1. It's not always about the salary for employees. Some people just don't have the DNA to work at the type of company who gives the 120k salary ( assuming large-co ). They like small companies, being empowered, and all of the other benefits of being part of a team building something. They expect to get 70k and not recoup the difference because they consciously "buy" the lifestyle with the difference in pay. They are driven by the passion of the founder and want to be involved in building "something big". They can't miss the chance to get this experience that would take years in a big company.
This type of employee sees equity in two parts: First as an emotional connection that they're working on something they "own" and second as the dream of a potential payout that gives them the vision / hope of a great future. Both are important emotional motivators that enable the team to gather round a vision and kick-ass nights and weekends to make something valuable.
A startup employee who says, "4%, so you need to sell at 15m or i'm out of here…" is the same person who says they should pay less for electricity because they didn't use as many lights as you. That employee shouldn't be choosing to work at startup A because they offered offered 5k more salary and 1% more equity than startup B. Which one are they passionate about? Where do they want to spend their life for the next few years? The equity is just gambling.
2. Not all founders will share the risk equally even if they all work full-time, quit their jobs, etc.
Scenario A: Founder A is a serial entrepreneur with a few M in the bank while Founder B is an engineer who needs a paycheck. Does Founder A give B 50% or does he just pay him for his work as employee #1?
Scenario B: Founder A doesn't take salary from the company but has a consulting gig that pays 10k/month and takes ~4/hrs a week. Founder B is wealthy and doesn't take salary but doesn't need to spend 4-8 hours a week doing "other obligations" and says Founder A isn't dedicated.
Things get more complex once people become serial entrepreneurs.
1. It's not always about the salary for employees. Some people just don't have the DNA to work at the type of company who gives the 120k salary ( assuming large-co ). They like small companies, being empowered, and all of the other benefits of being part of a team building something. They expect to get 70k and not recoup the difference because they consciously "buy" the lifestyle with the difference in pay. They are driven by the passion of the founder and want to be involved in building "something big". They can't miss the chance to get this experience that would take years in a big company.
This type of employee sees equity in two parts: First as an emotional connection that they're working on something they "own" and second as the dream of a potential payout that gives them the vision / hope of a great future. Both are important emotional motivators that enable the team to gather round a vision and kick-ass nights and weekends to make something valuable.
A startup employee who says, "4%, so you need to sell at 15m or i'm out of here…" is the same person who says they should pay less for electricity because they didn't use as many lights as you. That employee shouldn't be choosing to work at startup A because they offered offered 5k more salary and 1% more equity than startup B. Which one are they passionate about? Where do they want to spend their life for the next few years? The equity is just gambling.
2. Not all founders will share the risk equally even if they all work full-time, quit their jobs, etc.
Scenario A: Founder A is a serial entrepreneur with a few M in the bank while Founder B is an engineer who needs a paycheck. Does Founder A give B 50% or does he just pay him for his work as employee #1?
Scenario B: Founder A doesn't take salary from the company but has a consulting gig that pays 10k/month and takes ~4/hrs a week. Founder B is wealthy and doesn't take salary but doesn't need to spend 4-8 hours a week doing "other obligations" and says Founder A isn't dedicated.
Things get more complex once people become serial entrepreneurs.