Re:The Engineer Crunch
by tptacek on Tuesday February 18, 2014 @01:49PM
(#7260118)
The generosity strategy Sam Altman outlines is coupled to a "fire fast" (here, "before cliff") strategy that is hard to execute in practice; it takes a degree of ruthlessness to fire someone not because they're incompetent but because they're not performing at the level required for their equity grant, and it's not the same ruthlessness required to succeed in business. It seems especially risky for the kind of startup team where all the engineers are hired by being referred in by their friends.
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I haven't heard of early hires being fired because their performance didn't match the amount of equity they got. All Sam's really saying is that if someone turns out to be so bad that you have to fire them, vesting means they won't have cost you any equity.
I think we read Altman two different ways. I read him as saying that engineers should be issued drastically more equity, and that firing before cliff should be used to ensure that middle-of-the-road developers don't end up eating too much of the equity.
It doesn't need to be coupled to "fire fast". It is only the first quarter (or even 6th in some vesting schemes) that vests after the cliff.
In my vastly more limited anecdotal experience than both of you guys', companies are not just stingy with equity, but they are also overly stingy with salaries.
That's especially true about the ongoing startup myth of underpaying because the equity is supposed to make up for it - and then being stingy with equity. Sheesh. 0.1% of a $50M buyout is $50k... how many years of salary loss is that worth at the risk? And that's assuming that 0.1% doesn't get diluted down to more like 0.05% by later funding rounds.
Another way I could say the same thing that sidesteps your argument is that the more generous you are with equity grants, the more ruthless you need to be about firing.
So then why take options at all? Statistically and economically there's little incentive to at that point, especially if management is going to create this toxic ruthless "fire fast" environment.
The fact that employees and company principles value startup equity very differently is another reason why some companies are stingy about granting equity.