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The fun part comes when you put in 20 years doing this, and your dream is to buy a nice house, and you finally get your seven-figure payout, and.... it's not enough to buy a house. Because now a house is 3 million dollars.

At some point, aren't the C Suite and directors failing their fiduciary responsibility? I know they have broad freedoms, but when you're reducing an a minority shareholder's equity by 95%, it's well past "fiduciary responsibility" and looking like fraud.

Sorry to hear that =/

Work for good people with a history of moral dealing. A family member just had a life-changing payout because leadership was generous. A friend walked away from a company pre-pivot without equity for what became one of the decade's biggest acquisitions.

This stuff is lottery tickets, but real ones. You need to be smart about who you make your limited bets on.

And agreed, big cautionary note here shows that Windsurf having "founder-friendly" investors does NOT mean employee-friendly ones.

I often see job postings here looking for "top <1% engineer talent" paying $100k and <1% equity and I wonder who is actually applying.

I know this is HN but imo it's rarely ever a good deal to work at startups as an employee instead of a cofounder (with actual cofounder equity not just the title i.e. within the same order of magnitude as the largest-shareholding cofounder), over a bigger established company.

The only good reasons to do so are if you want to learn or make contacts so that you can found your own startup later.

In my pensive moments, one of the things about humans that makes me go "god damn" is how little money it takes for insanely talented people to just come and work for you.

The basic idea is that you either have stock, preferably founder levels from 10% up (which is itself a lottery ticket), or you hold retiree bingo cards. The retirement home provides the cards for your entertainment, but the real owners of the establishment, the founders and early investors, know the only way you can earn the big prize is at their expense, so they have a vested interest to see you fail - and they are the ones printing the bingo cards and setting the rules.

Paid more taxes on RSUs than I'm going to get post IPO. Company took investments on insane COVID valuation and then needed more money posts COVID which tanked it.

Then after his 3 month vacation to Italy, he came back driving his new Ferrari.

Hey, at least he’s taking his LARPing as a douchebag ceo seriously. Easy vip invite for DND nights.

I worked for an ed-tech startup as employee number 4, joined when it was obscure; not even in the Alexa top 4 million rankings and almost no revenue. The founder was really good though and gave everyone shares instead of options. I got a bit under 0.2% equity in the company. The company grew (slowly and steadily) to $6.5 million USD revenue with about 10% net profit margins but its last valuation (over 10 years later) was like $8 million USD. They charge like $15 USD PER YEAR PER student for their product so very cheap; I feel like they could easily increase the prices given how widely used they are in my country (over 30% of students in my country use the app).

I had the option to sell some equity recently but it would have only been like $16K USD so I held... I had about $9K taken out of my salary to pay for those so it doesn't make sense to sell given the massive growth the app and not that much dilution... The financial gain barely covers the inflation.

It feels like both revenue and profits have been kept artificially low. $6.5 million per year revenue, still growing steadily, with a loyal customer base with 10% profit seems really good... A valuation of $8 million seems ridiculously low... Not even 2x revenue, for a tech platform with good lock-in factor (they sell a lot of licenses to schools)!

It's kind of amazing how bad a deal it is to work for someone else as an employee. Even if the founder is good and generous in many ways and the business side (which you have little control over as a developer) happens to work out pretty well, they can still pull all sorts of levers to make the deal bad. With this one, I'm going to wait it out 20 years if I must. A lot of the game is just timing, you gotta wait it out, sell at the top... Some people see a peak opportunity to cash-in multiple times in their lives, some people never see it! In my case, I haven't seen the top yet.

I never had any opportunity to make serious money ever. Never had an opportunity to pull the trigger and make even $100K. The best I ever got was in crypto, my crypto was worth $100K but I was earning like 100% annual yield and required a 1-month unlock period. So I made more than that by holding it for 3 years anyway...

I think my career story so far is quite interesting. Probably more interesting than 99% of the classic SV startup stories (at least what they say publicly). I've done some things nobody else has done. Made money in truly adverse environments where a lot of people hated my guts. I've seen people behave in strange ways. At times, I felt like I was almost breaking through the membrane of 'the matrix'; almost transcending my social class. But all I got for it was 3 years of passive income. I never had the opportunity to cash out big.

It's tough out there, so tough, it often feels fake/artificial. Often, it feels like you have to be 'chosen' and that's all that matters. Your work doesn't matter, how talented you are doesn't matter, how lucky you get doesn't matter (besides the luck of 'being chosen').

At the end of the day, money is like a river and people upstream from you get to decide whether or not the river will flow in your direction. When you understand that new money is created constantly and, just like the river, the water cycles between the mountain and the sea, you start to understand the value of positioning and 'being selected'. The people upstream will keep telling you that they don't control the flow of money; that the river flows naturally through the lowest valleys... It's your job to put yourself in that low valley... But really, they've built massive dams up there directing the water almost arbitrarily. You may be at the lowest valley but they're redirecting the water elsewhere artificially because it suits them better. Reality is that they can easily alter the path of the river anywhere they want and it has little to do with 'building something people want'. It's about building something the people upstream want... And sometimes they just want to help their existing friends; unfortunate for you if you are not their friend.

It's a catch-22; you need rich friends to get money but you need money to get rich friends. But I suspect it's way easier for a poor person to get rich by befriending a rich person than it is for a poor person to get rich without rich friends. The second approach feels like you're piercing through 'the matrix' because of all the weird almost conspiratorial resistance you might get (tech feels like one big club).

Sometimes you might accumulate some dirt on some rich people and that gives you some leverage over them but it's the kind of leverage where you have to keep coming back to them to get crumbs. I feel like you can never break through that way due to regulatory capture. You can only do limited damage to them and it's always costly to you. They still have the balance of power.

> equity should be an incentive [...] and partial compensation for [...] One should value it at precisely $0 in terms of life planning.*

Not very good incentive or compensation, if you have to value it at $0.

> equity should be an incentive to contribute the the company's success

the much bigger motivation is "keep the company afloat so i can keep drawing my salary", so just boring old non-equity paychecks provide plenty of motivation.

if you're an employee that thinks your contributions are so great that you are single-handedly juicing the stock price or valuation, you're probably wrong but if not... you should probably take those skills and found your own startup.

> It's always worth offering to take equity as long as they agree in writing to not ever dilute your shares and vest them immediately. However, it's unlikely that any company will agree.

Well, yes, because that’s insane.

I don’t see how a company could promise this. Everyone gets diluted for every funding round, for example.

> I've tried to ask dozens of companies that wanted to hire me just for how many shares were outstanding and/or authorized.

"Wanted to hire me" as in they made an offer, or an earlier step? At offer stage, I've never had a company refuse to answer these questions. I don't have "dozens of companies" worth of experience though, maybe one dozen if that.

> I've tried to ask dozens of companies that wanted to hire me just for how many shares were outstanding and/or authorized.

Those questions are certainly worth asking but employees should also keep in mind that even if they do share that information your equity can still later be diluted away to worthlessness.

There is another variable. Find better companies to work for. If you don't think this is a unicorn, don't work for them. If this is another stablecoin startup leveraging quantum AI then you deserve what you get, cash comp or no.

I remember when my old employer was doing another round of funding

They offered to sell me more shares

I countered that I'd been trying to dump the shares they already gave me and if the shares are truly worth X dollars they should buy them back from me

Anyway glad I quit

Not everything is adversarial. More cash pressure on the company itself can be bad for the company which is bad for you too.

I always take more equity. I wouldn't work for you in the first place if I didn't believe in your equity.

There are more than enough stories about employees complaining that they didn't get a big enough payout on an acquisition or IPO to know that this isn't true. It all comes down to your risk reward preference.

Sure, if you don't want to take a risk then look for a higher salary, and probably at a more established company because even if you have mostly salary and little equity a startup is still risky (and you're making it even more so by putting cash pressure on the company at that stage).

On the other hand, if you want a chance at a bigger payout, you'll want more equity. And yes, you may well not get that payout.

RSUs are much better than options, they’re actually properly shares, will go to zero when the company is bankrupt and even then not necessarily.

Options go to zero much more often.

Dilution is where things get fucky.

So you're working at this startup. Lets say it's worth $10 million. To make things simple, in this company, there are 2 people, the fucker, the CEO, the guy that started it all. He holds 90,000 RSUs, each worth $100, so $9 million, and the fuckee, you, who holds 10,000 RSUs, each worth $100, for a cool million.

Here's where the fucker fucks the fuckee, ie you. The company does a round, and then creates, out of thin air, a billion shares (1,000,000,000), and issues them to the new investors. Lets say the company reached unicorn status this round, which is to say a valuation of a billion.

Holy hell a billion! But wait now there's 1,000,100,000 total shares out there, and the valuation of a billion, divided by the new shares, means that each share, of which you only have 10,000 of, is now worth just under one dollar.

That's right, your $1 million just turned into $10,000. Which isn't nothing, I'd love to come across a random $10k I didn't know I had. But that's just, like, one really nice vacation for you and the kids, which you haven't seen enough of because you've been working so hard at this startup, and not, like, a college fund for the kid that's showing aptitude at engineering and that you were hoping was gonna go to MIT.

Dilution is inevitable, there's no avoiding it. The scenario I presented is just to show you an example of how dilution fucks you. If things go well, would you rather have 10% of $1 million or 0.1% of $1 billion?

For more, it depends on how you like your information. ChatGPT's got stuff like ISOs vs NSOs pretty well covered, Investopedia's got a lot of good stuff if you'd rather it that way.

First, your stock has a much higher than 50% chance of being worth less, even at the best startups. This is why early stage investors invest in so many companies… a vast majority are worth zero, but the few that make it big pay for all those and more.

This is why you would never see an early stage investor invest in only one company. They need volume to be able to survive the high risk/high reward nature of startup investing.

Now, maybe you think you are a better judge of the probability of success for your startup than an investor, so the risk is lower. You would be wrong; if there was a way to reliably predict which startup would hit it big, then investors (who spend all their time trying to predict exactly that, and have a lot more data and history to use in their evaluation than you do as an employee) would have a much higher success rate.

So even if you have a very promising startup, your equity is a huge risk. Your company probably won’t hit it big, and if it does you have to hope you aren’t screwed out of your equity by the millions of tricks they use to screw employee shareholders; dilution, preferred shares, etc.

Even worse, you are taking double risk. Your startup is risking both your equity AND your salary. You want to diversify your risk, so you can use your investment when your salary fails and use your salary when your investment fails. In this case, those both will fail together if your company doesn’t make it.

Look, equity and stock options are great, but you REALLY have to discount its value as an employee because of the way the risk shakes out as an employee.

If I'm understanding your logic correctly, I think it's flawed.

It seems like you're saying: if you choose to work for a startup rather than a bigger company, it must be because you think their equity is valuable, so you should prefer to take more of your pay in the form of equity if you can.

But there are plenty of other reasons for choosing to work at a startup.

You might have chosen to work at that particular startup because the work interests you. You might prefer startups to bigger companies because they have less bureaucracy and can do (some) things faster. You might prefer startups to bigger companies because there are fewer layers of management above you and so you have a better view of why you're doing what you're doing.

Even if you're only in it for the money, I don't think your argument is valid, though this is more of a nitpick: it might happen that a startup particularly wants you or at least your skillset and is willing to pay more for it than any bigger company you've found. You might think the startup is likely to fail, but still prefer being paid twice as much. (This is kinda nitpicky because I don't think this situation is super-common, unlike the other ones I mentioned above.)

I've long preferred working for startups over big companies, but my equity has rarely been worth more than a day or two's salary equivalent.

I know a few people who did well working for unicorns, but that isn't most startups, and pretending that any given startup will be one is selling yourself short.

> Yah, over 50% it's going nowhere but expectation needs to consider how huge the win is even if it is lower probability.

yes that's literally the definition of expectation value...... so

    ev = 1 bagillion * 0.0000000000000001 = ~0

That sucks. FWIW I had a sandstorm instance back in the day, and I think it was an idea ahead of it's time. The stuff you were trying to do I think got easier as containers became more widely adopted, and as enshittification has made the case for self-hosting more obvious. So... Thanks for trying!

So many bitter aholes in this business.

sorry that happened to you. what taxes do you have to pay on a company making 0? just delaware franchise tax?

Whoa, bummer but interesting. It can be hard to let go. Thanks for sharing.

$25k/yr can be decent living in some places.

Sure, but if you're 10+ years into your career and have been financially conservative (i.e. have a positive net worth), a lump sum of $1m could be enough to retire to a lower-cost location.

probably right, but I'm not in SV. So its enough to pay off the mortgage and provide enough monthly income to not care what job I'm doing

Or in any big city tbh.

Don’t retire in Silicon Valley then

Take a million, go live literally anywhere that isn't Silicon Valley, remote work for a company that interests you, or your own project.

There's very few currencies in the world in which 1M isn't enough to retire. USD isn't one of them.

I don't believe they did. This acquisition was by Flipkart, the poster child startup in India, who had a very high bar for hiring. They wanted to interview the non-founders to make sure they met the standard. The founders said you get all or you get none. To be fair, it was a small team of 6-8 employees, so I doubt Flipkart cared. :)

My read was that Garry Tan implied "you sacrificed a lot of money in order to grandstand". I felt that was a knee-jerk dismissal of a founding employee's legitimate concern.

I'm not sure, but my interpretation is that Gary is implying that Prem Qu Nair received $20 million from the deal, and that by posting this tweet, he has violated the terms of the agreement, which generally have non disparagement clauses, and Gary will see to it that he won't receive anything.

He's misrepresenting his own words when he writes a vague tweet like that. Tan is a serial shitposter and is known for blocking thousands of people that even slightly disagree with him.

Thank you, that helps!

But so did he keep the shares or take the payout? Is the 1% payout an accurate reflection of Windsurf's value after having lost so many valuable employees? And why didn't he take the Google job? Was the 1% contingent on taking the Google job? But how could it be, since Google doesn't own Windsurf/Cognition? But if it did somehow, did it have a higher paycheck to compensate? Or was it contingent on staying at Windsurf/Cognition?

This thing needs an in-depth blog post analysis. The tweet by itself isn't providing even close to the information necessary to understand what's actually going on.

Yes, but 40 people cannot each have 5% of the company.

It's bizarre to see tech bros, YC, and megacorporations kill the startup talent pipeline that they rely on so much.

Who is gonna want to work at a startup in a non-founder role after this and Scale AI?

This continuing degradation of, and flagrant disregard for social norms is destructive for society.

> the absolute best case scenario you make just as much as at the public co's they rail against working for

that matches my experience working at 2 non-public venture funded companies.

"Founder" and "founding engineer" are two entirely different things. One of those phrases is a glorified substitute for "early engineer". Kind of like when you buy a "founders edition" Nvidia GPU. You are certainly not a founder of anything.

Well, that depends. I'm working in a startup and I'm in my 40's. Although it's a bit different than a typical startup, because it pays quite well compared to 95% of other offers in EU to live a very comfortable life in a not too expensive European city.

Yeah, the hours can be crazy but not too often. Yes, you're expected to give your best all the time but that's part of the fun. And the best part is the challenges are always interesting.

Maybe it makes it easier for me that I'm not at all interested in normal family life and never want to have kids.

Not everyone decides to have a family. For some getting that boring and stable job is the only way to get to take some risks later in life.

Take the moralising out it.

If I join a lottery syndicate and it wins 100m but I only put in 1% of the syndicate amount say $100 do I not deserve $1m because I'm just a "whatever I am just"???

Do you think founders deserve 100x more money because six weeks ago they sat in a few meetings with Y Combinator that went well?

Being a founder is a job as much as being an engineer is and being an investor is - especially if you get investors early and don’t take debt to capitalize the company (which you shouldn’t if you like your life.) If you did take debt as a founder, don’t brag about your bad decisions as if they make you special.

Thank you for your comment, it proves my point!

> I just fail to see why everyone in the comments here believes they deserve to be compensated at the level of the top 0.01% of all people without starting their own business.

No one is saying this.

There is no question that the Windsurf and Scale AI ploys effectively left employees with ownership in the company high and dry.

> but how much do you think you deserve as an employee

You deserve what you are promised. If a founder says you will get rich if the company goes to the moon, and they instead do some strange maneuver so only they cash out, the founder is a scumbag.

You are acting like early startup employees risk nothing working for a startup, and invest nothing of their own. Again, that is a weird assumption.

The August 2024 Series C round (last of 4 rounds) for $150M could dilute+smoke the preference stack for any earlier investors of which #2 nominally was basically the earliest class member of. C gets preferences+participation. B+A get preferences+participation+anti-dilution. Common gets what's left which apparently wasn't much.

Fiduciary duty is very low bar. Management has to act in the best interests of The Company, as in, as a whole. The company != #2. Lawyers are not taking this case.

I'm certain the accounting was done properly, maybe even by a Perl script, and this is how it penciled out. The question for us stiffs is what can we learn from it?

Lin Manuel Miranda is a poet and a scholar. Original cast video of the song in question:

https://www.youtube.com/watch?v=e_FWUW6SnDo

Less than 10 years ago but not recent.

No. The engineers build the product. They do the actual work. Let's flip your 'reason' around: the engineers are the reason the VCs have a job at all, since the entire point of the job is to find people building big things and funding them to get a cut. They are secondary, the actual product -- and the people who build it -- are what matters, morally and economically.

actually the big scam is the difference is not big at all, alot of times founding engineers do more work than the CEO. a startup that raises 1-3 million alot of times doesnt even have revenue. sometimes its just that the founder went to stanford, hires engineers, gives them lottery tickets, and hopes they produce good work

The company should have been worth at least the cash it had on hand, which has been reported as ~$100M. It's also been reported that all vested equity and VC shares were bought out (although apparently perhaps with a few exceptions for people who declined the offer), which meant that the employee unvested equity stakes were "undiluted" from whatever they were before (hard to judge, but maybe 5-10%), to 100%. So every employee had their stake in the company increase 10x-20x. So if the company had then decided to simply close up and distribute the remaining cash as dividends to the employees, it would be as if each employee had simply been bought out pre-deal at a $1-2B valuation. And that was the absolute worst case scenario - clearly Windsurf found a better deal with Cognition.

It’s like, what does vesting even mean?

Was this a scenario where he lost them because some sort of “cause” event occurred, like leaving to work for a competitor? I can’t imagine that would even be valid under CA law?

I’m not even sure who was forcing him to forfeit his shares…

Wow. How did the Windsurf investors feel about that?

Why would they give the CEO a bunch of money to join Google, but not employee #2? Is it possible the CEO is just worth way more for what ever reason?

Where would the 99% haircut have come into play?

I understand your clarification. You should be able to use vesting schedules, right of first refusal to counter, careful definition of IP and trade secrets with assignment to the company, right of repurchase of shares, etc.

This is indeed venture capital risk, but this case lays bare the exorbitant amount of risk for investing in these types of companies--perhaps especially in California?

It doesn't have to be a lawsuit preventing them from leaving. Golden handcuffs usually work pretty well for such a situation.

But also understand who broke the ride in mid-air, and treat them with according levels of scorn in future.

It was always a bad deal. It was supported by urban legends of janitors and cafeteria workers getting seven-figure payouts because they negotiated a few shares of a company that went IPO and went "unicorn". But the reality was, most startup companies failed, and most shares became worthless. In 1995, 2005, 2015, etc. it was the same story.

The only thing that changed recently is the "unicorns" stopped happening altogether.

It feels like it is worse now than it used to be. Back in 2010, you would be giving up a nice salary but not a much nicer salary by working at a startup.

So, startup base compensation hasn't kept up, and the career and financial risk of working for one has gone up due to higher interest rate and higher open-market asset prices.

2010s startups were a lottery ticket with bad aggregate odds but real upside. If you wanted to make a risky bet, or if you believed you were better at picking winners than the rest of the market, there were some real opportunities to be had. If the new trend is a cabal of investors and executives hollowing out all the upside, in the rare event of a success, that's stark.

More? Not really. But before Zuckerberg and the DOJ blew up the illegal wage fixing the big valley companies engaged in the gap was smaller.

Maybe way back in the .com days but its a terrible decision financially now.

It's generally not a good sign to me that this is the case. But I think you're right. Something needs to change to make startups feel more viable again.

Oh also there is the trick where the startup gets sold a little under its strike price and the execs each get signing bonuses > book value of company as sold

You can do that at established companies. If the cool thing comes to an end you'll often have a boring job you can keep or stay at while you find something else.