> Employee private stock outcomes are generally very poor even when the startup "succeeds". No party to the financing of a startup is served less faithfully than the ones who contribute via deferred or diminished salaries.
A six-figure salary is by no means "deferred". And, of course, I understand that there is a big difference between 100K and 150K/year. The whole point of the blog post is that if you want the 150K, then you can easily go to a Series C funded startup and get that (alongside the lower equity offer). If you want a higher stake, then you can go to the earlier stage startup, get your 90K and huge chunk of equity. If the parties want to have a custom "in between", then that is reasonable, too. Some startups can do it, others cannot depending on cash-flow. Expecting early stage-like equity and later-stage-like salary doesn't make sense. Not to mention the other equally important issues that we had with the candidate.
Your first sentence is a non sequitur. It's grammatically correct but contains no detectable semantic meaning. Salary is deferred when it would ordinarily be due immediately but is paid later. Formally, a deferred salary is a commitment to pay a precise amount of money at some point in the future. Colloquially, any promise of compensation that would ordinarily be due in the next pay period but will instead come 1-2 years from now at "exit" is a deferred payment.
Your reasoning about "Series C" versus "Series A" startups and salary expectations is also suspect. We pay market salaries to a large number of very talented, very specialized engineers and haven't raised a dollar of funding.
The problem with your reasoning is that it isn't based on the market, but rather on some kind of status hierarchy about startups. The mistake I think you're making is that you frame things in terms of "90k and a huge chunk of equity", rather than "your market rate of 150k, 2/3rds in salary, 1/3rd in equity, risk-adjusted based on expected liquidity from revenues we forecast at N, N+1, N+k over the next k quarters, at acquisition multiple y".
If you write the blog post that way, so that you can make a case that a 150k candidate is effectively demanding 300k, your post starts to make sense (but it's a little boring, right?). But when you write it in terms of "Series A employees should get 90k", you go way off the rails.
Later edit: you can also reason through your equity valuation with a candidate the way 'ChuckMcM does, but it seems like to do that honestly, your equity would need to be liquid enough that you could place another x00,000 shares; in particular, you can't just treat your last valuation as gospel; just like your B investors can reduce your valuation, so can candidates.
Your analyses are very good and your posts pedagogical.
I'd like to add that, just as you have the company presenting this in a certain light, the engineer needs to look at this investment of $60,000 a year of his personal money as cash salary to buy stock in a startup the same as a $150,000 a year earning person would view any other $60,000 a year stock investment in an extremely high risk unproven early startup. As a point of comparison, we know that Y Combinator gets significant equity for one time investments of only $10,000 in early stage startups. An investment of $60,000 a year should be valued similarly. Clearly the employee is directly contributing more than six times as much as Y Combinator does and should receive six times the equity for that first year.
> Expecting early stage-like equity and later-stage-like salary doesn't make sense.
Not for you maybe, but for the lucky sob who gets it, it definitely makes sense! Just like employers generally aren't in it to be "nice" to their employees, employees are not trying to be "nice" either. Now if you have a scarce resource, you are supposed to try and get a as high price as possible for it. Free market and all that.
Also, this James fellow, if he actually was an amazing engineer, one of the best in the area and Google-material, then I don't think it is unreasonable for him to ask for both a high salary and a big chunk of equity. If he also worked "crazy hours" that one of him would replace a team of 3-5 average engineers. If so, you were the one pasing on a great bargain. :)
The less he talks about these red flags the happier he will be. Just the concept of interviewing someone and then writing a negative blog post about it is skeezy.
A six-figure salary is by no means "deferred". And, of course, I understand that there is a big difference between 100K and 150K/year. The whole point of the blog post is that if you want the 150K, then you can easily go to a Series C funded startup and get that (alongside the lower equity offer). If you want a higher stake, then you can go to the earlier stage startup, get your 90K and huge chunk of equity. If the parties want to have a custom "in between", then that is reasonable, too. Some startups can do it, others cannot depending on cash-flow. Expecting early stage-like equity and later-stage-like salary doesn't make sense. Not to mention the other equally important issues that we had with the candidate.