Welcome to the ugly, ugly truth about startups. Employees have so little equity compensation it's almost hilarious - and yet founders will hand out 0.1% offers and expect you to take huge haircuts for the privilege of owning a tiny sliver of a 7-8 figure exit (potential exit, actually).

Having seen the stock and bonus structure at Amazon and Google, I can confidently say that your expected outcomes are considerably higher at a top-tier tech company than at your average startup.

Sometimes I wonder where all of this "take a haircut for equity" advice is coming from for employees. It's patently terrible given the amount of equity that most deals involve.

It's a founder generated myth - come here and work for me cheap in the hopes I become a billionaire and change the world blah blah blah. The funny thing about equity is the guy who starts benefits disproportionately by simply being there earlier than others of equivalent technical ability. Contrary to popular belief - most founders are selfish morons compared to some of the people they hire later to make them rich. It's the halo effect that occurs when some of them succeed luckily that makes people think founders are different from normal people - they aren't.

Fun fact: You know all those perks provided by startups to their employees that are marketed like charity - the value of said services doesn't come close to the haircut taken for becoming a startup employee. It's psychological arbitrage.

I wonder if startups are just an exercise in psychological arbitrage driven by myths and lies that allow them to take the delta of wealth from their employees' haircuts and transfer them to founders. 40% haircut for 100 employees for 3 years at 100k par value is worth 12 million - more with DCF and even more with an adequate investment strategy investing said wealth to acquire users below cost and psychologically arbitrage big company fear into a sale or acqui-hire.

  most founders are selfish morons compared to some 
  of the people they hire later to make them rich.

Lets hope there aren't many startup founders reading this forum - or they might get worried :-)

Anyway, enough silliness, is it feasible to create an expectation or culture that rewards early hires in line with the (expected) drop in salary - the argument being that if I could earn 150K contracting for a year, but work for you at 50K, I should expect to garner 100K worth of equity.

Or are we going to see a simple return to the basics of start-ups - it takes money to start a company. You need lots of it to hire good people. Or is it really feasible to do everything with three guys in a room?

Or is it simply that heaving a compny into existence takes more than just technical know-how. it really is about hustle.

I honestly doubt that start-ups that become profitable and breech the magic 1m /pa are purely taking the employees pay cuts and moving them around - I mean that money does not really exist.

I'm sorry, do you mean "paycut" or is this some sort of idiom I'm not familiar with? What does hair have to do with it?

Haircut is usually a term for taking a reduced return on an existing investment that is otherwise unlikely to pay off - for example many European banks have taken a haircut of upto 50% on Greek government bonds, otherwise the greek government would leave the Euro, default anyway and take its chances.

Said haircut of course then stuffs their balance sheets, so they need bailing out, from for example Spainish government, which then cannot payout its loans and threatens a haircut to its investors. Who are the same damn banks it just bailed out.

This leads to two situations - one ECB chief saying it will pay anything to anyone to stop this idiocy, just ask. And two, the philosophical approach to wealth "hair today, gone tomorrow"

While the term has more specific meanings in finance, "haircut" it has been generalized to often mean "a small paycut".

Wiki page with more info: http://en.wikipedia.org/wiki/Haircut_%28finance%29

It's a Valley-ism - but yes, "haircut" simply refers to a (substantial) pay cut.

Haircut = any asset monetized below par value (100%)

Equity offers to employees (past, say, the first ten) are usually at joke levels and used to try to negotiate your salary down and prevent you from leaving. Sometimes they'll even throw in a statement about "keeping you connected" or "making sure you're motivated". It's all crap- at best, the money you'll get from it will be equivalent to the bonus you'd get working for a larger company.

On the initial view, only the 40th to 60th percentiles are shown. On subsequent views, only the 25th to 75th percentiles are shown. There are many above those ranges, including some outliers with 3% or more of their company (choose Scientist > Fellow for one example).

Also, according to the Source line at the bottom, executives and founders are excluded from the data set. Getting a large share of equity of a private company is rare for everyone else.

It's probably an artifact of the data that Wealthfront is collecting. They're catering to people with wealth to manage, and critically, they omit founder-level employees in this chart. If you look at the people who've made over, say, $5 million from equity in Silicon Valley in the last couple of years, there are probably many more Facebook employees with 0.01% stakes than there are 1% employees at companies acquired for $500 million, or 2% employees at companies acquired for $250 million (above that and you're probably a founder).

> But really why is that level of equity share of any influence in anyone's hiring equation?

To be fair the article doesn't say if it influences many people or not. I do think it is putting emphasis on something that is simply of no real importance to most people in the job market.

For example, it isn't clear to me if those jobs are paying market rate salaries or not. If that is the case then "equity" may as well be lumped into the 'free E-ZPass', 'paid gym memberships' category (not something to write home about, but nice all the same).

With that said, I'd cut any interview short that was expecting me to take a serious pay-cut for a fractional equity share.

You're basically right for the initial display.

But equity is heavily dependent on company size, click on "Company Size" to see it break down. Or "Job Function" == Software Engineer and then click "Company Size".