I'm a founder at a high-growth startup in Mountain View. I always tell potential hires, "options are worth nothing until they're worth something. And, they may never be worth anything."

I think that's the opposite of the unrealistic optimism job candidates get. But I think it also helps set the stage for a culture of transparency and honesty very early. Even before that person becomes an employee.

I'm curios to know what HN'ers think of that explanation vs hearing only the optimistic case. Does it make you second guess the company prospects?

It strikes me as an honest statement and if you were pitching me I would give you honesty points :-)

But the problem you are dealing with is the problem in many questions here: these are complex financial instruments and most people don't understand them. Some people will hold false beliefs about these things. Some people will be afraid of the unknowns.

Also the problem is compounded because the word option has different meanings and if you wrongly believe that these employee stock options on private equity are the same thing as listed equity options you're in for a big surprise.

Generally when analyzing a compensation package if you have to do extensive scenario analysis to evaluate the package I think it is worse for most people than a simple package.

Also, the number of scenarios where the founder or investors can make decisions that render the option package worthless is fairly large. This creates a dynamic where if the employee takes an options heavy package they either were foolish / duped, or they are pledging their utmost trust and loyalty in the management team. It's a lot to ask.

Taken literally, this implies comparing offers strictly on cash+benefits, which typically skews things in favor of large companies.

Benefits could mean other things.

Many of us will take less money for remote options or more say in product development.

At my last company I left a few months before they sold. Been wondering if I made a mistake not buying my options. I was finally able to get the final selling price. It was half price per stock than the options were valued at. Looking back I made the right choice even thought it feels like I missed an opportunity.

> Does it make you second guess the company prospects?

Far from it, honest is one of the absolutely critical metrics I use to evaluate any prospective employer. Bravo.

I don't mind someone stating why they believe their start up will have a better chance of success than the average: it is a positive to believe in the product. But don't sell it as a sure thing.

I work in the DevOps/sys admin field, so I'm use to always looking at what could go wrong. I think this is a toss up depending on the persons experience with startups. I've been in mostly small sub 20 person startups for 15 years now so I've seen almost all of it.

You have the people who are new to startups, who think its a ticket to financial freedom in 4 years when they have fully vested and the company sells for 1+ billion. Those people might be scared away.

You have the people who have been through a few startups and have worked at a failed company or a company that the investors took all the money and left the common stock holders with nothing or little to nothing. I'm in this group and that would be a breath of fresh air to hear that. During interviews, if I hear only great things and nothing is wrong then that is a red flag to me.

I agree with the other folks commenting on your reply. I'd view it in a positive light. I'm always suspicious of founders that oversell startup equity.

The younger naive folks who walk away because you were too real will probably remember your candor in a positively Later on once they have some more life experience.

Personally, I would appreciate that level of candor (and that's how I view my options anyway). I've heard far too many pitches from desperate recruiters about how an options package is worth $$$$$$.

Working at a startup as an employee with the expectation your gonna get rich is the game.

Think about the percentage of their investments that VCs expect will pay off. You could work for 15+ years at startups and never be at the successful one.

Startups say that but I think in many cases applicants go to startups because they can't get a job at a bigco that will pay them more. This especially true for new grads who didn't go to a shiny University.

Now this isn't a bad thing as one of the best reasons to go to a startup is to sharpen or learn new skills to become more employable. It's basically what I did till I could swap to a bigco.

> ...applicants go to startups because they can't get a job at a bigco that will pay them more...

I can't speak for others, but I can certainly speak for myself and say that this isn't true. I had my internships at larger companies. Sure, they're not the big 5, but big enough that they're household names. I used them as resume boosters and now _prefer_ startups over large companies.

I was also fortunate enough to grow up without a lot of money, so my lifestyle is fairly affordable and I never had the luxuries that could be difficult to transition to a lifestyle without them. Because of that, and my interest in working on bleeding-edge-and-could-fail tech, I don't mind the risks that startups offer.

I'm confident enough in my skill set that I know I can go after many of those high paying jobs with at least a modicum level of success _somewhere_, but I like the challenges and pace of the startup space instead. I've even rejected offers that offered a larger salary in exchange for a lower salary at a more exciting (and even earlier stage) startup. Does that make me naive/crazy? I don't know, maybe. It's just what excites me more and the tradeoff is worth it for me.

I'd agree with a lot of what you said. The only thing I'd challenge is the implied notion that startups are inherently doing more cutting edge stuff than bigco's.

Right now I'm doing a lot of consulting/contracting at startups. Most of the companies I see on my travels are not really doing anything that falls into the category bleeding-edge-and-could-fail. Most are pretty boring and derivative. Especially compared to some of the stuff I saw worked on at Facebook.

I would argue that a lot of the cutting edge stuff that's being worked on these days is happening at bigco's (Google/Amazon/MSFT/Facebook).

Now their are some big exceptions to this but in general that's what I'm seeing while traveling around SV.

I would say that I prefer working with smaller companies for the sense of camaraderie and the relative lack of politics. That and the ability for my work to have a massive impact.

> Most are pretty boring and derivative

This is also true, sorry for implying that all the work is some sort of bleeding edge.

I disagree. I've been part of multiple startups; Only with the first two did I actually expect to make more money than I would at BigCo. Not because the later startups were worse, but because I was less naive.

The reason that I joined those other startups -- and the reason that I more often work for startups than big companies -- is not about money. It's about pace of career development.

Everything on my resume that is interesting or exciting was done at a startup. Every big jump in skill and in compensation has been a result of that startup mentality. Who's fixing this? Me, I'm the only one here. Who's going to deal with the fallout of my poor architecture? Me, I'm the only one here. Who learned a hard lesson? Me.

I can only speak to the cogs side of the house (I'm devops or whatever they're calling us this week).

> Negotiate for the best deal on options you can get (I.e quantity, terms like early excercise etc) but treat them as a lottery ticket.

Sure, you can ask for a 100% non-dilutable share, but you're not going to get it. In order to negotiate meaningfully, you need to have a valuation of the things you're negotiating on, so you can decide what tradeoffs are good and which are bad.

This is what I don't understand... Why can't developers get non-dilutable shares?

If someone helps you invent something, and they are willing to put their own skin in the game in exchange for an ownership stake, then shouldn't they become wealthy along with you if it is successful?

This whole notion that developers are expendable and disposable and that it is acceptable to give them dilutable stock options is fundamentally immoral and needs to go away.

It's nothing more than greed and exploitation.

When I said "100% non-dilutable share", that was unclear. I meant non-dilutable 100% share. As in, total ownership.

It's entirely possible to negotiate option excercise dates. Asking for 5-10 years to decide if you want to buy is within the realms of possibility for software engineers at early stage startups (pre b round).

Same with early excercise.

Sure. But since this is a negotiation, you probably have to make some choices. Should you press on exercise dates, or on number of shares? If both of these are worth zero in your calculus, you have no means to assess.