- Company fail? Oops, not worth anything - Company succeeded but sold for under whatever the last round was raised at? Oops, not worth anything - it all goes to the preferred stock holders - Raised a huge round at a great valuation? Too bad, you can't take any money off of the table like the founders probably can. Also, any options you now exercise are 'worth' more and oops, you just triggered AMT and now owe a bunch of taxes for income that may or may not ever exist and that you most certainly can't access yet - Company went public and the stock shot up? Great... unless it tanks before your 6 month lock up period is up and you're stuck with a tax burden you can't afford to pay
Layered on top of this is the fact that a lot of the decisions that have real, tangible effects on the above are totally out of your hands (things like how much dilution your company takes on). Even if your founders go to bat for you the investors have very different incentives than you do in all but the totally ideal outcome.
My point isn't that people should avoid accepting options but that they should be viewed as a nice perk along the lines of someone buying you a big stack of lottery tickets. I've had too many friends comparing offers between companies multiply what percentage of the company they'd be getting (if the company is even telling them this) by the company's current valuation and treating that like it's money in the bank.
By all means, trade salary for the opportunities that working at a small startup could give you (like responsibility, an opportunity to learn, coworkers you like/respect, etc...) but be _very_ aware that what the company tries to sell you RE stock is a reality viewed through the rosiest of glasses.
BTW, 20 years ago I read a statistic that Microsoft had made 10,000 millionaires just in the Seattle area alone. In the early 90s, an acquaintance would refer to his car as his "quarter million dollar Oldsmobile". I finally asked him what he meant. He laughed, and said that he'd cashed in his MSFT stock options to buy it, and that was what the options would have been worth when I asked him.
The employees should be receiving dividend-like cash bonuses and should be receiving salaries that actually afford the cost of living in their geographic location (in addition to legitimate retirement contributions, 40-hour work weeks, generous vacation, and legitimate insurance benefits, which all should simply be regarded as the absolute bare minimum conditions of employment period).
Saying it's either stock or no stock is a false dilemma. The same amount of compensation should be shared with the employees, just not necessarily in stock format.
I'm also not opposed to someone who chooses to take company stock instead of an equivalent cash bonus. If you weigh up those risks, you're a grown up and can choose for yourself.
But for most people, taking a cash bonus and putting it into a simple low-fee index fund or ETF is going to be worth a ton more than their company stock, while also lowering their overall risk, since a market downturn won't affect their regular paycheck and since their regular employer won't affect their return to their outside investments.
The point is they should have the choice.
> BTW, 20 years ago I read a statistic that Microsoft had made 10,000 millionaires just in the Seattle area alone.
BTW I read that someone somewhere won the lottery ... better go buy a ticket.
http://www.forbes.com/forbes/welcome/
Founding family got rich, too. Costco always did good pay and benefits with what HN would call a subscription model. Plenty companies referenced here have a subscription model.