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A comment on Just how much is that 2% really worth?. Parent comment

Re:Just how much is that 2% really worth? by binarysolo on Thursday July 03, 2014 @12:46PM (#7984140)
Because early on when you only have 500k-1M in the bank, you can't get the tier-1 150k+/year engineers and preserve your runway easily. Also, base+equity allow people a bit more of a trial period and spreads out the risk more. Lastly, retention is super important and you want to align risks/rewards. The idea is that you are giving people stock and diluting your share because you have conviction that post-dilution your sum will be a LOT more. :)

FWIW, I joined a startup as that third partner (domain expert + execution guy), taking 10% of the equity while collecting 70k/yr (my base rate is north of 200k/yr otherwise). It would have brutalized the startup's seed money and jeopardized them if I somehow didn't perform and deliver.

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Re:Just how much is that 2% really worth? by IgorPartola on Thursday July 03, 2014 @01:06PM (#7984282)
Right, so in your case it makes perfect sense. You are a third partner with a 10% stake in the company. Contrast this with a first employee who is getting a 1% stake and less than half the normal salary. Would you have taken this position for a 1% stake, all else being the same?

Edit: your point is that good engineers cost $150k (really closer to $200k with taxes, etc). That's correct. So what happens when these engineers as a group realize that taking $70k + 0.5% equity is not the same as taking $150k + full benefits elsewhere? What other options do startups actually have at that point? More importantly, will this point happen and will it happen soon?

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