> If a funded company (series A, say) is offering you equity as a large part of comp, you have to ask yourself why the VCs don't buy back that equity for the cost of paying market rates for talent.
Because the company wants to align your incentives with its own success, of course. That's the original reason why equity was offered to employees in SV, back in the good old chip-making days.
According to your argument, equity never made sense as a compensation factor. Obviously that's not the case, it has been an important factor in the past, and if enough people wisen up, will probably be so again in the future.
Look, either startups sell equity and pay developers market rate, or they give them more equity to compensate for under-market pay. Otherwise, these startups are underpaying developers, plain and simple, and these developers will prefer to work in companies that compensate them fairly, which this thread's commentary suggests is already happening.
Incidentally, I agree that paying market rate in cash isn't the solution, because startups need harder, more dedicated workers than the average company in the market.
That's exactly why equity is crucial.
Tellingly, startup founders agree when they pitch their startup as "definitely a unicorn, stick around and your options will be worth millions of dollars" to every single candidate. It's just that the equity factor is now only empty promises, because even early employees only get tiny amounts of bottom-preference options.
It makes 0 economic sense for developers the alignment thing is marketing BS. Go to the best VC in the field and offer him/her to bet all of the funds money on a single deal see how hard he/she laughs at you. If you exclude top 5 VC firms the whole VC field is net losers and that people who's full time job is to pick winners
> startups need harder, more dedicated workers than the average company in the market.
I agree. So hire harder and more dedicated people. This is not impossible.
The idea that people will work harder for equity than they would for EV-equivalent cash is where we disagree.
If you have 5% of the company, and your direct contribution makes 5% of the difference in whether the company meets its objectives, setting aside whatever external market factors that are totally beyond your control--how motivating is this really? How motivating would it be to a more economically rational actor? Maybe this is the real reason why startup employees tend to skew younger...
Because the company wants to align your incentives with its own success, of course. That's the original reason why equity was offered to employees in SV, back in the good old chip-making days.
According to your argument, equity never made sense as a compensation factor. Obviously that's not the case, it has been an important factor in the past, and if enough people wisen up, will probably be so again in the future.
Look, either startups sell equity and pay developers market rate, or they give them more equity to compensate for under-market pay. Otherwise, these startups are underpaying developers, plain and simple, and these developers will prefer to work in companies that compensate them fairly, which this thread's commentary suggests is already happening.
Incidentally, I agree that paying market rate in cash isn't the solution, because startups need harder, more dedicated workers than the average company in the market.
That's exactly why equity is crucial.
Tellingly, startup founders agree when they pitch their startup as "definitely a unicorn, stick around and your options will be worth millions of dollars" to every single candidate. It's just that the equity factor is now only empty promises, because even early employees only get tiny amounts of bottom-preference options.