Some (IMHO) very relevant past conversations on HN about equity:

1) Introducing Progressive Equity – Increase employee ownership as company grows: https://news.ycombinator.com/item?id=9336392

2) What I Wish I'd Known About Equity Before Joining a Unicorn: https://news.ycombinator.com/item?id=13426494

3) Open Guide to Equity Compensation : https://news.ycombinator.com/item?id=10880726

4) Employee Equity (Sam Altman) : https://news.ycombinator.com/item?id=7610527

5) Guide to Your Equity: https://news.ycombinator.com/item?id=10362141

6) Holloway Guide to Equity Compensation: https://news.ycombinator.com/item?id=17717727

Thanks for these links.

Thinking we will see amplification of this topic as employees, founders, investors, and hiring platforms bring more transparency to equity and compensation. Would love to hear any ideas that stick out to you.

If you're in SF, I'd be happy to chat over coffee - I have some ideas and suggestions for you. $HN_username @ gmail

Sent you an email!

I'm shocked by the comments of those here that don't see why something like this must exist and don't see that there is tremendous financial upside for whoever cracks this. Employee equity can generate unbelievable amounts of wealth as well as unbelievable tax consequences/missed opportunities. The deck is mostly stacked against employees, and you're on your own navigating treacherous waters with little information. A strong company in this space can protect employees and ultimately advocate for them and improve the landscape. Or it can augment the deck being stacked in favor of the investors etc. depending on how things shake out for the winners in this space.

It's wonderful for something like this to exist.

> In the future, Compound will earn revenue by offering financial products.

This is the only thing I would be concerned about. Would it generate a conflict of interest with some advice?

This is really good discussion.I ve created Ask HN post to learn more about equity return of early stage employees

https://news.ycombinator.com/item?id=20618916

>I'm shocked by the comments of those here that don't see why something like this must exist and don't see that there is tremendous financial upside for whoever cracks this.

Some of us don't live inside the Bay Area startup bubble. I've never worked for a place that has offered equity, I've worked for publicly traded companies and the government. For the vast majority of Americans (and the world) this is a situation where we will never see ourselves in, so some of us see this as a weird business idea given the incredibly limited market that relies on a booming economy resulting in VC money funding startups to survive.

As someone else in this thread said, this is a startup for startups.

I can see why YC funded it "we exist to fund startups, startups offer equity when they can't afford to pay employees fairly, of course we'll fund a startup that helps employees of startups!".

However the problem here is, YC has never existed with their current model during a recession. Y Combinator was founded in March of 2005 with what like 8 companies and a much smaller contribution, the recession started a few years later.

Fast forward to last year and they had 273 companies present at demo days between winter and summer batch, at what 150k a pop? What happens when we enter the next inevitable recession? Will accelerators like YC have 50 million dollars (given the events they put on, I imagine you can at least round up to 50 million) to fund startups at these levels? Or will they have to drastically dial back and fund considerably less companies and focus more on the continuity fund and additionally funding companies that are seeing growth?

Then enter Compound, relying entirely on startups popping up offering equity. Enter a recession and a lot of startups are likely to fail during tha tperiod because VCs will be less inclined to take on risky investments, companies and consumers will be less likely to take on buy new goods or pay for new services, and then Compound is suddenly like "whoa, if there's no startups offering equity we have no customers, we don't have any other product ideas!!!" Press Release: Company Compound has shuttered, in a noble gesture Compound posted all employee resumes on the website and urge companies to consider interviewing these now unemployed persons.

This is a problem I consistently see with YC companies and VC in general the Bay Area exists in a alternate reality, or fantasy, bubble that does not resemble the rest of the country or how most Americans lives are. That isn't sustainable. I mean you have all these SaaS companies -most Americans have no idea what software as a service is and doesn't need to have their toaster tweet that it is toasting the 17th piece of toast this week so that D0ughb0x can ship more artisanal gluten free free trade gmo free bread and notify the Ca$#p@y app that the subscriber's digital life companion Phriendly should request authorization for payment-.

Ok, maybe that example is a bit ridiculous but seriously, look at a list of the companies for the past few YC batches... there are some absolutely ridiculous ideas, most of these companies will fail miserably and would NEVER have been seeded during a recession, what happens to Compound when startup numbers plummet and they can't find customers to educate about equity?

Great to see such candid comments and this clearly shows you actually really care about this startup's mission "Compound is entirely focused on helping you—the employee—understand and manage your equity."

(Full disclosure: I've been following this founder for a while to see him do great things)

"there are some absolutely ridiculous ideas, most of these companies will fail miserably and would NEVER have been seeded during a recession"

So, to state the obvious here, recession is actually one of the best times to start companies or join solid startups to earn early-employee equity: fortune rewards the bold. And to some extent, that's the best concentrated personal wealth investment if you choose wisely which early-stage startup to join, especially when you don't have lots of cash sitting around to "buy the dip" from public market. So why not "join the dip" to take advantage of the recession years (golden era, blessing in disguise) to become equity rich coming out of the other side?

I believe it's true that many/most non-VC-funded startups don't give employee equity, but don't you think this situation actually also needs to change? Just like now remote/distributed work is all the rage, in 5-10-20-25yrs when most/many other companies also give employee equity for them to have the opportunity to "earn concentrated wealth" from 'investing in" what they work on at the company?

I see Compound's mission very aligned with employees at all kinds of companies of different time, start from a smaller focus market (VC-funded startups), to serving majority of the planet in the future :)

> look at a list of the companies for the past few YC batches... there are some absolutely ridiculous ideas, most of these companies will fail miserably and would NEVER have been seeded during a recession

Out of curiosity, what is the problem with people trying "ridiculous' ideas? Airbnb and Uber were considered ridiculous at the time and look how that turned out. Sometimes ridiculous ideas can turn to fantastic companies that add economic value to the world. The opportunity cost of not chasing these ridiculous ideas is worse than otherwise if you ask me.

Seeing lots criticism in the comments, similar to the kind that Uber faced when they were a private black cab app — "Yet another startup to serve rich startup folk" etc.

I don't think it's entirely warranted here.

"Equity compensation" as a whole definitely seems like a large market (there are many many many billions of $$$ tied up in employee equity), and becoming the go-to experts on everything to do with equity compensation seems like a solid foundation for building financial services + products on top. I'm sure this can eventually extend outside of the SV ecosystem, and probably extend outside of "equity compensation" too.

Congrats on the launch, guys! Look forward to seeing where this goes :)

Thanks for the kind words!

We see many large && important problems to solve in this space. Successful solutions will demand a long-term mindset but we are hopeful the right combination of product + technology + capital will unlock tremendous impact and value.

Congrats on making it to YC 19!

Love the idea, in fact I started something similar[1] in March 2018 when I was switching job. I also heard too many stories of friends accepting early stage companies offers with little to no equity and I was hurting for them.

I hope we (employees) will finally get our leverage back and fight for better equity but ALSO better liquidity!

If founders get liquidity, employees should too, it's only fair.

[1] https://reffo.us/

Thanks!

We aim to provide leverage to employees so they can make better decisions. We are starting with closing the information gap but, as you point out, there are tons of (very nuanced) problems that need solving.

We definitely want to encourage dialogue around equity compensation policies.

Completely agree! There is more and more liquidity these days for later stage startups! Not only are people paying up to get in, but sometimes they're paying a premium to what the last VCs paid.

Reffo.us is pretty cool, curious why you stopped (or is it still going?)

Well I didn't manage to solve the chicken & egg issue where there was no value for someone to put up their offer if there was no community adding feedback. I reached 500 users by posting on Blind app but not enough stickiness. I am open sourcing it next and hope to give it a new life!

I wish you all the best, but I worry that this is a case of a startup for startups, except one level removed, because its a startup for startup employees, who are usually the first to go when the startup market turns.

I say this basically as a warning to be cognizant of this fact and make sure to diversify away from SV startup employees as quickly as possible.

Do you have plans (even if only a few words of an idea) to do anything beyond this?

I imagine this market is pretty small, sure YC funds a bunch of startups every year but it seems like your business is almost entirely dependent on the Bay Area and maybe a handful of other locations around the globe that consistently produce startups that have to rely on compensating employees with equity instead of competitive salary. When the next recession inevitably comes, and VC money potentially dries up, it seems like your company won't fare well without other services to fall back on.

The vast majority of Americans, or people on earth in general, aren't offered equity as compensation (many aren't even offered stock purchase plans and for that matter Pew found that 41 percent of millennials didn’t even have access to an employer-sponsored retirement plan).

Not trying to be critical, just genuinely curious if you've thought about it.

>Do you have plans (even if only a few words of an idea) to do anything beyond this?

We believe the next generation of wealth will come from equity owners. There are hundreds of thousands of people—across the US—who need helping managing their equity.

Today’s financial industry is poorly set up to serve this growing set of people who will have a wide array of complicated, expensive First World Problems in the next 10 years.

We hope to fix this!

If you're affecting startup employees' (and prospectives') perceptions of compensation, how do you deal with the appearance of potential conflict of interest, as a YC startup (which presumably has an interest in hiring and compensation by its startups)?

Also, do you have some kind of official fiduciary obligation, as part of giving financial advice? And if so, to whom?

How will giving financial advice mesh with offering financial products?

(I mean these questions constructively, and I figure you have good intentions. These are merely the kinds of questions that come to my finance layperson's mind.)

Thanks for the questions!

>If you're affecting startup employees' (and prospectives') perceptions of compensation, how do you deal with the appearance of potential conflict of interest, as a YC startup (which presumably has an interest in hiring and compensation by its startups)?

Our customer is the employee. We're not going to put YC or employers ahead of them.

>Also, do you have some kind of official fiduciary obligation, as part of giving financial advice? And if so, to whom? How will giving financial advice mesh with offering financial products?

We're not currently providing financial advice. We're purely focused on education—helping people understand their equity. We anticipate this will change in the future (and when that happens we will seek RIA certification).

This pitch reminds me of those commercials for weed whackers where people are shown acting like replacing the string is on the level of rocket science.

https://www.youtube.com/watch?v=p22T3ZypQtA

After I left my last job, I had 3 months to decide if I wanted to exercise my options. I looked at the company's financial statements, compared them to publicly traded competitors, and made my decision. If I needed tax information, I would have gone to the IRS website and called them if necessary. (In my experience, they try to be helpful despite the hate they receive.)

I wish you guys the best of luck, but ultimately your revenue model seems predicated on the same strategy as the rest of the financial industry--presenting a good marketing story to attract other people's money. Nobody has a crystal ball.

To some people, what you just described reads no different from Lebron James saying “dunking is as simple as shoving the defender out of the way, jumping above the rim and jamming the ball down into the net.”

That's a fair comment, but I'm certain I don't possess Lebron-like ability when it comes to equity analysis. For me, the moral of the story is that people should go to the source material--contracts, laws, etc.--rather than operate on tribal knowledge. I'm sure some people would find this service useful, but will it be enough to sustain a business? Time will tell.

I think you got pretty lucky, I have been screwed out of my options twice now by shitty founders. God help you if the startup is successful and profitable, that just means they will get the really good lawyers to claw back equity by any means.

The company was not profitable, and I decided not to exercise my options. It was an eye opening experience when I started trying to look at the company objectively without the startup Kool-Aid flying around.

I get the impression that it is indeed all a very vicious game. Since I left, the remaining co-founder has been pushed out.

We had an incentive programme consulting company for several years. Trust me, most people, including financial professionals, had a very hard time understanding even the most basic options programmes.

> We provide forecasting tools that show you how much your equity is worth, display tax implications (AMT exposure, capital gains), and model exit scenarios.

That sounds like you would be cannibalizing your user base if you do a good job. Every time I (or friends of mine) started modelling exit scenarios in the past, it became very apparent that none of the realistic exit scenarios would yield any significant payout. Often times this was one of the contributing factors to leaving the company, and sometimes leaving the startup field entirely.

I'm pretty baffled someone thinks this is a sustainable business model, but good luck regardless.

Thanks for building this! I spent a year building this as a side project and never got anywhere in terms of adoption, so abandoned it. The world really needs this and excited that you're picking up the torch.

Your vesting calculator is buggy, it vests 50% at the one-year cliff instead of 25%.

https://withcompound.com/g/understanding-equity-compensation

https://imgur.com/a/ud87ehk

Hey thanks for the kind words and for calling this out.

Perhaps it is a bit misleading but the calculator is working as designed. The Vesting Start Date is the "first day your stock has vested" which, in that example, would be at the one-year cliff.

Hope that makes sense, we will try to think of a better design so this is clearer.

Yeah I think it is not clear enough. I suggest you rephrase the description at least.

What incentive do you have to keep the information I provide you for a consultation confidential? If I actually give you the information you're asking for (strike price, shares outstanding, shares granted, company name, etc), you basically know far more about the cap table than anybody outside of the company should know. Additionally, most companies have NDAs that probably prevent the disclosure of this information.

If you're not an RIA, how can I trust you with this information?

This, if made right, is indeed helpful. I have some friends working at early stage startups without understanding esop, even some can’t distinguish options and shares.

Thanks!

I find the signup form hard to use on chrome/pixel 3; the "fill in the blank, tell us about you" area was not selectable for me.

Good feedback—we're fixing!

FYI looks like a typo s/equtiy/equity/ on https://withcompound.com/r/offer-letter

thanks, fixed!

Wow.