> It’s specifically a high risk, high reward form of compensation.

This really only applies to the first few employees, or maybe the first few hundred if you happen to be at the next Google (so the company has to 1,000x).

After that, it's very unlikely you'd come out ahead even if the company 20x'ed compared to joining FAANG. And the other thing to consider is that FAANG stocks aren't stationary. I know people whose relatively modest AMZN stock offerings have made them millionaires.

The fact of the matter is you don't join a startup to get rich (unless you're an idiot). You join a startup because of the many other benefits it provides - having a bigger impact, working on a smaller team, less bureaucracy, etc.

> You join a startup because of the many other benefits it provides

This. So much this. The exit is the lottery ticket. It'll likely fail.

But the real lure is getting to wear a ton of hats and fly by the seat of your pants. Any engineer in a < 20 person eng team is going to have a ton of exposure to how the business works, to making real-time decisions, and just generally being impactful. _THAT's_ why you go.

(And, that said, it's definitely not for everyone)

If you value having exposure to how business works, making real-time decisions, and being impactful at > $100k a year you’re a much better employee/coworker than I’ve ever been.

The reality of the situations is working at a startup is a great opportunity to prove oneself and have stories to tell when it comes time for interviews (or drinks with colleagues).

For most employees it gives those of us without the “perfect” education/gpa/etc an opportunity to work ourselves into positions to be making significant income at larger companies either through exit, acquisition or being hired somewhere else.

It’s not high risk high reward, it’s high risk low reward

Exactly. 8-20x is a massively unlikely outcome so there’s huge risk. What do you get for taking a bet on that risk? Mere parity with annualized first year compensation elsewhere. That is a very low reward for such dramatic risk.

Some people might think "10-20x growth sounds likely for a startup, no?". Frequently, at "Series A" a startup is valued at $20-40M. Getting a 10-20x multiple on that means it should get to $200M-$1B range. Only 5% of all YCombinator companies hit that milestone (~100 companies from ~2,000 deals). Odds for a startups not backed by YC & co, would be lower. So no, not that likely, even if you're as early as day 1 of Series A.

You're comparing seed funding (Y Combinator) and series A funding - most YC companies have yet to raise a series A. The other thing is that most YC companies are young and still have time to grow.

I think you're comparing apples to oranges and trying to make a quantitative conclusion.

It's fair to point out that if a company gets to Series A, it is substantially de-risked. IIRC, ~30% of YC startups get to Series A, so this milestone is material.

If a yc co from 5 years ago still hasn’t raised a series A, it’s probably dead. (I would push this to “1 year ago,” but yc invests in long term projects now like biotech.)

Is "risk" even the right thing to call a too-low-to-expect probability of a desirable event? Is playing the lottery a "risk"?

I would saying playing the lottery is most certainly a risk (of the money you spent on tickets).

As the other poster said, this explicitly high risk low reward, at the expected required to break even. Because the range of those options is everything between and include 0x

In order for it to be high risk high reward, the option's paper value should closer to competing packages from public companies. Because in order to take advantage of options, you have to exercise them, and in order to exercise them, you need to do it before they expire, with real cash out of your own pocket.

Given the rate of startup failure, it's a good thing to allow earlier liquidity to those employees, so they don't get trapped into either staying for the 10 yrs till a real liquidity event, or bite the bullet and drop cash (forgoing other investment opportunities) when they decide to leave after some time (like a typical employee). In the end, the equity that group controls is very tiny.

I think the deal has changed quite a bit in terms of how long it takes to figure that out.

It used to be that a company's fate was pretty clear within a few years. You joined a startup and it either IPOed in a few years or you guessed your stock was worthless (and that was usually right).

Today some of these "pre-IPO" companies are being kept alive on private capital life support for a decade-plus. Palantir is finally going public after 17 years. 17! Waiting a generation for a liquidity event is ridiculous.

Except it's not. It's high risk, low reward for most rank-and-file employees. Unless the company has an insane exit, you'll end up with new car money at best.