Ask HN: Am I getting screwed on options/equity? (Employee #2)

https://news.ycombinator.com/item?id=2990449

by throwawhey • 15 years ago

12 6 15 years ago

news.ycombinator.com

Hi HN. I need your help here. Indulge me for a minute.

I am joining a [YC] startup as employee #2, and am being offered a near-market salary. So what's the problem? Well, the options package amounts to about 0.4% of the company (pre-series A and thus, probably pre-mass dilution).

Obviously the near-market salary is great and all, and some of you will probably say that I should take that and be happy... but I feel like I am taking on some risk by moving from "stable" work to a startup that may or may not survive the next 2 years. Obviously the equity question is not a question at all if it doesn't survive, but I would like to think that such an early [engineering] hire who will be working probably-ridiculous hours deserves more than 0.4%.

Am I just greedy? I think I generally have a good work ethic, and I will work hard in any case, but I am not very incentivized to work the usual 'crazy startup hours' if I get an almost ridiculously-small sized portion of "the pie." I guess I should add that this company does not have a very high valuation or anything, between 5-10 mil.

I've read most of the options/equity articles online, but feel free to post them again. Should I ask for more? If so, how can I ask without seeming like a total jerk? Am I just a greedy bastard? I'll accept any answers for all of these questions. Thank you for reading.

danielharan• 15 years ago

You should absolutely ask for more. 0.5-1% is more typical for early employees. The worst that can happen is they say no.

0.4% is great if it's the next Google. Assuming an early exit, that won't be life changing money.

Instead of making this an argument over how hard you can be expected to work, you could offer some flexibility on the salary ($10k lower than market until major financing is not going to be a big deal) or prove that you can add far more than 1% of value to the company.

snowtiger• 15 years ago

well, we all are greedy bastards, however - 0.4% sounds too low assuming that for the start-up you will have to put in all your passion even when it is not there. danielharan gave good advice - if you lower their costs at the moment (your salary) they might be interested in increasing your equity part. And yes, you are taking risk. P.s. if they succeed, you will have created much more than 0.4% of the value.

vicngtor• 15 years ago

I joined a similar startup as employee #2 and I got 1%. I think 0.4% is way too low.

However, my startup was after series A and was definitely going to be acquired (based on the talent alone)

amorphid• 15 years ago

Your current work situation has nothing to do with them. If I was the founder and you told me that my startup wasn't as stable a job as your current gig, that would tell me you don't have the stomach for startup life.

Also, if you want more equity, just ask them if the equity side is negotiable. They will get the hint.

glimcat• 15 years ago

You say you're getting paid well and that the valuation is in the single-digit millions. Run the math on that. The most you are likely to get out of that for ANY likely equity share is on the order of a nice bonus, NOT on the order of FU money.

Working at a startup usually means interesting problems and opportunities for rapid personal growth. That plus a near-market salary is a pretty reasonable use of your time unless Google is currently on the other line.

Negotiate, sure. But don't turn down perfectly good cake just because you wanted more icing.

relaunched• 15 years ago

You are probably a little on the low side, but that could be based-on any number of factors (and as mentioned, feel free to negotiate). How many founders are there? Consultants? What do you bring to the table? What do you bring to the table? Were you a significant contributor to a major startup?

What's the cash position? Do you know you have a job for at least 12-18 months? If so, I'm not seeing the significant risk that warrants a significant equity bump. I'm assuming they raised 350-550+k in angel funding and there is a probably an A round close / in the works. Also, what does the angel financing look like...if it's convert capped or even better for you, the Yuri convert/uncapped, you don't have that much to worry about pre-A vs. Post A dilution.

The dirty secret is startups are a home run only game. A 10 million dollar exit means (early successful exit) the angels get paid and founders get a paid a bit. A 50 million exit means angels & A get paid, founder are happy, but looking for a next project and employee 1-3 might get a down-payment out of the deal. Employee number 2 doesn't get to retire unless there is a couple hundred million dollar exit...the higher the better.

Ask HN: Am I getting screwed on options/equity? (Employee #2)

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