I see a lot of people on this bowl saying to treat equity as worthless when evaluating startup offers, and I wanted to provide an alternate take. Over the course of a career in tech / startups, equity is a very meaningful part of compensation (even if it sometimes ends up being worthless for a specific role, and/or only pays out a few times in a career). Please don’t disregard it - IMO it’s one of the better risk adjusted ways to make real money. Focusing on only cash comp is limiting long-term.

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And remember to put it in your Roth IRA

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Depends on stage of start up. Each stage has different odds of going public or being acquired. Early series has a really low EV of equity

Yeah very true, although if you spend a career working at the best Series A companies (top VC backing and experienced mgmt teams) it’s not clear to me that EV is low long-term

Equity in start ups is the possibility of FU money. Treating it as worthless is incorrect, but should be thought of as an out of the money option that can pay off big. How exactly to put a figure on that, well that’s individual discretion of course.

It’s nuanced: you must be okay without it paying out, but given your tolerance and situation, the risk can be very much worth it

Even the top performing VCs who spend every waking moment evaluating startups, have access to all confidential data and performance metrics, and have direct influence over the success of the companies via BoD participation have at best a 30% hit rate. It's easy when you play with other people's money and diversify bets across dozens or hundreds of companies. It's not so easy when you place 1 bet, based only on publicly available data, and spend the next X years of your life/career stuck to this bet.

Not suggesting equity is a lottery but should not be viewed as a contributor to your compensation... Unless you are a founder or member of ELT.

At a 30% hit rate, over a 30 year career across 10 companies (since any that aren’t going well you could move on from within 1-2 years), then you would on avg still get 3 large payouts. That is substantial.

How to think of it in relation to your TC depends on the context. If you’re budgeting for the year, or buying a house, ignore it. If you’re thinking about a career in startups vs consulting, don’t ignore it. If you’re weighing an offer, also don’t ignore it because you will have multiple times in your career where you would regret not paying more attention to it

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