Windsurf employee #2: I was given a payout of only 1% what my shares where worth

https://twitter.com/premqnair/status/1948420769945682413

by rfurmani • 12 months ago

672 506 12 months ago

linotype• 12 months ago

I’m afraid behavior like this will only get more common and really shines a light on what a bad deal startups are for anyone but VCs and founders. Windsurf founders should be ashamed of themselves, but of course won’t be.

sublinear• 12 months ago

Buy the ticket, take the ride.

jen20• 12 months ago

But also understand who broke the ride in mid-air, and treat them with according levels of scorn in future.

bachmeier• 12 months ago

Not much of a story here. The guy got a better offer and he took it:

I was given an offer that would explode same day. I had to forfeit all of my vested shares earned over my 3.5+ years at Windsurf.

mitthrowaway2• 12 months ago

It's still pretty shocking to have to forfeit shares that have vested.

nocoiner4• 12 months ago

It’s like, what does vesting even mean?

Was this a scenario where he lost them because some sort of “cause” event occurred, like leaving to work for a competitor? I can’t imagine that would even be valid under CA law?

I’m not even sure who was forcing him to forfeit his shares…

brutuscat• 12 months ago

He should come to the UE to work on … oh wait!

TrackerFF• 12 months ago

Financially speaking, is it even worth joining a startup anymore? Compared to just going to any of the big companies. The latter will likely pay you more, with less risk involved.

Seems like the best shot is to strive toward becoming financially independent, and then just go for the startup route and follow your passion. If you it doesn't work out, no big deal - if things turn out great, you'll just be even better off.

absoluteunit1• 12 months ago

Seems like the best shot is to strive toward becoming financially independent, and then just go for the startup route and follow your passion.

This is what I’m trying to do now. Having worked in startups and big tech; I think the best thing one can do is to attempt to forge their own path. For independence, financial gain and sanity

BrawnyBadger53• 12 months ago

It's generally not a good sign to me that this is the case. But I think you're right. Something needs to change to make startups feel more viable again.

lovich• 12 months ago

Has it been worth it in a while? This is a legitimate question as I am on the east coast and wonder if it differs from the west coast environment.

At least in my anecdotal experience, everytime I’ve entertained a startups offer in the past decade it’s been either something like engineer #1, 3% equity and no you cannot see the cap table or other agreements with investors, or something like 10k units at 25 a share when we’re on series z, and you lose them if you leave, and you can’t sell for 6 months if you leave, and the investors have priority on payment if we sell for less than our valuation and yadda yadda yadda.

I mentally just valued the equity as 0 in the compensation with all those limitations on liquidating them and never understood why anyone joined a startup

xkcd-sucks• 12 months ago

Oh also there is the trick where the startup gets sold a little under its strike price and the execs each get signing bonuses > book value of company as sold

marssaxman3• 12 months ago

Was there ever a time when you could reasonably expect to make more money by joining a startup? That has never been the case so far as I am aware, and I'm currently on my seventh tour through startup-land...

givemeethekeys• 12 months ago

It feels like it is worse now than it used to be. Back in 2010, you would be giving up a nice salary but not a much nicer salary by working at a startup.

So, startup base compensation hasn't kept up, and the career and financial risk of working for one has gone up due to higher interest rate and higher open-market asset prices.

phendrenad2• 12 months ago

It was always a bad deal. It was supported by urban legends of janitors and cafeteria workers getting seven-figure payouts because they negotiated a few shares of a company that went IPO and went "unicorn". But the reality was, most startup companies failed, and most shares became worthless. In 1995, 2005, 2015, etc. it was the same story.

The only thing that changed recently is the "unicorns" stopped happening altogether.

khuey• 12 months ago

More? Not really. But before Zuckerberg and the DOJ blew up the illegal wage fixing the big valley companies engaged in the gap was smaller.

eweise• 12 months ago

Maybe way back in the .com days but its a terrible decision financially now.

RainyDayTmrw• 12 months ago

2010s startups were a lottery ticket with bad aggregate odds but real upside. If you wanted to make a risky bet, or if you believed you were better at picking winners than the rest of the market, there were some real opportunities to be had. If the new trend is a cabal of investors and executives hollowing out all the upside, in the rare event of a success, that's stark.

pjmlp• 12 months ago

Outside US hardly, unless being one of the founders, because stuff like being given shares is not common.

You will get a regular salary, with occasional performance bonus, just like any regular company, with all the action a startup requires.

rexreed• 12 months ago

I am of the firm belief the solopreneurship is the future, especially with the power of AI. I don't believe corporations of any type, from startup to tech giant have the interests of anyone but the majority shareholders in mind. Employees, customers, partners, all get the shaft. When money is involved, startups aren't product companies, they're financial instruments.

thedevilslawyer2• 12 months ago

Compared to just going to any of the big companies

You're assuming someone joins a startup when they could join a big company. It's an exceptional occurrence.

nevon• 12 months ago

I must be misunderstanding what he is saying, but I can't figure out what. Once his shares have vested, they are his. What entity forced him to sell his shares for 1% of what they are worth and how could they possibly do that?

fragmede2• 12 months ago

Whichever entity ended up buying Windsurf, the corporation. They get to declare the exchange rate, and for what. Sometimes it's cash, sometimes it's stock, usually it's some mix of both.

nocoiner4• 12 months ago

Where would the 99% haircut have come into play?

conartist6• 12 months ago

Cognition made him a lightning offer it sounds like, valid one day only.

I think if I understand what he is saying he could either stick with the product and team giving up the shares, or keep the shares and try his luck getting money for them another way.

I appreciate that his choice shows that he is in it for the product and the team, but also ouch.

shawabawa32• 12 months ago

Google did a weird thing where they poached windsurf employees, licensed their tech and hired the CEO and upper management, leaving a shelled out company behind

Looks like employees were given an exploding offer to join Google and sacrifice windsurf shares at a low valuation, or stick with windsurf

If you stuck with windsurf you then joined cognition in a later acquisition

nocoiner4• 12 months ago

Wow. How did the Windsurf investors feel about that?

IncreasePosts• 12 months ago

Why would they give the CEO a bunch of money to join Google, but not employee #2? Is it possible the CEO is just worth way more for what ever reason?

bigmadshoe2• 12 months ago

Vested options can be voided when you leave a company, unless you want to exercise them.

wmf• 12 months ago

It's not entirely clear, but I think Google/DeepMind offered him 1% of (what he thought) the shares were worth and then he refused and then the shares became worth almost nothing because Windsurf was just a husk of its former self.

ThePowerOfFuet• 12 months ago

https://xcancel.com/premqnair/status/1948420769945682413

hackermeows• 12 months ago

why would anyone work in startups as early devs anymore. Tell me what is the upside? There seems to be only downsides. Startup Fails , you loose - Gets acquired - you loose What is the motivation to perform .

agartner• 12 months ago

Working on decently cool things with relatively limited bureaucracy.

phkahler• 12 months ago

You can do that at established companies. If the cool thing comes to an end you'll often have a boring job you can keep or stay at while you find something else.

mianos• 12 months ago

If you want to write new code and have a lot of influence over the overall implementation instead of fixing bugs on a years old steaming pile of tech debt.

Not all places with large existing codebases are that bad, but if you are experienced, it can be very personally satisfying doing something well before it has degraded over time.

I have worked in quite a few. One is a household name down here in Australia. I was the first engineer with the two founders. I worked 2 years 24/7 for half the salary I got when I left. I'll never get my money back but that's ok as I loved the time there.

BoiledCabbage• 12 months ago

There seems to be only downsides. Startup Fails , you loose - Gets acquired - you loose What is the motivation to perform

You get to make a nice payout for a VC. And isn't that all of our life goals?

SirMaster2• 12 months ago

Because you like the work you are doing and the projects you are working on?

Presumably you have a lot more control and freedom to do things how you want than at a large company with a lot of red tape etc.

That's the main reason I would do it.

lsllc• 12 months ago

So "heads I win, tails you lose!"

bwfan1232• 12 months ago

faang has sucked the oxygen in the air. For experienced engineers, the one upside to startups is if you are a founder and you are creating a change you want to see in the world. But this delusion is shattered as time goes by and you realize that you are only a cog in a smaller wheel, whereas, in bigtech you are a cog in a bigger one.

On average, startups tend to have a better culture due to the incentives at play compared to big-tech. And that attracts engineers regardless of the comp.

crazygringo6• 12 months ago

This is one of the most confusing things I've ever read.

Cognition acquired Windsurf. So how has he "joined Cognition"?

"I had a place at Google DeepMind as part of the deal." What does that mean? DeepMind doesn't have anything to do with Cognition or Windsurf, right?

Why would an offer at Google require forfeiting vested shares in Windsurf? Is that Windsurf policy or Cognition policy or Google policy?

"I was ultimately given a payout of only 1% of what my shares would have been worth at the time of the deal." So he took the payout and forfeited the shares? "In going to Cognition, I’ve chosen a different direction." Or not, he rejected the payout and kept the shares? I can't even tell what's hypothetical versus what actually happened.

I literally don't understand a single thing about this tweet. I've read all the comments here so far and my confusion seems to be shared. Can anyone who has context please help explain what's actually going on? And particularly how any company could force you to forfeit vested shares in a company?

shawabawa32• 12 months ago

You have to know some of the background

Google poached windsurf employees and licensed their tech, paying out billions to upper management but apparently offering a fraction of the value of shares

This employee chose to stick with windsurf instead of moving to Google

Windsurf was then acquired by cognition for an unspecified but probably quite low amount

So this employee is now at cognition

crazygringo6• 12 months ago

Thank you, that helps!

But so did he keep the shares or take the payout? Is the 1% payout an accurate reflection of Windsurf's value after having lost so many valuable employees? And why didn't he take the Google job? Was the 1% contingent on taking the Google job? But how could it be, since Google doesn't own Windsurf/Cognition? But if it did somehow, did it have a higher paycheck to compensate? Or was it contingent on staying at Windsurf/Cognition?

This thing needs an in-depth blog post analysis. The tweet by itself isn't providing even close to the information necessary to understand what's actually going on.

bryanrasmussen• 12 months ago

Writing for LinkedIn metrics means never having to make an understandable statement that someone could take exception to.

mjiang41• 12 months ago

Some more context from Ali Partovi, founder of Neo accelerator:

https://x.com/apartovi/status/1948444826674102732

bad look all around.

SirMaster2• 12 months ago

Why do people care so much about what some random guy did in a company acquisition?

lokar4• 12 months ago

A lot of this industry is focused on early stage startups as a path to financial success. The rules and laws around this don’t tend to protect even early employees much at all. People depend on social norms for what to expect. Shifts in the norms are of interest.

blitzar2• 12 months ago

Everyone thinks they are the next random person who wins the startup lottery. Dreams of 50 million dollar paydays are brought crashing down when they realise they will be lucky to get 50,000.

Muromec3• 12 months ago

Because it sets the expectations and everyone here is (pretending) to play the same game as that random guy. Okay, not everyone, but it's YC forum.

lemax• 12 months ago

This is a fair cautionary tale but it's worth understanding the specifics of the situation – Windsurf maintained a relatively easy to replicate product with no moat, and employed a bunch of attractive talent. The company got gutted of these employees and lost its valuation because no suitable buyer thought their IP was exceptionally valuable on its own. Just because this was the outcome for Windsurf does not mean there are no longer opportunities to join startups building sticky customer bases with valuable IP and walk away wealthier when they exit – yes there is a liquidity problem[1] but let'a be honest with ourselves about the specifics of the case for Windsurf.

[1] https://techcrunch.com/2024/01/11/us-startups-have-a-liquidi...

gsibble7• 12 months ago

Actually, their recent acquirer is now raising at a $10B valuation from Founder's Fund.

They had plenty of value left even after getting gutted.

sailingparrot• 12 months ago

I don’t understand why the specifics of the situation matters here. We know the company got acquihired for $2.4B, the problem is, why did all of it go to investors and founders and nothing for employees?

I’m not sure customer churn rate has any impact on liquidation preference.

KaiserPro3• 12 months ago

I was aquihired by a FAANG.

The headline "startup bought for x million" is almost always a lie, either direct or by omission.

First, when a startup is bought, its generally not bought at the headline rate. So if you see a "bought for $45m" that doesn't mean People who own shares all got a % of 45m.

That number is normally bullshit, but also a "total package" which include share offers for joining the new company.

This means you will get say 1% of the headline buyout now, and then golden handcuffs to get the rest.

Also, it makes no sense to give employees that much money upfront. After all, if I'd been given $1m in one go, I wouldn't be fucking working now.

bagels• 12 months ago

1m isn't enough to really retire in in silicon valley

throwawayq34232• 12 months ago

Or in any big city tbh.

loire280• 12 months ago

Sure, but if you're 10+ years into your career and have been financially conservative (i.e. have a positive net worth), a lump sum of $1m could be enough to retire to a lower-cost location.

KaiserPro3• 12 months ago

probably right, but I'm not in SV. So its enough to pay off the mortgage and provide enough monthly income to not care what job I'm doing

ohdeargodno2• 12 months ago

Take a million, go live literally anywhere that isn't Silicon Valley, remote work for a company that interests you, or your own project.

There's very few currencies in the world in which 1M isn't enough to retire. USD isn't one of them.

baq8• 12 months ago

Don’t retire in Silicon Valley then

kentonv3• 12 months ago

Yeah, I used to hear all the time that "a startup is worth $1 million per engineer in a pure acquihire", but learned the hard way this is a myth.

When we were talking to various companies about acquiring Sandstorm.io (my startup) in 2017, one of the companies told me, essentially: "We aren't interested in your IP, only the employees. We'll give you a set of job offers for them. We will then sum up the salary and equity grants from these offers, and call that the acquisition price. If you want to take some of that money and redirect it to your investors instead, that is up to you."

I was a bit taken aback. Obviously I wasn't about to take a cut of my employees' future comp and give it to investors.

Instead we ended up going to Cloudflare, but not as an acquisition. Cloudflare told us very honestly that they couldn't justify buying the IP, but they would be willing to acquire the company for $0 to wind it down for us. I decided to just take the job offers but keep the company independent as an open source side project, thinking maybe I'd revive it eventually. Turned out to be a mistake as some guy who was mad we didn't hire him sued Sandstorm six months later, and that was then my problem instead of Cloudflare's, oops. Should have sold for $0.

(Once it became clear to the plaintiff('s lawyer) that we weren't going to settle, they stopped pushing the case forward, but didn't drop it, so it just sat in limbo for 5 years before the judge finally threw it out it 2022. Meanwhile I couldn't dissolve the company and had to keep filing taxes for it. Ugh... lessons learned.)

kingforaday• 12 months ago

Whoa, bummer but interesting. It can be hard to let go. Thanks for sharing.

swyx• 12 months ago

sorry that happened to you. what taxes do you have to pay on a company making 0? just delaware franchise tax?

lvl155• 12 months ago

So many bitter aholes in this business.

igor472• 12 months ago

That sucks. FWIW I had a sandstorm instance back in the day, and I think it was an idea ahead of it's time. The stuff you were trying to do I think got easier as containers became more widely adopted, and as enshittification has made the case for self-hosting more obvious. So... Thanks for trying!

sokoloff• 12 months ago

$1M in one shot leaves you with around $600K after taxes in most states. That’s enough to pay you around $24-30k/yr.

Unless you already had several other million saved already, I bet you’d be working again.

para_parolu• 12 months ago

$25k/yr can be decent living in some places.

wnc3141• 12 months ago

Sure, buts its a solid career break for a year.

_DeadFred_2• 12 months ago

When I was a kid (early 80s) the receptionist at my mom's company drove a Porsche and didn't need to work anymore because of a past company hitting it big. This woman wasn't a financial genius and didn't hardball negotiate with the previous company for her receptionist job, it was just Silicon Valley didn't used to be so gross and actually paid out to people.

caseysoftware• 12 months ago

Some of the mechanics on this one..

Generally, when a startup is acquired, people get paid in a number of tranches:

- First, debts get cleared in order according to debt types. This could be cloud providers, lawyers, employees who deferred salary, etc, etc. If there's still cash left..

- Then preferred (generally earliest) investors get paid back. Some investors will have liquidation preferences where they get 2-5X their initial investment. If there's still cash left..

- Then execs get their preferred shares cashed out. Depending on how many rounds they'd raised, they may own less than you think. If there's still cash left..

- Finally, general stockholders get paid. This is where most employees may actually get cash.

To further complicate things, some people could be in multiple places here. A founding exec may have lent the company money to get started, have preferred shares, and have common shares so they could get paid out in early levels but not at the end.

*There are WAY MORE nuances in this but the point is: You don't just say "total price divided by shares times number of shares = the cash you get"

jschveibinz2• 12 months ago

I am surprised that the employment agreements between execs/founders and Windsurf didn't address this. A cautious investor--or even a cautious key employee joining the team--would have locked the founders and key employees down to prevent them from being hired away without some recourse. This is especially important when all of the value was in the employees. There should be lawsuits forthcoming...

toomuchtodo5• 12 months ago

Non competes are illegal in California, there is no legal way investors can lock founders and employees down. This is venture capital investment risk. The employees, who are most of the value (aside from potential IP and customer contracts), can walk at any time.

DanHulton• 12 months ago

It doesn't have to be a lawsuit preventing them from leaving. Golden handcuffs usually work pretty well for such a situation.

jschveibinz2• 12 months ago

I understand your clarification. You should be able to use vesting schedules, right of first refusal to counter, careful definition of IP and trade secrets with assignment to the company, right of repurchase of shares, etc.

This is indeed venture capital risk, but this case lays bare the exorbitant amount of risk for investing in these types of companies--perhaps especially in California?

mawadev3• 12 months ago

I'm waking up personally to the unethical side of Software development as well. You can either do little and get paid pocket change or you can provide a ton of value for pocket change next to some promises lulling you in, where the value of your work exponentially increases, but you will see nothing of it and whatever you do: you are still a replaceable cell in excel to them and there will be ways where you get dragged over the table. If the money isn't directly in your bank account, it might as well not exist or was a lie. Sooner or later you are the horse behind the barn anyway.

istjohn• 12 months ago

To state the obvious, software developers are doing just fine.

GuinansEyebrows• 12 months ago

how much change fits in your pockets?

Muromec3• 12 months ago

You do sometimes get the 0.31% of a relatively big number under a promise you tag along for two years and some more pocket change on top. Still better than just pocket change zo

pembrook3• 12 months ago

Okay, but how much do you think you deserve as an employee who has invested none of your money in the company and decided to join on a 6-figure salary only after the company is already through YC, is funded by top investors and looks attractive?

If you’re instantly replaceable by any dime-a-dozen engineer than can install packages on npm and use react components and add a thumbs up to slack messages…to not get accidentally rich because you just took a high paid tech job a year ago…seems fair?

I just fail to see why everyone in the comments here believes they deserve to be compensated at the level of the top 0.01% of all people without starting their own business.

Start your own company if you think it’s so easy to be a founder instead of an employee. Nobody is stopping you.

I also think it’s some crazy cognitive dissonance to assume you’d be able to walk right into a FAANG sr. eng gig instead. As if most startup employees haven’t tried before joining [insert startup].

mawadev3• 12 months ago

Thank you for your comment, it proves my point!

xvector4• 12 months ago

I just fail to see why everyone in the comments here believes they deserve to be compensated at the level of the top 0.01% of all people without starting their own business.

No one is saying this.

There is no question that the Windsurf and Scale AI ploys effectively left employees with ownership in the company high and dry.

but how much do you think you deserve as an employee

You deserve what you are promised. If a founder says you will get rich if the company goes to the moon, and they instead do some strange maneuver so only they cash out, the founder is a scumbag.

You are acting like early startup employees risk nothing working for a startup, and invest nothing of their own. Again, that is a weird assumption.

saagarjha2• 12 months ago

Do you think founders deserve 100x more money because six weeks ago they sat in a few meetings with Y Combinator that went well?

baq8• 12 months ago

Being a founder is a job as much as being an engineer is and being an investor is - especially if you get investors early and don’t take debt to capitalize the company (which you shouldn’t if you like your life.) If you did take debt as a founder, don’t brag about your bad decisions as if they make you special.

bravesoul27• 12 months ago

Take the moralising out it.

If I join a lottery syndicate and it wins 100m but I only put in 1% of the syndicate amount say $100 do I not deserve $1m because I'm just a "whatever I am just"???

bjackman• 12 months ago

As an engineer if you are gonna be a rank and file employee you need to do it for your own reasons. I think the main good reasons to do it are:

1. It's relatively chill and you value the stability. You deliver competence from 9-5 then go home to your family or some other thing that's more important to you than work.

2. You really enjoy the pure engineering side and find meaning in the technical artifact you're creating. Probably it's open source and has some value/community outside of your employer.

3. You're gaining valuable experience that you can later leverage into something else. Probably you're in the first 5 years of your career.

If the main thing driving you is growing a business, and you don't directly own (not options or RSUs or whatever, actual real equity) a significant slice of it, you are very likely misdirecting your energy.

(I guess there are also cases where the mission of your organisation is not profit and you care about that. I don't know any engineers in this position but I might be quite happy working in the public sector).

ponector3• 12 months ago

Welcome to the real world. It is the case with pretty much every job, not only IT.

mawadev3• 12 months ago

I still feel the need to bring clarity by pointing out the obvious in the most direct unfiltered manner, as you can see other commenters in this thread trying to frame it differently with an absurd of confidence while doing so.

stan_kirdey• 12 months ago

Engineers: always negotiate for higher base salaries. In the vast majority of cases—especially during acquihires—your equity will be worth little or nothing. Founders and VCs still get paid; employees rarely do.

Don't just accept promises. Ask for the 409A valuation, liquidation preferences, and pay bands. If a company won’t provide transparency, that’s your signal.

Equity is a lottery ticket. Salary is money in the bank.

gsibble7• 12 months ago

I tell every engineer always to maximize their cash comp and every founder and investor always says "No, that's such a bad idea! Get more equity!"

Yeah, because that is in your interests, not the engineer's.

01HNNWZ0MV43FF• 12 months ago

I remember when my old employer was doing another round of funding

They offered to sell me more shares

I countered that I'd been trying to dump the shares they already gave me and if the shares are truly worth X dollars they should buy them back from me

Anyway glad I quit

usaar3336• 12 months ago

Not everything is adversarial. More cash pressure on the company itself can be bad for the company which is bad for you too.

I always take more equity. I wouldn't work for you in the first place if I didn't believe in your equity.

tensor• 12 months ago

There are more than enough stories about employees complaining that they didn't get a big enough payout on an acquisition or IPO to know that this isn't true. It all comes down to your risk reward preference.

Sure, if you don't want to take a risk then look for a higher salary, and probably at a more established company because even if you have mostly salary and little equity a startup is still risky (and you're making it even more so by putting cash pressure on the company at that stage).

On the other hand, if you want a chance at a bigger payout, you'll want more equity. And yes, you may well not get that payout.

CalChris4• 12 months ago

There is another variable. Find better companies to work for. If you don't think this is a unicorn, don't work for them. If this is another stablecoin startup leveraging quantum AI then you deserve what you get, cash comp or no.

gsibble7• 12 months ago

I've tried to ask dozens of companies that wanted to hire me just for how many shares were outstanding and/or authorized. They almost always refused to share.

You can almost never get any info on equity until it's too late and you realize it's worth nothing.

georgemcbay• 12 months ago

I've tried to ask dozens of companies that wanted to hire me just for how many shares were outstanding and/or authorized.

Those questions are certainly worth asking but employees should also keep in mind that even if they do share that information your equity can still later be diluted away to worthlessness.

drmath• 12 months ago

I've tried to ask dozens of companies that wanted to hire me just for how many shares were outstanding and/or authorized.

"Wanted to hire me" as in they made an offer, or an earlier step? At offer stage, I've never had a company refuse to answer these questions. I don't have "dozens of companies" worth of experience though, maybe one dozen if that.

toomuchtodo5• 12 months ago

Additional resource:

Ask HN: How to negotiate stock options? - https://news.ycombinator.com/item?id=28401655 - September 2021

djoldman6• 12 months ago

Indeed. Likewise with non-guaranteed bonuses (gotta love the "plus a discretionary bonus!" commentary during offer discussions).

It's always worth offering to take equity as long as they agree in writing to not ever dilute your shares and vest them immediately. However, it's unlikely that any company will agree.

It's best to imagine compensation as exactly one's salary. Then (virtually) all surprises are good.

azinman22• 12 months ago

I don’t see how a company could promise this. Everyone gets diluted for every funding round, for example.

tyre• 12 months ago

It's always worth offering to take equity as long as they agree in writing to not ever dilute your shares and vest them immediately. However, it's unlikely that any company will agree.

Well, yes, because that’s insane.

usaar3336• 12 months ago

Under any normal circumstance I've ever seen, you should be taking the higher equity/lower salary combination and should focus on equity rather than salary.

The only time it ever makes sense to push for more salary instead is if you literally cannot get a job at a public company (or even a near IPO unicorn). Plenty of startup employees can, so clearly they believe their startup equity is worth something.

Financially speaking, startup equity is actually worth a lot as an employee (https://www.amafinance.org/startup_comp/). Yah, over 50% it's going nowhere but expectation needs to consider how huge the win is even if it is lower probability.

almostgotcaught2• 12 months ago

Yah, over 50% it's going nowhere but expectation needs to consider how huge the win is even if it is lower probability.

yes that's literally the definition of expectation value...... so

    ev = 1 bagillion * 0.0000000000000001 = ~0

hence you should absolutely not be taking higher equity/lower salary ever. hell i wouldn't even take that at a publically traded company if given the option.

gjm11• 12 months ago

If I'm understanding your logic correctly, I think it's flawed.

It seems like you're saying: if you choose to work for a startup rather than a bigger company, it must be because you think their equity is valuable, so you should prefer to take more of your pay in the form of equity if you can.

But there are plenty of other reasons for choosing to work at a startup.

You might have chosen to work at that particular startup because the work interests you. You might prefer startups to bigger companies because they have less bureaucracy and can do (some) things faster. You might prefer startups to bigger companies because there are fewer layers of management above you and so you have a better view of why you're doing what you're doing.

Even if you're only in it for the money, I don't think your argument is valid, though this is more of a nitpick: it might happen that a startup particularly wants you or at least your skillset and is willing to pay more for it than any bigger company you've found. You might think the startup is likely to fail, but still prefer being paid twice as much. (This is kinda nitpicky because I don't think this situation is super-common, unlike the other ones I mentioned above.)

zdragnar• 12 months ago

I've long preferred working for startups over big companies, but my equity has rarely been worth more than a day or two's salary equivalent.

I know a few people who did well working for unicorns, but that isn't most startups, and pretending that any given startup will be one is selling yourself short.

cortesoft4• 12 months ago

First, your stock has a much higher than 50% chance of being worth less, even at the best startups. This is why early stage investors invest in so many companies… a vast majority are worth zero, but the few that make it big pay for all those and more.

This is why you would never see an early stage investor invest in only one company. They need volume to be able to survive the high risk/high reward nature of startup investing.

Now, maybe you think you are a better judge of the probability of success for your startup than an investor, so the risk is lower. You would be wrong; if there was a way to reliably predict which startup would hit it big, then investors (who spend all their time trying to predict exactly that, and have a lot more data and history to use in their evaluation than you do as an employee) would have a much higher success rate.

So even if you have a very promising startup, your equity is a huge risk. Your company probably won’t hit it big, and if it does you have to hope you aren’t screwed out of your equity by the millions of tricks they use to screw employee shareholders; dilution, preferred shares, etc.

Even worse, you are taking double risk. Your startup is risking both your equity AND your salary. You want to diversify your risk, so you can use your investment when your salary fails and use your salary when your investment fails. In this case, those both will fail together if your company doesn’t make it.

Look, equity and stock options are great, but you REALLY have to discount its value as an employee because of the way the risk shakes out as an employee.

makk• 12 months ago

Yes, maximize cash and use it to acquire a diversified portfolio.

andy99• 12 months ago

Yes - equity should be an incentive to contribute the the company's success, and partial compensation for the risk of going to a startup. One should value it at precisely $0 in terms of life planning.

This becomes truer and truer the more of an employee and the less agency over the company's choices you have, but generally if you're not a co-founder (founding engineer doesn't count) equity traded off against salary is someone scamming you.

neilv2• 12 months ago

equity should be an incentive [...] and partial compensation for [...] One should value it at precisely $0 in terms of life planning.*

Not very good incentive or compensation, if you have to value it at $0.

parpfish• 12 months ago

equity should be an incentive to contribute the the company's success

the much bigger motivation is "keep the company afloat so i can keep drawing my salary", so just boring old non-equity paychecks provide plenty of motivation.

if you're an employee that thinks your contributions are so great that you are single-handedly juicing the stock price or valuation, you're probably wrong but if not... you should probably take those skills and found your own startup.

fusslo2• 12 months ago

my equity from 2years pre-acquisition: ~$2800. Then the CEO gave out bonuses when everyone threatened to quit. Then after his 3 month vacation to Italy, he came back driving his new Ferrari.

My equity from 4 years ( employee ~60, grew to over 500 ): worthless. No one is able to exercise any options. They also readjusted when the valuation came below the total raised, making the value of my vested shares ~$13k ( down from ~$200,000 ) . They 'made us whole' by giving more shares with a new 4 year vesting schedule.

Startups have found ways to fuck everyone but the investors with equity. It's confederate dollars; funny money. Maybe some people get great deals, I don't know. From my limited experience at very successful startups, the only people who made real money were those able to parley huge bonuses or base salaries.

dehrmann• 12 months ago

At some point, aren't the C Suite and directors failing their fiduciary responsibility? I know they have broad freedoms, but when you're reducing an a minority shareholder's equity by 95%, it's well past "fiduciary responsibility" and looking like fraud.

lmeyerov• 12 months ago

Sorry to hear that =/

Work for good people with a history of moral dealing. A family member just had a life-changing payout because leadership was generous. A friend walked away from a company pre-pivot without equity for what became one of the decade's biggest acquisitions.

This stuff is lottery tickets, but real ones. You need to be smart about who you make your limited bets on.

And agreed, big cautionary note here shows that Windsurf having "founder-friendly" investors does NOT mean employee-friendly ones.

fermentation• 12 months ago

I often see job postings here looking for "top <1% engineer talent" paying $100k and <1% equity and I wonder who is actually applying.

jongjong3• 12 months ago

I worked for an ed-tech startup as employee number 4, joined when it was obscure; not even in the Alexa top 4 million rankings and almost no revenue. The founder was really good though and gave everyone shares instead of options. I got a bit under 0.2% equity in the company. The company grew (slowly and steadily) to $6.5 million USD revenue with about 10% net profit margins but its last valuation (over 10 years later) was like $8 million USD. They charge like $15 USD PER YEAR PER student for their product so very cheap; I feel like they could easily increase the prices given how widely used they are in my country (over 30% of students in my country use the app).

I had the option to sell some equity recently but it would have only been like $16K USD so I held... I had about $9K taken out of my salary to pay for those so it doesn't make sense to sell given the massive growth the app and not that much dilution... The financial gain barely covers the inflation.

It feels like both revenue and profits have been kept artificially low. $6.5 million per year revenue, still growing steadily, with a loyal customer base with 10% profit seems really good... A valuation of $8 million seems ridiculously low... Not even 2x revenue, for a tech platform with good lock-in factor (they sell a lot of licenses to schools)!

It's kind of amazing how bad a deal it is to work for someone else as an employee. Even if the founder is good and generous in many ways and the business side (which you have little control over as a developer) happens to work out pretty well, they can still pull all sorts of levers to make the deal bad. With this one, I'm going to wait it out 20 years if I must. A lot of the game is just timing, you gotta wait it out, sell at the top... Some people see a peak opportunity to cash-in multiple times in their lives, some people never see it! In my case, I haven't seen the top yet.

I never had any opportunity to make serious money ever. Never had an opportunity to pull the trigger and make even $100K. The best I ever got was in crypto, my crypto was worth $100K but I was earning like 100% annual yield and required a 1-month unlock period. So I made more than that by holding it for 3 years anyway...

I think my career story so far is quite interesting. Probably more interesting than 99% of the classic SV startup stories (at least what they say publicly). I've done some things nobody else has done. Made money in truly adverse environments where a lot of people hated my guts. I've seen people behave in strange ways. At times, I felt like I was almost breaking through the membrane of 'the matrix'; almost transcending my social class. But all I got for it was 3 years of passive income. I never had the opportunity to cash out big.

It's tough out there, so tough, it often feels fake/artificial. Often, it feels like you have to be 'chosen' and that's all that matters. Your work doesn't matter, how talented you are doesn't matter, how lucky you get doesn't matter (besides the luck of 'being chosen').

At the end of the day, money is like a river and people upstream from you get to decide whether or not the river will flow in your direction. When you understand that new money is created constantly and, just like the river, the water cycles between the mountain and the sea, you start to understand the value of positioning and 'being selected'. The people upstream will keep telling you that they don't control the flow of money; that the river flows naturally through the lowest valleys... It's your job to put yourself in that low valley... But really, they've built massive dams up there directing the water almost arbitrarily. You may be at the lowest valley but they're redirecting the water elsewhere artificially because it suits them better. Reality is that they can easily alter the path of the river anywhere they want and it has little to do with 'building something people want'. It's about building something the people upstream want... And sometimes they just want to help their existing friends; unfortunate for you if you are not their friend.

It's a catch-22; you need rich friends to get money but you need money to get rich friends. But I suspect it's way easier for a poor person to get rich by befriending a rich person than it is for a poor person to get rich without rich friends. The second approach feels like you're piercing through 'the matrix' because of all the weird almost conspiratorial resistance you might get (tech feels like one big club).

Sometimes you might accumulate some dirt on some rich people and that gives you some leverage over them but it's the kind of leverage where you have to keep coming back to them to get crumbs. I feel like you can never break through that way due to regulatory capture. You can only do limited damage to them and it's always costly to you. They still have the balance of power.

roncesvalles• 12 months ago

I know this is HN but imo it's rarely ever a good deal to work at startups as an employee instead of a cofounder (with actual cofounder equity not just the title i.e. within the same order of magnitude as the largest-shareholding cofounder), over a bigger established company.

The only good reasons to do so are if you want to learn or make contacts so that you can found your own startup later.

In my pensive moments, one of the things about humans that makes me go "god damn" is how little money it takes for insanely talented people to just come and work for you.

supportengineer4• 12 months ago

The fun part comes when you put in 20 years doing this, and your dream is to buy a nice house, and you finally get your seven-figure payout, and.... it's not enough to buy a house. Because now a house is 3 million dollars.

ivape• 12 months ago

Then after his 3 month vacation to Italy, he came back driving his new Ferrari.

Hey, at least he’s taking his LARPing as a douchebag ceo seriously. Easy vip invite for DND nights.

Hikikomori• 12 months ago

Paid more taxes on RSUs than I'm going to get post IPO. Company took investments on insane COVID valuation and then needed more money posts COVID which tanked it.

cornholio2• 12 months ago

The basic idea is that you either have stock, preferably founder levels from 10% up (which is itself a lottery ticket), or you hold retiree bingo cards. The retirement home provides the cards for your entertainment, but the real owners of the establishment, the founders and early investors, know the only way you can earn the big prize is at their expense, so they have a vested interest to see you fail - and they are the ones printing the bingo cards and setting the rules.

jjice• 12 months ago

I had some RSUs from a previous company (likely will not be worth anything) and some options at another, but I have no idea how to understand how dilution like this works. My understanding is surface level of that scene in The Social Network.

I feel like I understand _what_ an RSU is and what options are, but are there any good resources for me to learn from?

baq8• 12 months ago

RSUs are much better than options, they’re actually properly shares, will go to zero when the company is bankrupt and even then not necessarily.

Options go to zero much more often.

fragmede2• 12 months ago

Dilution is where things get fucky.

So you're working at this startup. Lets say it's worth $10 million. To make things simple, in this company, there are 2 people, the fucker, the CEO, the guy that started it all. He holds 90,000 RSUs, each worth $100, so $9 million, and the fuckee, you, who holds 10,000 RSUs, each worth $100, for a cool million.

Here's where the fucker fucks the fuckee, ie you. The company does a round, and then creates, out of thin air, a billion shares (1,000,000,000), and issues them to the new investors. Lets say the company reached unicorn status this round, which is to say a valuation of a billion.

Holy hell a billion! But wait now there's 1,000,100,000 total shares out there, and the valuation of a billion, divided by the new shares, means that each share, of which you only have 10,000 of, is now worth just under one dollar.

That's right, your $1 million just turned into $10,000. Which isn't nothing, I'd love to come across a random $10k I didn't know I had. But that's just, like, one really nice vacation for you and the kids, which you haven't seen enough of because you've been working so hard at this startup, and not, like, a college fund for the kid that's showing aptitude at engineering and that you were hoping was gonna go to MIT.

Dilution is inevitable, there's no avoiding it. The scenario I presented is just to show you an example of how dilution fucks you. If things go well, would you rather have 10% of $1 million or 0.1% of $1 billion?

For more, it depends on how you like your information. ChatGPT's got stuff like ISOs vs NSOs pretty well covered, Investopedia's got a lot of good stuff if you'd rather it that way.

tlogan2• 12 months ago

This is a brilliant move by Google: it makes joining any AI startup even less appealing.

Stock options were always a lottery. But this takes the shenanigans to a whole new level.

jahewson3• 12 months ago

Pro tip: do both.

bravesoul27• 12 months ago

If you are gonna do that just work for a FAANG really right?

closeparen• 12 months ago

Working at a startup pretty much always involves trading off money in the bank for other things. That’s the industry’s whole deal. Which is why I stay in Big Tech with liquid RSUs.

myrandomcomment• 12 months ago

I would like to understand a bit here about what you are saying as having been involved in a few startups and I do not quite understand what you are getting at. My understanding based on experience (successful exits, small exits and crash and burns) follow.

First a 409A is generally engineered to keep the lowest value possible in order to allow the employees to exercise their options at the lowest value via an 83b election so at an exit they can be taxed at the long term capital gains rate. When someone joins a startup and is issued options the value of the stock is set via the 409A (which has to be renewed every year). The lower the number the more likely an employee can afford to write the check. 100K shares at $0.01 vs at $0.25 is a major factor for anyone to consider. Any startup worth their damn will make sure the facts in any 409A fit a low number for that reason. The reality of an exit where you are acquired will be based on other numbers that optimize for forward earns and value of your team and tech.

The questions you need to ask are:

What is the total authorized shares? What is the required process to raise that number? How are we funded? Does funding include preferred shares? What is the preference on those shares? On an exit what is the payment order?

I agree about the salary bands and at my current company we provide them, as well as answering all the questions above upfront to any candidate with an offer.

The reality of windsurf is that the founders are scum and this is going to end up in court for years. Google should be ashamed.

skybrian• 12 months ago

When people give you a percentage (1%), that is a ratio and they are not telling you either number. So, that makes me a little suspicious. I wonder how much he got in the end?

xvector4• 12 months ago

It doesn't really matter if he got less than what the acquihired founders did proportionately to his percentage.

cleandreams2• 12 months ago

My base salary was fine but the magic was in the stock.

I got a payout on acquisition by a FAANG+ (as first employee). It was only 300K but I put 50K of that into Nvidia. Actually I invested all my payout from my startup stock into tech stocks. And I got a terrific golden handcuffs deal.

After that I could afford to retire and I did.

another_twist• 12 months ago

Did you also post this recently in Blind ? If it is so you might want to fuzz the numbers a bit.

cleandreams2• 12 months ago

Less than 10 years ago but not recent.

saagarjha2• 12 months ago

What I find amusing is that YC’s Garry Tan is going around explaining to Prem how he actually got a good deal and that the Windsurf founders were very generous to their early employees. Meanwhile from his perspective he joins a company with friends he’s known for years, takes on basically the same risk that the founders did, probably gets some fraction of the equity they did for that work (10%? Less?) and then when payoff time comes he gets cheated out of that too.

If I was a venture capitalist dependent on 20-somethings believing in the dream I sold them maybe I wouldn’t write snarky replies on them on Twitter when this happens and actually look into fixing things for early employees (like, maybe, giving them similar terms that the founders get), but that’s just me I guess.

dragonwriter• 12 months ago

He has just as much financial interest in the dream being false as he does in people believing it, which your recommendation seems to overlook.

chambers2• 12 months ago

https://x.com/ahmaurya/status/1948491614160122308 Garry Tan posted "sounds like a tweet that cost $20M" which he later deleted.

Smells like a strong bias against employees in favor of management and founders.

gsibble7• 12 months ago

That was really shady.

JumpCrisscross• 12 months ago

Could you expand what's going on there?

chambers2• 12 months ago

My read was that Garry Tan implied "you sacrificed a lot of money in order to grandstand". I felt that was a knee-jerk dismissal of a founding employee's legitimate concern.

WatchDog2• 12 months ago

I'm not sure, but my interpretation is that Gary is implying that Prem Qu Nair received $20 million from the deal, and that by posting this tweet, he has violated the terms of the agreement, which generally have non disparagement clauses, and Gary will see to it that he won't receive anything.

Lionga• 12 months ago

That is YCombinator & Garry Tan for you. Disrupting the screwing over employees (and founders if they can but its just much harder) as a sport.

czbond• 12 months ago

I believe Tan's words were mis-represented. I believe he is saying that it cost Prim $20M and he then wrote that post. I don't think he is insinuating anything else.

Invictus0• 12 months ago

He's misrepresenting his own words when he writes a vague tweet like that. Tan is a serial shitposter and is known for blocking thousands of people that even slightly disagree with him.

93po• 12 months ago

i read it the same way but i have no context to be confident in that reading

CPLX• 12 months ago

When you were younger and learned about history did you form a mental image of what kind of people the famous financiers, capitalists, and robber barons were?

These are those people. Oil and railroads were high technology too.

They want you to think they’re Lazlo Hollyfield, but they’re Daniel Plainview.

barrkel• 12 months ago

Tan is someone who can't handle disagreement or criticism. It likely leads him to live in an information bubble.

ls-a• 12 months ago

Don't upset pac

BhavdeepSethi2• 12 months ago

I went through an acquisition very early in my career, and for the longest time I believed it was the best outcome for everyone. Over time, I realized that my naive belief was purely due to the founders going way above and beyond to make sure each and every employee (including folks doing just data entry) got a good outcome (accelerated vesting, significant equity in new company, top of the band pay, etc.). It made me realize that if you ever want to work at a start up, bet on the founder, rather the company. Even with mediocre outcomes, you'll end up ahead in the long run compared to folks who're just looking out for themselves.

rhyperior• 12 months ago

They must have had a strong position from which to negotiate those favorable terms, in addition to the experience to know to do so, and the integrity to actually do it. The type of people you should follow.

BhavdeepSethi2• 12 months ago

I don't believe they did. This acquisition was by Flipkart, the poster child startup in India, who had a very high bar for hiring. They wanted to interview the non-founders to make sure they met the standard. The founders said you get all or you get none. To be fair, it was a small team of 6-8 employees, so I doubt Flipkart cared. :)

neilv2• 12 months ago

due to the founders going way above and beyond to make sure each and every employee (including folks doing just data entry) got a good outcome (accelerated vesting, significant equity in new company, top of the band pay, etc.)

Commendable of them. That should be normal decency by leaders. I wonder how common it is.

whiplash451• 12 months ago

A lot of bias against startups in the comments. These are missing (1) how terrible the working conditions in bigco have become in the meantime (2) truly good startups (they exist) that pay solid base salaries

toomuchtodo5• 12 months ago

The odds are clear as day. ~90% of startups fail, and the truly good ones are very rare. Do small pockets of good exist? Yes, absolutely. But most of the startup ecosystem is convincing employees to grind for peanuts until founders and investors (whether that's accelerators or institutional) hit liquidity (if ever). Of course, if you find the unicorn (good comp, target work life balance, meaningful work [to you]), hold on tight and don't mess it up.

https://www.marketsentiment.co/p/the-yc-report

https://news.ycombinator.com/item?id=42828198

Muromec3• 12 months ago

Depends on a big co. You can skip all the drama try harding and work in a boring place too.

xvector4• 12 months ago

At least you get paid in bigco and you don't have to worry about your equity being snatched from under you.

CalChris4• 12 months ago

This was just a preference cliff, plain+simple. Windsurf got paid maybe $3B for itself. But the investors and senior management got their cut first. How? Well, the preferences they negotiated.

  No one really knows how the game is played
  The art of the trade
  How the sausage gets made
  We just assume that it happens
  But no one else is in the room where it happens

#2 wasn't in the room when it happened. In a very real sense, he's lucky he got anything. Management owes a fiduciary duty to the shareholders and #2 is a shareholder. But negotiating the $3B covers that duty.

highfrequency3• 12 months ago

Doesn't seem that simple. They raised a total of ~$250m and acquisition price was almost 10x that. The preference cliff means that employees get nothing before investors get an X% return on their investment (100%, 150%, maybe 200%). After that, the payout should be proportional to common stock ownership. Surely the preference guarantee was not 10x?

Would be curious to see the breakdown of the $2.4b:

1. How much to the founders in Google employment incentives

2. How much in licensing fee to the company itself

3. How of the licensing fee went to immediate payout to VC investors (+ employees)

4. How much got left on the balance sheet of the remaining company

I don't understand how #3 can be so large and common stock holders walk away with almost nothing without breaching fiduciary duty?

CalChris4• 12 months ago

The August 2024 Series C round (last of 4 rounds) for $150M could dilute+smoke the preference stack for any earlier investors of which #2 nominally was basically the earliest class member of. C gets preferences+participation. B+A get preferences+participation+anti-dilution. Common gets what's left which apparently wasn't much.

Fiduciary duty is very low bar. Management has to act in the best interests of The Company, as in, as a whole. The company != #2. Lawyers are not taking this case.

I'm certain the accounting was done properly, maybe even by a Perl script, and this is how it penciled out. The question for us stiffs is what can we learn from it?

scns• 12 months ago

in the room where it happens

Great song from Hamilton. Sorry for being off topic.

aspenmayer2• 12 months ago

Lin Manuel Miranda is a poet and a scholar. Original cast video of the song in question:

https://www.youtube.com/watch?v=e_FWUW6SnDo

blitzar2• 12 months ago

You got zucked.

highfrequency3• 12 months ago

Directly contradicts Garry Tan's post saying that all forty founding engineers got seven figure payouts from the Google acquisition: https://x.com/garrytan/status/1947072583092052406

Even if the OP considers the full headline number of $2.4b to be the value of the company, and taking his "1% of fair" number as truth, seven figure payouts would imply all 40 founding engineers had >4% equity which is nonsensical.

ohdeargodno2• 12 months ago

Garry Tan's job is bullshitting. Lying isn't very far from it, and he even covers his ass with "I heard".

Who did you hear it from Garry, the founder that made out with all the money ? Or the other VC that made a few hundred million from the sale and stands to gain even more if the lie of "founding engineers get rewarded" is perpetuated?

b_be_building• 12 months ago

No, what Garry is saying DIRECTLY correlates with the outlined opportunity.

For his assertion to be right, 40 people need to get paid out at least 1 million. That's 1.67% of the company or 0.04% evenly. Its not hard for me to image that up to 10% of this cap table was distributed among the 40 people.

reducesuffering• 12 months ago

Hilarious that the best case positive spin highlighted is 40 people cleared at least $1m, so $40m out of $2.4 billion and $240m funding. He's praising "look 2% of the payout went to people in the company".

Nevermind that $1m over ~4 years is approximately the same as the differential other public tech co's pay. ($150k + equity at YC co, $350k TC at G/Amzn/FB/Uber/etc.) So when they tell everyone they should work at YC co's, they're saying they're proud when in the absolute best case scenario you make just as much as at the public co's they rail against working for.

If you want to come across as genuine, directly say how much % of the payout went to employees that weren't the founders. They won't, because it's likely 3%, which correctly sounds horrible

umeshunni• 12 months ago

the absolute best case scenario you make just as much as at the public co's they rail against working for

that matches my experience working at 2 non-public venture funded companies.

karmasimida2• 12 months ago

Not contracting.

Let’s do a simple math. Assume this employee gets 5% of the company (which is super unlikely, but let’s go with it), that is 150m for what could be worth if OpenAI deal went through. 1% of that would be 1.5m.

That is still 7 figure. But this person spent 3 years in a startup, which turned out to be a unicorn and super highly successful, and he bagged a FAANG salary man pay at the end of the deal.

Basically this just proved startup model for normies are completely broken, if your goal is money, don’t join a startup

xvector4• 12 months ago

It's bizarre to see tech bros, YC, and megacorporations kill the startup talent pipeline that they rely on so much.

Who is gonna want to work at a startup in a non-founder role after this and Scale AI?

This continuing degradation of, and flagrant disregard for social norms is destructive for society.

highfrequency3• 12 months ago

Yes, but 40 people cannot each have 5% of the company.

michaelt• 12 months ago

40 founding engineers

Forty founding engineers? Seriously?

They must have a very expansive definition of founder.

bloodyplonker22• 12 months ago

"Founder" and "founding engineer" are two entirely different things. One of those phrases is a glorified substitute for "early engineer". Kind of like when you buy a "founders edition" Nvidia GPU. You are certainly not a founder of anything.

Rexxar• 12 months ago

'Founding engineer' is the new 'Vice president'

recursivecaveat• 12 months ago

Why would you believe extremely motivated hearsay from Garry Tan? The man is already very untrustworthy before we get into the "I heard" and conflict of interest.

WatchDog2• 12 months ago

Garry Tan allegedly replied to this tweet, but later deleted it

https://x.com/dvassallo/status/1948635445233156239

ensignavenger• 12 months ago

It is possible that 7 figure number included the offer to join Google, and since this engineer didn't accept that offer, they would not have recieved the compensation for doing so. It sounds like Garry Yan was getting his information second hand, so it may not include all of the context.

ww520• 12 months ago

That’s why founding engineers are such a raw deal. They take just as much risk as the founders but much less payout. Also on the hook to do most of the work.

doctorpangloss2• 12 months ago

It's complicated. The difference between a founder and founding engineer - I think you mean early employee - is pretty big. The fact that they are getting a "raw deal" in your POV should inform you that the equity grants are not related to risk.

This is coming from someone who programs for a living: contrary to what you are saying, the money guys take too little equity. The money guy being, the reason you are raising money at all, and not just dipping into your own savings.

achierius• 12 months ago

No. The engineers build the product. They do the actual work. Let's flip your 'reason' around: the engineers are the reason the VCs have a job at all, since the entire point of the job is to find people building big things and funding them to get a cut. They are secondary, the actual product -- and the people who build it -- are what matters, morally and economically.

mikert894• 12 months ago

actually the big scam is the difference is not big at all, alot of times founding engineers do more work than the CEO. a startup that raises 1-3 million alot of times doesnt even have revenue. sometimes its just that the founder went to stanford, hires engineers, gives them lottery tickets, and hopes they produce good work

jacquesm• 12 months ago

Always, always think about the downside scenarios if you enter an agreement. If you don't you will end up regretting it for sure.

siliconc0w• 12 months ago

These stories really kill the golden goose because it means a lot of talent just won't work at a startup.

YC isn't particularly great here either, they are pro founder but not pro startup employee. Most YC companies offer pretty paltry equity to even the first few hires - and that is even assuming you aren't going to get screwed down the line.

Yeul• 12 months ago

The people who go to work for start-ups are usually young. There comes a certain time in life when you have a family that relies on you and you get old enough that you start to make plans for retirement.

That's when you get a real job at a very boring stable company and stop being delusional.

dom963• 12 months ago

Not everyone decides to have a family. For some getting that boring and stable job is the only way to get to take some risks later in life.

pimeys• 12 months ago

Well, that depends. I'm working in a startup and I'm in my 40's. Although it's a bit different than a typical startup, because it pays quite well compared to 95% of other offers in EU to live a very comfortable life in a not too expensive European city.

Yeah, the hours can be crazy but not too often. Yes, you're expected to give your best all the time but that's part of the fun. And the best part is the challenges are always interesting.

Maybe it makes it easier for me that I'm not at all interested in normal family life and never want to have kids.

bwfan1232• 12 months ago

The risk-reward equation for startups vs boring-big-tech has turned completely upside-down. Back in the day, startups were the only lottery ticket to riches, not to mention do interesting work. But now, the tables are turned. For experienced engineers big-tech comps are attractive enough to put up with the office politics, and if you lucky do some interesting work.

DonsDiscountGas2• 12 months ago

There's a lot to be said for working at a startup, just be sure to value the equity portion at what it's worth (nothing) and decide accordingly.

ada1981• 12 months ago

Can someone help me understand why he would have to take this deal and not just say “no thanks”?

suralind• 12 months ago

Can someone explain how that worked? How was the CEO allowed to sell license AND talent to another company? Wouldn’t that screw investors? Why would they allow it if their stock becomes worthless after that?

NooneAtAll3• 12 months ago

were*

rectang• 12 months ago

I feel like there needs to be the analogue of open source licenses for equity offers. Something standardized, so that both employees and management could negotiate in good faith with high confidence that the terms are as advertised.

Because right now, there has been too much innovation in ways to screw over employees and the only reasonable assumption is that equity will vanish.

Sephr• 12 months ago

For some startups (mostly dealing with local and self-hosted software), it may be a better option to offer perpetual license grants to the product being worked on as opposed to equity in the startup itself. This encourages employees to make the best software if they know that they are also going to be the end user as well.

flappyeagle• 12 months ago

The thing they don’t tell you about joining startups is: the integrity of the founders matters more than anything else.

If you’re not a good judge of people you should work somewhere that pays cash

qkhhly• 12 months ago

i had many startups reaching out over the years but i just could not make the numbers work to make the shift.

it's not uncommon that a regular salary from a big tech in the bay area would amount to ~$2M total after 4 years (considering stock appreciation).

if you were given 1% of equity of the startup then start up has to worth $200M after 4 years. or more likely you would be given 0.1% of equity of the startup, and then it has to worth more than $2B, in order for it to make sense for you.

how likely is that going to happen?

_jab2• 12 months ago

The details here remain unclear to me, and even this tweet is somewhat vague.

I was given an offer that would explode same day. I had to forfeit all of my vested shares earned over my 3.5+ years at Windsurf. I was ultimately given a payout of only 1% of what my shares would have been worth at the time of the deal.

Was forfeiting the vested shares conditional on accepting the offer, or did he have no choice over the matter? Was the payout what he was offered as part of accepting the deal, or was that his consolation for not accepting it? The wording is genuinely unclear to me.

I literally see 3 interpretations here:

1. Offer was to forfeit shares in exchange for 1% payout, but OP rejected and still has shares

2. Offer was to forfeit shares in exchange for undisclosed payout, but OP rejected and got 1% payout instead and still has shares

3. He had to forfeit shares regardless of accepting offer, got 1% payout

(1) and (3) are both shitty offers from Google, but (2) is reasonable. Exploding offers are not uncommon in tech acquisitions. My guess is that (2) is what happened, since that's not in contradiction with prior reporting.

itake• 12 months ago

what are those shares worth with the company gutted? Seems like not much of a choice if leadership and IP are gone...

_jab2• 12 months ago

The company should have been worth at least the cash it had on hand, which has been reported as ~$100M. It's also been reported that all vested equity and VC shares were bought out (although apparently perhaps with a few exceptions for people who declined the offer), which meant that the employee unvested equity stakes were "undiluted" from whatever they were before (hard to judge, but maybe 5-10%), to 100%. So every employee had their stake in the company increase 10x-20x. So if the company had then decided to simply close up and distribute the remaining cash as dividends to the employees, it would be as if each employee had simply been bought out pre-deal at a $1-2B valuation. And that was the absolute worst case scenario - clearly Windsurf found a better deal with Cognition.

DonsDiscountGas2• 12 months ago

I assumed it was #1, and his shares were acquired as part of the cognition deal

pacificmaelstrm• 12 months ago

Pretty clear that OP signed away his shares and ended up with only 1% of what they were worth.

Presumably they told him his shares would be worthless anyway an if he didn't take this "great offer" it would expire when he left the room and he would get nothing...

...and he fell for it.

It wasn't dilution of other things people are talking about here... those things happen but this guy straight up just got had.

So sure equity is worthless... if you sign it away.

bravoetch• 12 months ago

Since others are sharing their doom and gloom stories - Mine is the opposite. I was hired at a startup, and I didn't even know what a startup was. I just liked the industry they were in and applied to join.

In negotiations I tried to get more salary, by taking less equity. It kinda worked, but later they doubled my equity to match other hires of the same era (but with a new vesting schedule for the new options). Then at some point I was fired without reason. The company went on to become worth a lot, and I was able to get out with enough to never work again and live pretty luxuriously. AFAIK others that were in my era at this startup did equally well, or many times better. It can happen, but I didn't ever think it was even possible because I didn't understand what 'options' even were when I was hired.

im_down_w_otp• 12 months ago

That stinks. I'm sorry. The founders could have taken part of the proceeds to at least adjust your upside with a transaction bonus. It's pretty easy to do.

tlogan2• 12 months ago

When joining a startup, the most important factor isn’t the idea, product, or the VCs: it’s the founder(s).

Think like an investor. Would you back this person? Are they ethical? Are they resilient?

Also stock options should not be high on the list. Most startups fail before founders or VCs even get the chance to screw you over. In 99% of cases, nobody wins.

iblaine• 12 months ago

Having been aquihired three times by FAANG+, the biggest take away is have accelerated vesting. To do that you got be lucky or in the C-suite. Being bought out usually sounds better then reality for everyone but a few that get that accelerated vesting clause.

anonzzzies• 12 months ago

Every time... The salary or fee what you trade your life for, shares might multiply that. Might. If your base salary is low 'because you have shares', you will probably never see a return: the idea this is loyalty or something is some weird thing; don't do it unless you love it and want to spend that life blood without a return.

kome• 12 months ago

this is something that my feeble European brain will never understand: why people in American start-up keeps getting scammed with pseudo "private" equities, stock options, that are not on a market, and therefore cannot be priced? equities surrounded by very obscure (or no) legislation, that if you get fired or decided to leave you cannot keep. it just make no sense but americans loves them.

tjpnz• 12 months ago

If you've convinced yourself that layoffs are a normal (and accepted) part of a career you'll have no issues believing in this crock either.

dfadsadsf2• 12 months ago

European salaries are laughably low even compared to low ball offers from US startups.

Essentially options for good (but not great) sr engineers are

1. Get 120k salary in Europe (on higher end)

2. 500k at FAANG in US (salary + RSU)

3. ~200k at startup in US + lottery tickets

Both option 2 and 3 strictly beat option 1 (especially after taxes) so European should get off the high horse and recognize reality that they are poor and exploited by companies and government.

const_cast2• 12 months ago

It depends on what you value. For example, if you want a high quality of life and acceptable work-life balance, that is very, very hard to find in the US. IMO, 500K a year doesn't matter too much if you're fat, lonely, and want to kill yourself. Not saying that everyone in the US is like that, but certainly it seems to be a much higher degree.

AYBABTME2• 12 months ago

So if one was to start a company today and wanted to enshrine employee-and-founder-friendly terms in their company, how should things be structured? Make the founders' shares be of the same class as the employees? Something special?

Nemo_bis2• 12 months ago

Make it a cooperative. https://tech-coops.xyz/

AYBABTME2• 12 months ago

Kind of a non-starter. No one is going to found and invest in a cooperative.

positron26• 12 months ago

Holy shit. We need need better early phase governance tools than handshakes and winks. The SAFE was written to streamline things so that everyone can get to work right now with a reasonable basis of trust. How can we have that basis of trust among founders and early hires when stuff like this happens?

If no founders can be trusted, sweat equity partnerships will become rare. If the only people who can build companies are VC funded founders who hire employees who treat the whole thing like a game, there will not be a good crop of companies to come out of that environment.

Founding is freaking hard. It needs to be reliably and fairly rewarded. Otherwise the people trying to bootstrap and make things happen have nowhere to go if the idea they are completely convinced MUST be built is also a hard hard sell to VC hive minds... because it's too oddly shaped (innovative).

We all have an interest to put the instruments and paperwork into place to make stories like this NOT happen so that sweat equity startups founded on personal convictions and strong cooperative incentive alignment will happen.

https://positron.solutions/careers

catoc• 12 months ago

He elected to move on before his shares were vested.

Many interesting, and probably true, replies about investors cheating out employees, but it seems very few people read the actual post.

deanmoriarty3• 12 months ago

Where can I real the actual post you are mentioning? The tweet only mentions "had to forfeit all of my vested shares earned over my 3.5+ years at Windsurf", which seems to conflict with your "before his shares were vested" statement.

tzury• 12 months ago

AI companies paying $100M+ for a single hire is like Tesla buying oil fields.

Oras• 12 months ago

The comments here taught me about startup acquisitions more than any article/video I have watched in the last 5 years.

Deep appreciation to everyone who shared their story, thank you!

burnt-resistor• 12 months ago

Most early employee equity has the worst liquidation preference. It's almost always toilet paper.

bravesoul27• 12 months ago

Title should be changed. Sounds like this was a choice not a fuckover.

That said...

Don't be a fool for all these AI startups that want you to burn out on 100 hour weeks. Many YC and non-YC startups are using this bravado based hiring strategy trying to get cheap labour to fuel their rockets to the moon. Don't be no fool!

Dylan168072• 12 months ago

The value of the options was destroyed in the deal. He had a choice between getting 1% or getting nothing.

It was a fuckover.

rml• 12 months ago

The classic article on this topic is https://steveblank.com/2019/04/10/startup-stock-options-why-...

Nothing has substantially improved since the article was written. With “forever private” companies it’s only gotten worse.

_cs2017_• 12 months ago

I don't understand the twitter post.

- Did he take the offer or not? - Did he forfeit the vested shares because he took the offer or because he didn't? - What was he offered in return for forfeiting the vested shares? - Did he get a payout of 1% because he took the offer or because he didn't? - The 1% comment implies that Google didn't use the $2.4B to buy the shares of Windsurf; if not shares, then what did Google get in return?

Original citation: "I was given an offer that would explode same day. I had to forfeit all of my vested shares earned over my 3.5+ years at Windsurf. I was ultimately given a payout of only 1% of what my shares would have been worth at the time of the deal."

gsibble7• 12 months ago

This really breaks the social contract that startups and employees have had together for a very long time and will severely damage the ecosystem in the long term.

Shame on the VCs who got paid out allowing this to happen.

up2isomorphism• 12 months ago

Since a certain point in time, I usually reject most startup offerings, because their term all look fishy.

beavis000• 12 months ago

Question - why did you have to give up your Windsurf vested shares? Did Cognition want that, or was it a term of the Windsurf equity plan?

mertleee• 12 months ago

This is an exemplary reason to not work for a startup.

Cash is king - never work for free or let some overzealous founder (who has tons of equity and is ok working for poverty wages) try to encourage you to work longer or harder "because equity go up one day".

The founders of Windsurf are clearly horrible people and the fact they were DM'ing people on twitter trying to explain being awful people really reflects the current state of the valley.

Garry Tan even deleted a comment on this tweet where to Windsurf employee #2 he said "looks like you left $20M on the table". These people see employees as replaceable widgets and to them this is just a game build around the "excitement of building".

Legitimately F*CK these people.

kotaKat• 12 months ago

At what point do these gross overpaid bubbles pop? None of these people are worth this kind of money and it’s time we re-balance tech salaries, tbh. Be thankful you got your million dollars and move the fuck on, ‘cause some of us will never get that kind of money.

Windsurf employee #2: I was given a payout of only 1% what my shares where worth

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