This was how you could get rich. Maybe I'm overly cynical, but I feel that these days VC and founders know all the right tricks to play to remove value from the contributors and reallocate it to the investors.
Nope. You can still get rich from equity, especially by being an early employee. It's all a giant lottery though.
The easiest way is to join companies that are obviously doing well and will likely IPO in 2-3 years. This is still a lottery, but one with much higher odds and a lower potential payout. You can make $600k-1m every few years in equity alone by hopping around these companies.
If you ever wondered why so many people have ~1-2 years of experience at each company on their resume, this is often why. They join, get a decent chunk of their equity grant (in RSUs), then go to another company to get more equity. Some of these companies will do well, others will do poorly. You end up distributing your risk and ensuring you'll get a decent payout.
This is a great narrative! It just doesn’t work out for most people.
I would say that if you want to hit a lotto ticket, this is your best route. Increased variance is your friend when you are at the downside and it’s all uphill.
But if you want to get rich, and you are the average HN reader, it’s better to bet on the typical case.
(That said, if you have a list of companies that meet your current criteria, I would love to know! I know a lot of faang engineers who are bored and would love a shot at millions.)
Companies typically switch to RSUs from option as they get closer to the IPO. Conversely if a company is offering RSUs then it’s a strong signal that they will go public within 18-24 months and also that the options have appreciated as much as they could as evaluated by private investors and so subsequent stock appreciation could only happen by public investors. Exceptions exist but it’s a good heuristic.
You can get RSUs and RSAs from a private company, it's just often undesirable because you pay income tax on the valuation of the shares vested but you can't sell your shares until a liquidity event or IPO.
A lot of the recent IPOs are pretty big, and while I don’t have insider info I assume at least the early employees did well. Robinhood, snowflake, UiPath, Toast, Roblox, Coinbase etc. we are not short of large tech IPOs.
I think this is around $2M in the US, using what the FIrE community says. Does that seem reasonable,
Or are you thinking about $20M+ payouts? (That’s what I would need to retire now.)
"retire early" does not necessarily have to mean "retire tomorrow", I guess it depends how old you are.
If you're in your 20s or 30s, 2M is probably not "retire tomorrow" money, but it would probably let you retire very early if you managed it and made smart investments with it. Maybe I'm wrong but I don't think many ICs are getting even 50k from startup equity, nevermind 2M.
20M is "retire tomorrow" money for sure. And definitely workers do not get that kind of money from startup equity.
Most of what I hear now is companies giving fake "shares" that are ostensibly tied to the value of the company but are not actually shares and do not represent any ownership. If they do give shares it's not enough to pay out big, and they get diluted repeatedly over time.
1. you personal savings are more volatile tolerant than big pension funds. SP500 annual avg growth is 10% so you can almost achieve that 7% if you deploy 50/50 split to sp500 index + 30 year t-bonds.
2. It is magnitude more easier to deploy 2 million dollars to market than 2 billion dollars.
