Startup Equity Compensation

Startups typically offer employees, particularly early employees, substantial equity compensation. If the employer is offering this compensation in bad faith, or otherwise preferring one equity holder over another without an explicit contract - then they are at the very least a crappy business partner. A founding engineer with a 2% stake could be missing out on 5-10 million of this transaction.As an aside, most founders are paid during the entire project. It’s not hard to raise a preseed roun

To corroborate this, I joined one fintech startup when it had 7 people, with no equity, based on salary. The founder's rationale for paying higher salaries and not offering equity was that equity is worth substantially more to founders/investors than employees, due to factors like risk preferences and the fact that they could diversify, so it made more sense for him to just raise more money and pay purely in cash. This made sense to me and I actually wonder why it isn't more commo

Employees have a better overall risk / reward ratio, as they usually do receive salary, unlike founders, who often invest their own money and have negative effective salary. So them having a higher equity is fair.

Stock options or equity are one of the draws for working at a startup. Particularly as an early hire or taking a pay cut I would expect some equity. I'd be suspicious if the founders aren't offering a small amount of equity.

Why "slightly" less? Even if it can't be sold, equity in early stage startups has an exact dollar amount attached to it. If one founder needs more salary it should be a simple calculation determine how much equity they should give up for that salary.

Founders are not even giving enough equity for employees to match the income they lose not working for big tech. Its common to still make less on equity + salary after a successful exit compared to the yearly total compensation at big tech.

I can vouch for this from personal experience. If you aren't getting a percentage comparable to one of the founders, then you shouldn't settle for anything less than near-market salaries.Startups bring on employees for their expertise. You should be compensated appropriately for it...especially if you're facing as much uncertainty and risk as the founders without the potential for a big payout.Also, when negotiating and judging a compensation package, remember that few startups have succes

"working at a startup is riskier for employees than for founders."That (honestly) is ridiculous. If the founder is taking the standard path, they are going months or years without salaries, oftentimes accumulating debt to do so. When they get a little slice of angel funding, they usually pay themselves pennies so their early hires can get non-insulting salaries.You seem to assume that a "cash-out" is a foregone conclusion. 99% of startups go belly up. No payout for the founders, "modes

Startups that start off being run by well-intentioned people you trust can turn into places with management that has no problem diluting or otherwise devaluing your equity.Also, most startups use a little trick: they tell you that your equity is enough to make up for the difference in salary. Some of the clever ones will even do this using the valuation at the last fundraising event. VCs will agree that startups are a risky investment, and they seek 10x return on their investment because mo

If you're not pushing for equity, why are you doing a startup? I'm talking about an earlier-stage startup where there isn't a lot of money for salaries (i.e., you are getting below-market rates regardless).