Inbox: "What do you think about equity in startups?" Consider it from the perspective of a founder choosing between businesses to run. There are some businesses where even the success case for the business is a failure for you. There are other much more attractive businesses.
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"AppAmaGooFaceSoft all build a material amount of their compensation strategy around equity grants, Patrick." I am aware of that, voice in my head.
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I am low-key concerned about geeks treating equity not as a financial instrument with a payoff function attached to it and more as a tribal signifier, because the amount of the cakes geek bake which is denominated in equity is *extremely large.* To reprise yesterday:
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If you loudly advance the opinion "I value equity at approximately zero" then people who have an informational advantage regarding what the equity is worth will say "Got it, in cutting this cake, I hear you want less equity and more flavors of fizzy water at the office."
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I know there are some people who *say* variants of that who do not *believe* it (i.e. would not take the trade "4 years of your equity for a new Playstation, let's go, it's worth zero"), but tribal beliefs become *very real* for young and unsophisticated people.
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"Are you claiming people saying that are being disingenuous?" There are beliefs near and dear to my heart where you could ask me about the truth value, I'd be an automatic yes, and where I'd not weight them highly when making consequential decisions. People are complex.
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End of conversation
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The worry I have around joining even a successful established non public company with equity comp is that I’d be locked into staying with them longer than I might wish because of the tax consequences of exercising options on leaving. 10y to IPO seems normal now.
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So, if you're the +100th employee to receive equity you should give value some equity (evidence that is likely to one of the companies where it's worthy). But if you are still one of the first 10 employees to be offered equity, you should value it at zero. Right?
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