> As of 4 months ago I left a very successful stealth startup (which grew to 40M in ARR in two years) to become a founder and that is when it clicked - I expected to feel stressed, pressured, and the weight of all of the risk I was taking.

Please let us all know how that's working out for you in 5-10 years. 4 months in and no stress? Must be easy riding from here!

Sure, you've got a decent chance to rocket past them in wealth. But they've got everything they really want. You might have foregone your shot at a partner to build a company to mostly profit someone else who did nothing but write you a check. If you do have kids, you'll be old as hell raising them. All you'll have is extra stuff hardly anyone cares about - except maybe you - if you're the type of person chasing down a decimillion net worth.

I hope these people truly enjoy their boats and their third homes in Aspen! It sure is a lot of work to get them.

But beyond that, it’s interesting you picked FAANG SWE and not startup SWE as the basis of your comparison.

The whole premise of the article is that startup employees are often sold a bag of goods about equity and upside that’s simply a terrible deal. Not terrible in the sense that it’s highly risky, but that it doesn’t even come close to compensating for that risk premium. Its sold as FAANG is low risk medium upside but startup SWE is high risks high upside but really its extreme risk and almost no upside because VCs find dozens of ways to carve it out. And people will say startups pay “market” compensation but they almost always mean base salary only, and the equity is such a horrible deal, it’s borderline fraudulent scam on the part of founders to sell startup employees on the equity as a fair deal.

As an aside, when people think SWEs don’t need unions/ professional associations, they think of teachers unions or autoworker unions where pay is standardized on seniority. Instead, we could have something where our lawyers in our camp could review equity terms and we could collectively advocate for things like liquidity deals. That will never ever happen if you only trust the deals the VCs and founders offer.

I very much appreciate the startups pushing to extend the exercise window out to 5 - 10 years, but that's far from the norm. I've debated this with a couple of investors and their stance is if you leave the company then you're not committed enough and shouldn't receive anything. I think that's quite debatable, but that's certainly not the case when folks are laid off. And we commonly discuss people thriving in one particular phase of a company. If you're not in that phase, it's no good for either the company or the employee to continue the relationship just to defer having to exercise options.

This is why I advise everyone that you must early exercise (exercise your option as soon as you start with the company) if you're going to join a startup.

Some startups don't let you early excercise. Run far, far away. Find a different startup. Never join a startup that does not let you early exercise.

That's terrible advice, if you present it in an absolutist, blanket way like that. I do wish I early-exercised at my last startup, since I had a nasty AMT bill when I finally did exercise, and I could have had better tax treatment under the small business qualified stock rules when I finally sold. But: a) early exercising my initial grants would have cost me $40k, which would have eaten into my savings to a degree I wasn't comfortable with at the time, and b) I early exercised at two previous startups, which failed, and that ended up being money flushed down the drain to the tune of around $9k.

Sometimes people want to wait a bit to get a better idea of the company's prospects before investing their own money into it. Maybe they want to hold off until the company has revenue, or hits/maintains a particular revenue or growth metric. Sure, if you're a super early employee and have 5-cent options, maybe you'll feel comfortable gambling that money away (but maybe you won't be!). Yes, there will likely be a tax penalty for waiting, but that can be a reasonable and sound financial decision.

I was (fortunately) a few years too young to get mired in the original '00s dot-com bust, but I know several people who were encouraged/pressured to take out loans in order to (early) exercise their startup stock options, and ended up with worthless or underwater stock, but still had to repay those loans. It would have to be a pretty exceptional situation for me to recommend anyone take that route.

(I do agree that a startup not allowing you to early exercise is a red flag, though.)

I don't think that's debatable at all; I think it's bullshit. Once your options vest, they are yours. They are compensation for the work you have already done, not the work you will do in the future.

Once/if your company switches to RSU grants from option grants, then at vest day your stock is yours, and can't be taken away when you leave the company (well, I imagine they could write up a contract that says that, but that would be quite non-standard, and I would never work for a company that did something like that). The vested RSUs are, again, compensation for the work you have already done, not the work you will do in the future. I don't see why options and RSUs should be considered differently here.

(I might even stretch that into the idea that it's bullshit that startup options expire at all, even if you stay with the company forever, but I do think that's debatable.)

Extreme risk? Some startups pay fair salaries.

I don't think startups are that risky (unless you start putting money into them, that is a suckers deal). Or if you work for free, what you naturally should not do. Not everyone can get a FAANG job so it is not very clear alternative.

If you get paid a slightly below market rate and get some worthless equity, what's the big deal? You can always quit any time and change to a corporate career. It is not an end of the world.

If you really do, agree that it's ok and a fun ride.

But where are you going to find a startup that pays market rate? Never seen one.

Base salary can be very close! But at an established company you are also making money on RSUs, often more than your salary. And usually have a bonus, which can be quite significant.

So your base salary might be 250K in an established company and 200K at the startup. Not a huge difference. But total comp at the established company is more like 500K-600K vs. at the startup just 200K. Huge difference.

I guess you're looking in the wrong places. Over the past 13 years, I've worked for five startups (both full-time and contract) that paid market rate (two paid a fair bit above, even). In my professional and social circles, this has been pretty common. Certainly some have worked below market rate for some companies, but that seems to be the exception, not the rule.

> But at an established company you are also making money on RSUs, often more than your salary

That's definitely not been my experience. At established companies, the RSUs are usually a nice quarterly bonus, in the wide range of 10-50% of base (annualized). Certainly there are some where the RSUs can end up being several multiples of base (I've worked at one like that, though my equity comp level was not common, and was mainly a consequence of my long tenure there from when they were small), but I don't think it's that common. A lot of people seem to assert that you can easily get that at a FAANG, but that doesn't seem to be true. Some people can, but not the median employee.

Also consider that a lot of the stories of high equity comp come from people talking about the FAANGs. Those companies were founded 20-25+ years ago, and matured into established companies 10-15+ years ago; the "rules" have changed quite a bit since then.

With that I agree with you that upside is often lower than people expect.

The world has changed. Google IPOed just a few years after it founded. Now Stripe, objectively one of the most successful startups ever, still hasn’t IPOed after 15 years.

Liquidity preference Dilution

Even the F in FAANG had a major movie made about early employees getting shafted by dilution!

FAANG is 5 companies founded a long time ago. Since then VCs have completely rewritten the rules of the game. But they’ll still point to extreme outliers in the old rules. The fairy tale of the Google masseuse has probably cost tens of thousands of engineers millions in compensation.

You need to get things in writing and do the math and startups make it as difficult as possible to do that and then the math never adds up. So they resort to fairy tales.

Consider that if you could make 400k (including liquid stock) in compensation at FAANG but you take 180k at the startup, you're basically betting 220k a year on the company. Except unlike any other company you bet 220k on, you won't get a board seat, you won't get access to key metrics, your influence will be dominated by "real" investor's influence.

If your NW is less than 10M, which presumably it is, anyone who's heard even heard of the words "Kelly Criterion" would tell you your nuts for betting 220k a year on one startup. And yet, you get treated like "an employee" and not like "an investor" for taking that insane risk.

So YC has invested in 5000 companies, and you can name 3 that had top-notch outcomes, thats 0.06% success - and you had to work like a dog to realize it! And that money was locked up. Those same early employees could have taken that $220k/ year, put it on Bitcoin or Apple stock, and retired off that. And Bitcoin and Apple were much easier "picks" than an given startup.

The math simply does not add up and the whole system runs off mystique and naivety. And I've worked at startups that gave me a hard time about asking about outstanding shares, about asking about the cap table, about asking about liquidation preference. This is _critical_ information before you invest a significant portion of your life and net worth on a company and that they're guarded about and it should raise the ultimate alarm bells that they don't fall over themselves to explain every part of it.

There's a bunch of propaganda out there "Explaining ISOs, written by a16z" that's a smoke screen of the truth. The math does not add up.

The dream startup employee is really really good at Transformer architectures and really really bad at personal finance. Fortunately for startups, a shocking amount of these people exist. But it doesn't change that if sharp financiers looked at employee equity packages at startups objectively, every single one would agree it's a scam deal.

Your denominator (5000) is _all_ investments that YC has made. You need to look at investments of a certain vintage, e.g., 10 years or more. You also need to include all the other companies of that vintage where employees did well (way more companies in that cohort have sold or gone public). The result is 0.06% is a gross understimation of the success rate (where success is defined as successful enough for early employees to make a lot of money).

I'm very skeptical of the idea that this is common for new hires at FAANGs today. Certainly some people can command that level of comp, but I find it hard to believe the median employee can.

Even worse, your bet is on common shares. Far better to work at FAANG and Angel invest so you get preferential shares.

The biggest scam of VC is that the dollar value of your time is hugely undervalued compared to a $ from VC that gets preferential shares.

People who can get 400k job at FAANG should be smart enough to avoid shitty startups. Looks like they aren't, based on these comments.

Stripe is one example of a successful startup not going public, but there are tons of startups that are going public. And there are many startups that wish they could go public, but they simply don't have the finances or business to do so.

I don't think VCs changed much from when Google went public until COVID. We were seeing massive overvaluations of tech companies for years. Once through 2020, VCs got scared and now the landscape is a bit different. But the AI craze has started to get VCs back out of their shells taking bets on risky projects.

So, yeah, idk what I agree with this assessment. At least it's not been my experience in tech over the last 8+ years.

VCs changed a ton over that time. In 2004 VCs were still smarting from the dot-com bust. And VCs were hardly spewing cash during and in the aftermath of the GFC of 2007/08. The days of easy VC money were mainly in the early-mid to late '10s.

And as you point out with your end date of COVID, VCs have now backed off again, as they did around 2000 and 2008 during those bust/bear cycles. I would credit interest rate increases with the current backoff, though, not COVID. During early COVID, funding was still fairly well available, assuming your business wasn't something that required in-person contact; even better if your business facilitated home-office work.

> At least it's not been my experience in tech over the last 8+ years.

That's only ~4 years pre-COVID; either seems like too short a horizon to make this sort of assessment. (Source: been in tech for 20-odd years.)

You might as well go to the casino. You will save years of sweat, heartache, and stress-induced mental decline.

Instead at a casino you get to blow your money quickly, enjoy fun, free drinks, and still have the upside potential to become super rich if you are in the 0.000001 luck percentile.

"It's not your money anymore."

I’m not sure where that’s coming from.

Also plenty of companies out there have control past the A.

And in the best case it’s just one series A taking ~15%, thus founders still have 85%

Also realize you were probably forced to take a pay cut and have a below average salary due to cost-cutting measures from the board. We'll ignore the non-financial problems, like tons of stress, complaining employees demanding more equity because you couldn't give them raises...

No, it's not a good situation.

I highly doubt ALL your peers are making that much. And I think the people making $1M per year at FAANG tend to work much more than 6 hour days. You have to be very productive to get $1M per year.

Founders tend to only talk about the good things happening at their companies, and tech press tends to focus on the successes. These things contribute to more people starting companies.

On the flip side, though, any regular HN reader has likely seen dozens of accounts written by startup founders whose companies have failed. And there's quite a bit of overlap between the set of HN readers and the set of past, current, and likely-future startup founders.

There isn't much point sweating for another person's dream, go big with your own startup or rest and vest at FAANG and live life.

I can't help but feel this would be better for the founders, the employees and the customers of the company. It just doesn't make as much sense for the investors.

onlyrealcuzzo is comparing 2 things:

* Being a founder and working mega hours and having no life (e.g. no spouse or kids) and having a decent chance of losing most of your money as the company fails.

* Working at FAANG and making a lot of money while not having to work too much.

onlyrealcuzzo is saying the second option is better.

Can you say more on this? I didn't realize FAANG TCO was quite that high. Maybe it's time to swallow some pride and take the adtech money after all...

In 5 years, if you work even a fraction of as hard as you need to be a successful founder, you should be L7 - salaries are usually >$800k at that point.

No, it is not like any average slacker straight out of college in 5 years can get to a $1M salary at FAANG. But if you're the type of person that could successfully grow a company to a multi hundred million valuation in 5 years - you can make $1M at FAANG.

Disagree. Totally different skill sets. Not saying there is no correlation at all, but probably less than one might think.

1. You’ll have to be located in SF or Seattle.

2. Going from L5-L7 is _not_ trivial. It requires a somewhat miraculous combination of being on a productive team with a good boss, a lot of opportunities for showy work and your own gamesmanship around corporate politics.

Is it possible? Sure. But in my short stint at Amazon, I met a lot of people who should have been higher level and were simply not due to missing one of these factors.

You're going to need to be this size to have a ~$100M+ exit.

There's about ~5 years between funding Series C and Series D [1].

Only ~55 Series C companies got funding in Q1 [2].

Only ~39 Series D companies got funding in Q1 [1].

You're going to have a MAX of about ~.7 * ~2300 * 1/5 = ~322 successful > $100M VC exits per year.

Ultimately, you really need to IPO to have a successful exit - and there's only ~257 per year total, only ~65% of which are VC = ~167.

~5% of FAANG is L7+ - if you're including Microsoft, Nvidia, AirBNB and all the other companies with FAANG-like pay - you're at >2M employees.

That's ~100k If the average tenure is ~10 years before retirement - you're looking at ~10k per year.

Okay - it's about ~100 per successful exit.

[1] https://carta.com/blog/state-of-private-markets-q3-2023/

[2] https://www.mosaic.tech/saas-startup-funding/series-c

The distribution of the ladder is logarithmic. Most never make L6. L5 is often terminal level IC without any “up or out” obligations. Lots of people spend a long time at L5 and retire.

Microsoft in the Ballmer years (early/mid 2000s) had this problem. Promising L65/L66/L67 (probably equiv to L5/6 at AMZN) would leave because the next step was full. All the "partners" were hanging around and not making room for the next gen of leaders.

Also note that some comp numbers get heavily inflated by people incorporating stock value increasing between the equity was first issued and the stock actually vested.

Yeah ever since COVID this has really muddied the water, partially both up and down. Depending on the year combined with the type of company (large cap vs growth SaaS vs finance) you can massively swing the same exact "offer comp" into many communicated effective comps.

Well, some founders care about their employees and their idea, and the idea of the start up failing is much more than just money.

Only in some states would minority shareholders have a cause of action. So there are some states in which the courts agree with you. As you might imagine, startups do not typically incorporate in those states.

In our case, we offered all vested employees the option of selling in the same round on the same terms.

I personally don’t recall any disclosure requirements at 10 people; however, we didn’t have that many participate so perhaps it didn’t apply.

In general, Founders Preferred does layer on the preference stack but also hopefully by a relatively trivial amount to the overall funding size.

Honestly VC-funded startups seem like a cake walk compared to actually starting a small business. Your biggest challenge is walking into a room full of rich dudes and schmoozing for your pay cheque. If you fail you get acquired and get golden handcuffs.

If you start a real business you can expect to take on debt, and you'll be personally guaranteeing it because nobody cares about equity in your boutique ice cream parlour. Plus a 5-year lease (which you will also personally guarantee).

Sure, if you magic up a startup with VC funds you suddenly have it easier than a small, bootstrapped business.

Startups almost never start with a round of VC though. There are almost always months or years of the same experience as a bootstrapped business (ie: extreme uncertainty, no money to pay yourself, etc).

Most startups don't manage to raise VC, and most startups that raise VC fail with no acquihire.

Make this about any brick/mortar businesses and the stresses multiply by another factor. If they're in a federally regulated biz (compliance) or an insurance dominated state (rates, inspections), then multiply again.

And yes, some businesses are even harder due to regulatory requirements

Making a wedge where there isn't one is disingenuous.

1. Caring about the mission -- the real-world positive impact -- and potentially able to make or break that. Not just taking a shot at making money, for some opportunity cost that I could evaluate quantitatively on a napkin, and walk away from as soon as an option with a higher expected dollars number came along.

2. Livelihoods and investments of time&effort by colleagues hinge to a large degree on decisions I make, ideas I have, and things I have to pull off, and not wanting to let them down. (A bit similar with money investors, but I care more about personal connections, and involvements where it's not just someone buying lots of lottery tickets.)

3. Low "paychecks" for my HCOLA, at that startup and earlier, so personally needing a big win financial exit, and the startup is what I decided to invest my time&energy into. If that fails, it's starting over, and a lot of wading through various startup ickiness to get another good opportunity (or doing FAANG interview BS, and then their promotion-chasing BS).

> You don’t lose any money if your startup fails.

Except all the money you lost by not having a proper job along the way. Also it’s not uncommon for founders to float the company at early stage until investment is raised, and they don’t always get a refund for this.

But I'm finally debt free and ready to risk my future yet again on another startup.

I am sure enough that I would crumble under that specific kind of pressure that I don't put myself in situations where I would experience that specific kind of pressure. Works great!

cause if you fail you have to tell your investors you lost money

cause if you fail is a thought that’s always running through your head as you live it

This isn't the founder's risk. It's the employee's risk. And it has the added bonus of, if there is a liquidity event, the employee's don't get the upside.

I was like engineer #3 at a company that eventually was acquired for ~$250MM. My payout was $60,000, after 5 years of employment there. I could have made more by going and contracting at megacorp for a single year. There was never any upside for me.

That was because you negotiated and accepted a shitty deal. Unless someone scammed you into believing something that isnt' true, which I doubt. Founders can be overly optimistic, but it isn't same as scamming.

Startups are a difficult game. Everyone gotta watch for themselves. Don't blame on others if you accepted a suckers deal.

Inconveniences are part of life anyway. Being the first engineer means you get all these inconveniences (tell your wife and your kids) plus real risks as above (taking a loan to buy the options and losing it)

at megacorp, you shrug and look them in the eye and they know you can’t do much

your in the same boat

as a founder every layoff is YOUR failure

Compare startups to restaurants- their failure rate is absolutely massive. Working for a new company is simply always a risk for everyone involved, there's no getting around that.

I can't imagine caring about reputational damage with rich people unless that reputation is in service of not starving in the streets.

I have worked in startups in Silicon Valley and have had many friends working for them. Most startups pay a base salary of around 200k$ I reckon (for new grads, perhaps 150k). This might come down to 9-10k after taxes per month. A good 2 bedroom house to rent in a location like San Jose would be 3k$ per month, which leaves you 6k for other expenses. Assuming 1k for car, you should still have 5k in savings per month, in a year of working you will have saved up 20 months of rent, maybe 12 months of living without a job. I find it hard to believe anyone in SV startups, is in risk of “personal financial ruin”, or “starving in the streets” just because they lost a few months of paychecks while searching for another job. That may be true in another country, in another market, but all tech workers in the Bay Area are living well above subsistence and acting like they are living paycheck to paycheck is a fantasy. There is a cost to working in startups, and it is an opportunity cost of not working in a big tech company and cashing out your 200k+ RSU over 4 years and instead receiving paper money stock options that can be worth 0.

But I'd like to point out that in your math, you calculated the cost of a car and a rent, but no other living expenses. Also in what universe does a car cost $1000/month??

There’s a pretty large risk to family security. By year two of the startup I have made 15-20% the cash I could have made elsewhere. I have stock that I trust will be worth more in the future (so imo worth it). However, I can see liquidity events being useful if you’re tight on cash after that run

Though if you don't care about anything in the first place what are you doing trying to build a company?

(1) The opportunity cost to the founder of taking early liquidity:

If a founder cashes out 10% of their position for $500k @ $25M Series A valuation, that de-risks a lot of their personal life. But when the startup ends up selling for $250M, that $500k of 'early' selling would have been worth $5M (less any dilution between rounds) - hard not to regret the choice in that case even if hedging is going to be the correct choice 99% of the time.

(2) Meaningful vs. not-meaningful amounts:

From my prev example, the founder sells 10% of their position for $500k. Well, if all employees were allowed to sell up to 10% of their positions too, would that even matter to them? If you were an employee and had $200k total value in your options, and you could sell 10%, you're getting $20k. Not really enough to de-risk your life although still might be welcome (and employees would appreciate having the choice).

(3) Sellers need buyers:

In order for there to be a seller of shares, there needs to be a buyer. The founder is effectively choosing his buyer and future business partner by taking investment and choosing to give that buyer more control over the corp by selling him even more shares (his personal shares). The buyer wants to make the founder happy and de-risk their downside so they can be more aggressive or big-picture or whatever, plus is happy to own more of the company assuming it's a hot round.

But what does the buyer want to achieve by purchasing the employees shares? Just to own a little bit more % of the corp? For amounts that might not even matter for the employees and may de-incentivize them?

It's all very complicated and perhaps there are nuances that make every situation unique.

IMHO, it's very easy not to regret, with those particular numbers.

I'd take $500K now plus possibly $45M later -- over $0 now and possibly $50M later.

I'd take that deal even if "possibly" were "guaranteed".

(Who might regret that is a founder who was otherwise already wealthy.)

When they finally sold about a decade later I ran the numbers and determined it would have been about $40,000 based on the actual sale price.

There's no guarantee of a $50M exit for anybody.

$500K is an immediate big quality of life boost for most people.

For example: a condo/house downpayment, which lets you move out of cruddy ramen apartment, to routinely get a good night's sleep. And/or that relieves some of the various other startup salary level money stresses on your family.

I think this can also be aligned with the goals of the startup. You don't want people so "hungry" that the stress is hurting their health and their home lives. You want them motivated by the mission, the work, the environment, and the possible big liquidity windfall in the future -- but not by desperation.

Usually if you don't have the money for a down payment, you probably don't have the cash inflow for making monthly payments either. Especially at a startup where you are not drawing much in salary.

Only a little anecdata, but the few times I've looked (affluent university town, once recommended as a place to do a tech startup)... if one could swing a downpayment on certain places, the monthly costs were lower than rent one would otherwise have to pay, on places not as nice.

I actually kinda think a founder that was otherwise already wealthy wouldn't mind this too much, either: say they already have $50M in the bank; the difference between $95M and $100M feels even less of a big deal than $45M and $50M. Granted, the founder with $50M already in the bank probably wouldn't bother with the $500k in the first place, though, especially if they believed in the likelihood (or guarantee, in your hypothetical) of a future larger exit.

The numbers are made up anyway, adjust up by a few hundred thousand and the point that securing one’s shelter is worth foregoing winning the lottery still stands.

Plus, setting 100K aside for medical bills and even throwing the 400K into Bitcoin is a far less risky investment than me NOT being in a FAANG and accumulating 401K money which is absolutely critical if you want to keep up with the rising cost of life through retirement. When everyone else who joined Google or Meta out of college and now has a 10 million net worth at 40, that defines the cost of living in the area, and that's the bar you have to keep up with if you want to still live here at 40, 50, 60. Chipotle will cost $50 in a few years. A 1 bedroom apartment will cost $5000 in a few years. UberEats was $15 when it started, already costs $50 for lunch in my area, and at this rate, it will be $200 in a few years. Because those people can afford it, so greedy owners and greedy landlords will up their prices, so I will have to pay not just my $5000 rent, but also the Chipotle worker's rent, and the Chipotle franchise's rent, in order for their prices to stay profitable. The cost of living in the bay has tracked the S&P500, not the CPI. YOU will be priced out if you didn't have liquidity at a younger age to throw into some investments.

I'm at a large company right now. Being compensated enough to be able to afford life in the bay area now, having enough income to afford a mold-free modern apartment in a place where I don't need to worry about getting mugged, and hedge the risks of all the crap that's going on in the world was a big part of my reason to join one. If I had enough saved to "feel safe", I would absolutely be doing a startup again.

I would very much like to know where you can find low-risk investments that are likely to net you 10x-40x returns in the span of 10 years.

(But overall I very much agree with your point that $500k now and $45M later can be a much much much better deal for someone than $0 now and $50M later. I would likely take that deal every single time.)

By doing homework and research every day and investing only in things you personally deeply understand.

But if you don't want to do that ... passively investing in QQQ would have given you a 5.4X return in the past 10 years.

If you just throw your money across some large, too-big-to-fail companies, you could have 10X'ed easily.

AAPL, NVDA, MSFT, TSLA, NFLX have all >10X in the past 10 years. GOOG, META have come close.

You could have split your money evenly across the biggest 5-10 companies in tech and 10X'ed.

And if you actively invest and do day-to-day research it's fairly easy to beat 10X in 10 years.

By the way my definition of "low risk" is calibrated to the risk of founding your own startup and making 100K/year hoping for a big payout later in the future vs. joining a big company and making 500K/year.

My "startup founder calibrated" low risk stock investment means:

- Reasonably high probability to 10X in 10 years

- Some probability of losing money, but very low probability of losing most of your money

- If you lose money, it's because of a major world situation, and holding for another 10 years will probably get you out of that

- You also have skills and are hireable so you can hold the stocks

AAPL, NVDA (even without the recent events), MSFT, TSLA, NFLX, yeah sure. But out of those, only Apple and Microsoft were reasonable companies to put that kind of money into. I think you're not realizing that you're cherry-picking.

I mean I think your point still stands with just looking at QQQ, but I'm just saying over embellishing hurts your argument, not helps.

Joining a startup is extremely high risk from an opportunity cost standpoint. Literally any profitable company's stock is low-risk in comparison.

But ... if you don't want to do homework, you could just buy a smattering an equal distribution of the biggest names in tech (MSFT, NVDA, AAPL, GOOG, META, TSLA, etc.) and you would have easily gotten 25-37% pa averaged over the past 10 years. It's highly unlikely all these companies suddenly fail, all together.

And if you want to protect yourself against that, write covered calls at ~15-20% per week and use the proceeds to buy protective puts on all of your stocks.

(Disclaimer: not investment advice blah blah blah)

The other thing I've noticed is that for people on the other side of this transaction, it's not like "smaller numbers" all of a sudden become immaterial. $1M is still $1M. $5M is still $5M.

Again, I'm with you, I don't think it's regret exactly. But post hoc you might choose differently, even if it's the rationale choice at the time.

The whole concept of diminishing marginal utility is that this isn’t true. The first $5M is worth far more to a given individual than the last $5M.

I guess you'll feel pretty bad if you pay for car insurance for 40 years, and never have a crash.

If the 100% upside is guaranteed, then sure, you should hang on.

But if "anything can happen" then cashing out 10% now, and providing a "can't fail" safety net, is well worth it. The reduction of risk of "losing it all" is well worth the 10% premium. And if the (somewhat unlikely) big exit ever happens you still have 90%.

Overall agreed, but that's not even always true! If you're -- for example -- under crushing levels of debt today, you very well may want to take that $500k now, even if that $50M is 100% guaranteed in 5 or 7 or 10 years.

Or even if you aren't in debt, but would find it a huge quality of life improvement to be able to have a down payment for the house you'd really like to live in now, and not have to wait 5 or 7 or 10 years.

in the scenario you outline the founder sells the remaining 90% of their position for $45MM?

I don't think many people would experience any real regret at "only" getting $45.5MM instead of $50MM, due to declining marginal utility of money

If you can't handle "regret" in these cases, then you probably shouldn't be in a position where you're deriving the vast majority of your income/weatlh from investments (which is fundamentally what a CEO does).

It's astounding how many ICs can't wrap their heads around the concept that holding onto your RSUs make absolutely no financial sense. With rare exceptions, this doesn't make sense for anyone. And yet, fear for "regret" keeps people holding.

But it's not shocking that even in tech many ICs are not good at reasoning financially. But if you want to be a co-founder, and hold a lot of your wealth in investments it's essentially that you learn to reason, plan and accept outcomes accordingly. Otherwise you're more-or-less a professional gambler.

Disclaimer: I’m an IC myself.

I worked for my 1st company for 15 years. Held to their RSUs most of the time. Then moved to another (public) company and stayed there for a year before leaving. Now in a startup with a lower salary and no immediate liquidity on my stock options.

When you work at a public company, you have multiple exposures to the company’s growth: the RSUs that have already vested, the RSUs that haven’t vested yet and through your own career growth and salary increase that goes with a successful company. If you were early enough, you also get market cred for having made the company successful. If the companies goes under (or shrinks, or lays people off), all those assets are at risk.

Usually, one has more in granted stocks than in vested stocks. If your company just went public, you might have a lote more sellable than in your pipeline, but even that is unusual. Usually, you’ll still have more in the pipeline than you’ve already vested.

If your company has been public for a while, you should get frequent refreshes, which means you still have a significant numbers of unvested shares.

Regardless, you should sell as soon as you can, because of the remaining exposure through unvested equity. Use the proceeds to place in an ETF, or in a high-yield savings account, or some more aggressive investment strategy. Or use it for the downpayment on your house, or fund your kid’s college funds, whatever floats your boat.

Anyways, keep in mind that you still have a significant exposure to the growth of the company through your unvested equities. If you’re worried about short-term cap gain, don’t be. If you sell immediately, there’s no growth between cost basis and selling price, so no cap gain. Another upside to selling is that you’re not bound by the blackout periods, so your assets are much more liquid. And remember you still have exposure

The only reason to wait for LTCG on RSUs is if you decided to hold it for some non-zero amount of time after vesting and then the stock price shot up. But then you're also taking on the risk that the stock price will drop again before the year has passed, and end up with less post-tax money than if you'd sold at short-term tax rates.

   (1) give you the amount in cash (as regular income) 
   (2) take that cash and buy that stock on your behalf
   (3) turn around and give you the stock

(that's assuming that there's an ability to liquidate the RSU on the vest date)

The issue here is that sometimes if you procrastinate about diversifying, it pays off very well. As a Google employee (who joined after IPO), it was by far my best investment and funded my retirement.

I guess that's accidental gambling. I did have other investments.

If you had worked at a different company with pure cash comp equivalent to your RSUs, would you have invested the same $$ in Google stock? Or would you have invested it instead in an aggressive but diversified portfolio (e.g. 100% S&P 500 or even just a bucket of blue-chip tech stocks).

I am confident that for the vast majority of tech employees they would choose the latter if they were operating in a pure cash regime.

It's easier to be comfortable investing long-term in something you know well. While there's a lot I'll never know about Google, I think I understand the company somewhat better than others. For example, I can discount a lot of news articles as being written by people who don't really understand the culture. If I hadn't worked there, I might worry more.

That's less and less true, though, as much has changed since I left. And for investment purposes, maybe that bias only seemed to be helpful, versus an outside view?

Ask a Yahoo employee how that same plan would have worked out for them.

That being said, good for you. :)

I've benefited financially from having a good sense of how well things are going and holding/selling accordingly (within the confines of the law and blackout periods, of course).

This can also cut the other direction too. I had a slightly negative sentiment about Google during my tenure there due to the organization I was in. When earnings call season rolled around it didn't matter since the ads revenue line always dominated everything else.

Ultimately it's an investing decision. If you believe the stock price is going up at a rate faster than the rest of the market, and are willing to accept the risk that a concentrated position like that entails, then that can make financial sense.

For people who want to hold their RSUs but still want to diversify to some extent, my usual recommendation is to pick some percent of the shares that vest every quarter to sell immediately, and hold the rest. And -- critically -- to stick with that commitment every single quarter, and not fall into the trap of thinking "oh, the stock seems to be doing so well, I'll skip the sale this quarter". (Of course, a measured re-evaluation of the plan is a reasonable and good thing to do every so often.)

Going in they have a lower salary than if they work for a more established company.

Then, either their shares end up being worthless, or at the final exit, they make less money than if they worked for a more established company the entire time. IE: Being an early employee in a startup is a lose-lose situation.

This is something founders need to understand when recruit their early employees: These are often the most critical hires for the business, and therefore it needs a high probability of upside.

IMO: A series of retention bonuses, and/or guaranteed bonuses at acquisition / funding events is a good solution. It's how I've sidestepped the equity issue when I was employed during an exit event.

Either they have the skills to be a founder themselves or to work at BigTech... or they are financially ignorant/disinterested enough to not understand how equity in corporations work? Or is the charming and misleading founder who is to blame?

My point is that considering the high avg intelligence of the typical startup employee, there must be something else going on.

Clearly, people like working at smaller companies that have potential to grow - maybe that's because there's more interesting work, less bureaucracy, smaller teams, more of a sense of a journey, etc. Easy to devalue these things, but what else explains the fact that even when there's more risk and likely poorer financial outcomes these otherwise very intelligent people still choose to work at these companies?

The "old" calculus was that, being an early employee in a startup, you'd make less cash money than at a "big corp", but if the company "hit" you'd end up doing much better. Just look at the stories of early Microsoft employees, or the Google chef whose stock options ended up being worth tens of millions. Obviously those are outliers, but it was still common that early employees of "home run" startups would be doing great.

But the thing that really changed the calculus is that the FAANGs started paying extremely well, especially as the value of their RSUs skyrocketed. So the new problem was that even if your startup hit, you'd be doing about as well as a senior engineer who was at Google for 5 years.

I know in the past YC itself has commented about this dynamic, basically arguing that early startup employees deserve more equity.

Other part, buying out any promising startups and letting them rot on the sidelines of the main business.

I work for startups because I get a ton of responsibility for things I would never get at a big company. I get a chance to learn a ton of new stuff.

Through my career, I've made all my money at the public companies, and had most of my skill growth from the startups (Netflix being the big exception, where I both made money and leveled up my skills).

Yes, definitely, I think we live in a bit of a bubble here where we actively read and think about these things. I think most early employees will see a 0.5% or even 0.1% equity offer and think that's incredible. It barely even registers that the founder sitting across the interview table from them holds 40% or whatever, and that while, yes, the founder has taken on more risk than they are about to take on, they certainly have not taken on 80x the risk or are putting in 80x the work.

That's the wrong question to ask.

The right question to ask is: "How does an early stage startup attract the people it needs to be successful."

Money isn't the only metric, and there are good reasons to say "if you want top dollar, go work for a FAANG."

On the other hand, I was once approached to be employee #1 of a rather interesting startup, and the risk/reward ratio just wasn't there. The company was more likely to fail, and I was more likely to find myself unemployed after 24 months. Now that I have children and a mortgage, I can not do this.

In contrast, the company severely needed someone like me: Significant experience and knowledge; AND active interest in their product, with a mildly personal stake. Relying on someone young and cheap would be risky for them.

> If you were an employee and had $200k total value in your options, and you could sell 10%, you're getting $20k.

It obviously depends on your financial situation, but having the option vs not will certainly matter to some employees. Not to mention that the stake could well be worth $0 in the future.

I totally understand why a typical founder doesn't want to do that. If for you as an employee it is a deal breaker, then you can complain about it, change company or whatever. It is not like the founder owes anything to the employees (unless he has promised that). Everyone in the equation are adults and have to decide themselves, if the position they are in makes sense for them with the terms they have.

From a founder's perspective sure, you can do what's best for you.

That's not what this article is about. This article is highlighting that there's a tendency in SV for founders to cash out early, and secretly. And along with that, there's a tendency to paint a narrative that the founders haven't sold a share. It's hard to see that as anything other than deceptive.

It's one thing to join a startup that you know may not succeed in the long run. It's another to join a startup that has a founder whose been secretly cashing out along the way.

Justification does seem necessary in that second scenario, at least from a morality perspective.

Personally I'm not in the SV scene but from Europe, and I don't know much cases of these early cashouts.

If we also believe that founders are important to a company's success as it grows from a small startup into something more mature, I'm pretty sure that unfortunate financial (and housing) situation would drastically reduce the chances that the company would make it to that $250M exit later.

So taking that $500k may increase the chances that the startup later gets sold for $250M, rather than, say, $50M... or just failing entirely, returning whatever small amount of money is left to investors.

If you tell them the value of their stock is $200k, and 90% of that is imaginary, then they might start thinking about that job offer with a 500k stock grant at a listed company.

The only reason it happens is that the founder is negotiating both on behalf of the business and a bit for themselves.

$20k would be a life changing amount of money for me right now

if you ask you mom or dad, whichever believes in you, they have enough money to fund your dreams (if you care enough to ask) of joining or starting a startup to become an (x) CEO/salesman/builder/marketer/whatever for whatever you want to build, and that includes signing onto some startup that won't pay you a living wage until it fail-exists for $5 million and everyone goes to burning man/Berlin/ibiza on the founders dime (including rent for everyone N months).

Yes, if $500k doesn't move the needle on your life then the question is moot anyways. Most first-time founders will be closer to the poor end of the spectrum than the wealthy side.

There are people reading this for which $20k will change their life (which in my example was the 'shouldn't matter' amount instead of the $500k).

“We all go to the pay window at the same time.”

It’s ok for founders to take a little bit of money off of the table if they extend that to their employees as well. Asymmetry is where things get weird.

I’ve seen many founders who got deep into the fundraising cycles without ever realizing they could take a cent out. VCs will constantly tell you to let it all ride, and sometimes that works out, but for most people, having a little bit of financial security while you’re trying to change the world is necessary.

The best startups figure out how to manage liquidity through financing in a way that aligns incentives, keeps the goalposts at the mission, while allowing their teams to thrive.

It’s about alignment. If everyone is pulling in the same direction you’re going to execute the vision. Whether you win in the startup lottery is up to the threads of fate, but alignment is the straightest path towards a result.

I think there are a lot of us who struggle to fit the larger corporate mold who pretty much only thrive in the startup world. I can't speak for all of them, but I've been very willing to take the balance of lower cash compensation and a fistful of lottery tickets and not having 12 layers of middle management breathing down my neck over more liquidity.

I guess I'm also blessed with inexpensive tastes, which helps, but I'm still able to live somewhere I love and do all the things I care to do, so it works out.

It’s possible you’d be making $700k+/yr if you were at google. About triple what you are now.

With that perspective, $200k/year and $700k/year both reduce to "well-paid".

Also, a Staff title at a Seed or Series A startup can definitely ask for $250k/year, although they'd likely be trading off against equity grants.

Certainly this depends on where you're going to live, but if you're in a place where startups are common (even considering the current remote work situation), $200k/yr will either be a stretch for you to meet your living expenses, or will require that you live fairly modestly, especially if you have dependents. If you are able to put any of that into savings/investments, it will be a fairly small amount.

With $700k/yr, you can live quite comfortably, while putting quite a bit away for retirement.

And I don't think your (1) & (2) points really make sense here. Investments compound over time; starting off in your early 20s putting $50k in your investment/retirement accounts every year vs $10k will give you a very different outcome once you reach retirement age. Hell, you'll reach a very different outcome in your 40s. (But honestly, if you decided to live a $200k/yr lifestyle at $700k/yr, you'll be saving so much money that you could easily retire in your 30s.)

It will also mean getting to put a down payment on that house much earlier, and/or being able to afford more of a house. And in the meantime, it will mean being able to dine at fancier restaurants, take more luxurious vacations, buy more expensive toys, etc., if that's the sort of thing you value. And I wouldn't even consider all this to be lifestyle creep (as you genuinely wisely advise against downthread of a sibling comment); this kind of lifestyle would be perfectly sustainable at $700k/yr, but not at $200k/yr.

(But really, though, who the hell is making $700k/yr in their early 20s? Very few, very exceptional people, that's who.)

Assume an "effective" average pay (i.e. "net" pay + retirement and other deductions, inflation-adjusted to today's dollars and averaged over the course of your career) of $120k/year.

From age 22 to 40, you've earned $2.16mm in inflation-adjusted-to-today dollars as a single earner. With a not-unreasonable average savings rate of 30%, not accounting for tax-advantaged growth or any growth at all, you'll come out with $650k of inflation-adjusted-to-today capital in savings.

Realistically, this should end up invested in some kind of equity (housing, stocks, bonds, whatever). If you finance the purchase of a house at 30, you're only 10 years into a traditional 30-year mortgage at this point, for reference. So you're roughly 1/3rd of your way to owning all the equity in your home. That's fairly comfortably a $1mm home (home equity being 30% of your assets at 40).

Of course, if you're DCA-ing into something that yields a modest average of 5%/year in inflation-adjusted returns, that $650k is closer to $1mm inflation-adjusted-to-today capital. And you still have 25 years at that point for your retirement savings to compound. And you can work part-time in something more fulfilling until retirement to supplement your income.

YMMV, but the marginal utility of money beyond $1mm in equity at 40 and $6k/month in expendable (on rental housing, food, travel, social events) income during your 20s and 30s is pretty small for most people. If you add a partner with any kind of income to the mix, it makes the marginal stress of earning more money even less appealing.

Edit: the main thing you ought to avoid like the plague is lifestyle creep. Spending money on things with zero or vanishingly-small happiness ROI. Read this story every year or two, or whenever you get a raise at work. https://www.marxists.org/archive/tolstoy/1886/how-much-land-...

If someone's offering $500k/yr to an engineer plus stock, they're definitely trying to attain someone with very niche skills. Which begs the question: Just how applicable is this scenario for everyone else?

I haven't found many startup roles going past $200k for a fully remote engineer, almost regardless of level. I don't think they even try to get someone who would be Staff+ at FAANG because it's basically pointless.

Top quality in your scenario might mean niche skills like you've done specific computer vision work, have a PhD, and are going to a self-driving startup... Cool but not really applicable to most of us, is it?

Whereas compare as to how common it is to be a typical full stack or backend engineer with a decade of experience... join FAANG at Staff and make $600k+.

> It’s possible you’d be making $700k+/yr if you were at google.

Possible, sure, but not likely. For a mid-tier SWE joining Google (or another FAANG) today, even $350k/yr salary+equity is probably above the median.

Also that feels like a specious comparison: most people (including those who would be otherwise joining a startup) are not joining a FAANG, and will not be getting paid as well.

At a startup you have more autonomy and power over your personal position. I wrote 90% of the code that is generating company growth, released 2 months after a layoff. If I had taken longer to release that code or if my code didn't work the company would be in a worse financial position.

But that also means a lot of personal stress. There aren't 4 layers of middle management to catch flak for you. If you fuck something up, you are directly responsible and depending on the environment that can result in some heated conversations. I also work way harder at a startup than I ever did for a big company

What makes me want to put my head through a wall is when I fuck up, and four layers of people above me are the only ones allowed to fix the thing, but they don't, so I keep catching flak for my fuckup without any way to stop it and fix the thing. I have many more heated conversations with those managers, which typically leads to the door.

When I fuck something up, rarely is anyone more upset about that than I am. Nobody's dumping more heat on me than I am on myself, so bring on the heat-- as long as I have the agency to fix the problem.

But overall that statement is making a lot of assumptions.

It's assuming money is the main priority for everyone. Sometimes the priority is to have a ton of autonomy and influence on product direction, not have to deal with 8 layers of management, and have an actual, large, often-measurable impact on the company's success.

It's assuming that the alternative is that anyone can work at a FAANG, and be in the higher tiers of salary they offer for their quite-above-average employees (hired today, not 10 or 20 years ago). Most competent, talented people won't pass an interview at a FAANG. Of those that do, many of them will not immediately be making $500k/yr. These points are especially true for 22 year olds, naive or otherwise.

I was going to make a comment about working your ass off at a startup vs. working 9-5 at a more established company, but I know plenty of people at FAANGs who work 50- or 60-hour weeks, every week, and often put in time on weekends. Granted, I would agree that pretty much everyone at a small/early startup is going to be working long hours, while a large number of people at a FAANG are going to enjoy a nice, relaxing life outside of work, so they're not at all equivalent in that regard.

As a rule, it is and always has been. For every unicorn piñata stuffed with winning lottery tickets, there are hundreds/thousands? of others whose employees walk away with nothing or less (debt, strained relationships, mental health issues, etc.) at worst or a job at AcquiHireCo at best.

To put it another way: early employee equity was always a lotto but now the payout is like some lame scratch off instead of the powerball jackpot.

It's just that these companies very often are the darlings since their inception, get constantly talked about. Everyone wants to to invest in them and everyone wants to join them. So they have the ability to pick out the best talent, in other words, it's unlikely you'll be able to join that specific startup.

But even 20 years ago, try getting into early Google. From what I heard they had extremely high bars for hiring as well and only lowered them once they got so large that the pool was exhausted.

I'd argue that the total comp at the established companies for engineers has increased precisely because of competition from startups: to make the startup not be the better option.

Does that mean that VCs are not taking a bigger slice than they used to? Absolutely not, but I wouldn't put the blame solely on them.

We’ll see when it happens. If I had to name a company most likely to have massive landmines buried in front of common stock cashing out, it would be at the top of the list.

My startup idea is a firm that uses generative AI to flood the internet with pro-startup, pro-VC, pro-founder propaganda, so that message will never reach the naive 22 year olds. Personally, I think it's like saving the environment, since naive 22 year olds are precious resource we cannot allow to be destroyed.

As long as naive 22 year olds think have that one friend that stuck around long enough to cash out on an IPO, then yes. On a risk-adjusted basis, this has basically always been the case - you're better off working at FAANG.

And I think starting now at a FAANG is a lot less lucrative than people seem to think for the average (or even above-average) employee. Certainly nowhere near as lucrative as it was 7-10 years ago or more.

I was offered the option to liquidate up to 20% of my vested shares at my last company's Series A. It was restricted by tenure though (3 years), so it wasn't available to everyone. In retrospect, I should have liquidated the full amount, but it was a new concept to me at the time and I was more conservative with the amount.

I more recently interviewed with a pre-series A company and they said that they'd include me in a liquidity event when I brought up compensation.

It's not related to risk, at least not directly. It's related to the supply of entrepreneurship as a factor of production. Entrepreneurship is scarce, so founders have leverage in any bargaining situation against early employees, who are more numerous and therefore less valuable and less powerful. If 10x the number of people tried to become founders, then founders would hold less leverage and the equity terms would become more "fair" because they'd have no choice but to give generous terms if they wished to hire people.

But this isn't a static situation. For example, the article author points out that his startup doesn't reduce the options-expiration clock to 90 days after leaving the company, and I've read of similar cases in the past 5 years or so. I wouldn't say this practice is common now, but I feel like this was unheard of around, say, 2010.

After the company I worked at went public in 2016, they did another public offering 2 or 3 months later, before the 6-month lockup period ended. Nonetheless, they allowed employees to participate and sell up to 10% of their shares in this offering. I feel like this sort of thing is more common these days, and absolutely wasn't 20 years ago.

Established still-private companies like Stripe, and even newer ones like OpenAI, have given employees the opportunity to sell some of their equity to new investors during funding rounds, giving them some pre-IPO/pre-exit liquidity. There are certainly other examples of this in recent years. That surely was rare in the past.

I'm not sure what's driving these changes. Employees have been gaining more negotiating power somehow. Maybe that's a function of labor supply. Maybe that's a function of employees being better educated now about corporate finance and the things that are possible but historically not offered. Not sure.

I think more companies offering it is maybe driven by feedback loops around recruiting (prospective employees asking for more and varied opportunities for compensation, and rejecting offers that don't include them). And also perhaps by employees just simply becoming educated about and talking about this stuff, with the sometimes-tacit understanding that they're going to be looking elsewhere for other employment opportunities if their employers don't give them more than just salary bumps and occasional equity grant refreshes.

Oh wow, how many companies have a series A after 3 years? How did your company survive without any raises for 3 years and what made your company finally decide to raise money after going 3 year without doing so?

We hit an inflection point in the early pandemic where money was cheap and we had a ton of new customers coming in, so we were able to secure very favorable terms for the Series A and used that money to expand the business. Things continued to go in the right direction for the next ~2 years and we ended up doing a Series B round, and that in retrospect was a mistake. We over-hired in 2022 and couldn't back that up with increased business. And because we had given up so much control to investors in the previous rounds, we were unable to return to the sustainable-growth strategy that had worked for us in the past, and had to adopt faster growth strategies, none of which panned out and ultimately hurt the company and led to many rounds of lay-offs.

As someone that is outside of the tech industry, the fact that this is seen as an abnormal approach seems quite ridiculous.

The problem is that new startups often don't have options here. Unless you're in a market where VCs are shy about funding new companies, if you don't take the VC cash and go into high-growth mode, someone else will, and they'll end up out-competing you, at least in the short term. (Long enough that you won't be able to remain solvent, at least.) So you either fail, or take the money and often get into a situation of doing not-particularly-sustainable things.

Also Elon famously put 200 million of his own money into Tesla and SpaceX to keep it afloat, which is the opposite of cashing out early.

Is that what happened? I thought he had $200m, and put in $200m.

Nasa only contracted SpaceX because of that AND because SpaceX saves them billions of dollars from otherwise inefficient suppliers.

But that's not relevant.

If you have a philanthropic bent and want to be able to fund various charities to the tune of $5M or $10M per year (in addition to a reasonably luxurious lifestyle, though considerably less than the above hypothetical), $50M might not be enough to sustain that over time, but $250M probably will.

I think it's fair to say that there's not much difference between net worths of $25M and $50M, or between $50M and $75M. But jumping an order of magnitude from $50M to $250M will let you live a very different kind of life, if you so choose.

(This is the part where you say "Yes, having lived both ")

  A: I’ve seen many founders who got deep into the fundraising cycles without ever realizing they could take a cent out.

  B: I have known zero founders who have turned down an option to take money off the table [...] I love the idea of your universe, though.

Have seen companies offer this to employee's

And companies that let employee's take money off the table at series A are also likely to be generous with meaningless titles; that is they will let early employee's call themselves founders.

It also works well for everyone involved if they're selling their shares to the investors for Series A - investors get shares for cheaper, founders get paid based around the value of those shares, more cash & runway in the bank.

By the time they're ready for a series A (VCs/larger institutional investors, though sometimes angel investors from the seed round participate as well) they'll very often have something to show for it, and may even have paying customers. The A round can come during the first year of operation, or later.

Given this, it's not uncommon for founders to be able to have some liquidity during their series A. Granted, it's usually not going to be a ton of money, but it can be a nice bonus that allows the founders to pay off debt they might have accrued during the first stages of the company, or perhaps move out of their 1BR apartment and put a down payment on a larger house, etc.

We also see pre-seed, where the goal is to get into an accelerator. It's like $2000 for 3%. Enough for a domain name, a laptop, a babysitter, something that gives you the space to do a proof of concept, but not a full MVP.

Here where VC funding is dry, we also have some stage between seed and Series A, where the startup raises from friends, angels, crowdfunding. It's not really given a name because it's a signal that the company has already burned through seed and yet hasn't done enough to raise Series A from proper "professionals".

But here, by the time you've raised Series A, you're expected to be #1 in a market - best language app, best tax app, etc. And Series A is just to prove it works in other markets. Worst case I've seen was a guy raising US$500k seed (not Series A), but they had to prove they could be #1 in five countries.

US is a market of 300M people and even top companies like Amazon don't have to go far, but many countries have both low population and low spending, and investment is still US-centric.

Pre-Seed, Seed, and some really really early Series A employees got to cash out fairly significant chunks of equity. Not as much as a founders' 1-2 million, enough for downpayments on homes or slick new cars all cash. The founders apparently were incredibly generous to Seed stage employees.

Still doesn't compare to a Founders' equity, as this article implies.

Along that line, I would be very surprised that there are founders who don’t seek an opportunity to set aside their nest egg to “de-risk”.

You say you have seen such guileless dedication to the founding first hand, can you share what industry or type of company? Perhaps I’m just exposed to the wrong crowd.

It's also not in the interest of the VC that the founders are worried about making their rent or mortgage payments, or paying off the credit cards they maxed out paying their AWS bills in the early stages of their company.

The VCs want their founders to be hungry for more, and see their company's growth as a vehicle for that. But they don't want founders to be stressing over basic human needs, either.

Any VC that would refuse to let you take some liquidity in these situations is not a VC you want to make a deal with. And if you can only find VCs like that, your company is probably doing poorly enough that you might want to rethink what you're doing.

I think giving founders liquidity but not employees is maybe ok for series A: the founders may have been working for $0 for a couple years at that point, and may have taken out a second mortgage or ran up a bunch of credit card debt to keep things going. An early employee is not going to do any of that once they join, even if they're getting paid a below market rate salary. That is definitely an asymmetry! Getting some liquidity at the series A allows the founders to pay down debt and replenish their savings, financial issues that are probably directly related to their time working on their company.

But after the series A, founders should be able to pay themselves a livable salary. The founders and employees should be on much more equal (or at least comparable) footing when it comes to their regular income. By the time the series B comes along, if the founders are going to get some (more) liquidity, the employees should get some too. That only seems fair.

Yeah, if the founders don't do this I wouldn't want to work for them (not that I'm the target demographic anyway).