can you throw out some numbers?

        I have a friend who joined 4 startups and sold his stock 4 times.

        I’ve worked at least four startups (two as senior FTE, one as cofounder, others as contracted engineering talent), and only now might have stock from one of them. Last one the founder got really weird when I talked about exercising my options to see our finances. Good for your friend, but equity is basically a joke on par with exposure now.

        No other industry has these amazing jobs.

        You might be surprised at the perks and job security offered by other white-collar fields. Engineering, once you have a PE, is relaxed as hell by all accounts. If these jobs are so great, why do we mostly only see dumb young men signing up for them?

        ~

        Like, I get it–in magical little pockets of reality that still mirror the 90s, being a startup early engineer is great. For most of us, though, we’re getting shafted compared to the value we add.

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          Sorry to hear that, doesn’t sound like a great environment. As an engineer you can be quite picky where you work. I’ve made this mistake in the past as well, staying too long somewhere were the culture/environment isn’t right. Did you find a good opportunity eventually?

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          I have a friend who joined 4 startups and sold his stock 4 times.

          When did this happen? His whole argument is that options used to be a good deal, but no longer are. Examples from ten years ago don’t disprove that thesis, which is in accord with my experience. Yes, it’s a good time to be an engineer, but only because salaries are high. None of the equity I’ve notionally had at several startups has ever been worth even enough to buy a coffee in actual exchange value.

          Maybe we’re particularly generous, but the difference between top employees and founders is not that big over here.

          OK, I’ll bite. What’s the ratio of a founder’s equity to the equity of an April 2019 new hire at your shop?

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            I don’t think the post said or could credibly say it’s a bad time for engineers, but it did raise some things that seem both true and relevant to one’s analysis of options. Just that you might be waiting a long time before you can sell is a pretty big deal. A naïve analysis of options value probably doesn’t factor in dilution – you might think “it’s 0.x% equity” based on what it is at the time, forgetting that if there are more rounds, that will change. This post only touches on it, but the whole short exercise window if you quit thing is relevant too.

            The world is, in general, quite unfairly kind to engineers in 2019. But you should still understand upsides and downsides of options when you’re evaluating them.