Do you like Top or Bottom?

September 13, 2007 - Get free updates of new posts here

WTF does that mean? It means there is only upside for Entrepreneurs!

Not sure what the best title is but after looking at equity breakdowns, the founders of companies win. Yes, bring out the first 500 employees at Google, early Microsoft and other large companies. I call them edge cases. I am talking about people that are new college hires. If you graduate college here are a few basic options:

large blue chip
– .001% equity, $50,000 salary. The company is proven, you take no risk and you have no upside. Enjoy going to your kids soccer practice at 5pm.

early start up – .1% equity, $65,000 if funded. The company needs to get to $1 billion just for you to make a million. Also, you have 4 years to wait for vesting. Work your ass off and your CEO (plus a few early employees) gets the pay day on exit.

your own company – 100% equity, $0 salary. Now if you believe in yourself you really don’t need to grow your company that much to make it worthwhile. Hire a few people. Shoot you still have 40%. Now you are making your money/equity work for you.

Bottom Line: It comes down to what you want to do in your life. Basically, at startups the employees are just working to make their CEO’s equity more valuable while they get a penance. I am not discounting self-fulfillment, work-life balance & some benefits of working for someone else, just strictly pointing out the financial.

Which position do you prefer, “top or bottom” ?

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13 responses to “Do you like Top or Bottom?

  1. Matt Snider Reply

    Well, there is a lot more than just equity to consider here. I’d rather have .1% of a company that I think is going to be a hit than 100% of a company that I know is shit or in a crowded market, even if it is my own. I’m actually in a similar situation right now. I have a small amount of equity in a company that I know is going to do well and then I have my own company which has produced another Social Networking platform…

    The Social Networking platform is so risky because the market is crowded with such big players. I couldn’t fathom leaving the company that I have a little equity in given these circumstances.

    Then again, if my company had developed a video game platform, i’d be all over that. ^_^

  2. Mark Johnson Reply

    You never made the connection between top and bottom explicit. I assume that Big Company is Bottom, Your Own Company is Top, and Startup is Versatile. . .

    Unless you are a priest, I think you meant “pittance” not “penance.” =)

  3. Jason Reply

    I’ve been in the latter two of those situations now. It’s a tough call. It’s all about what you believe will really be a winner, you have to evaluate every investment on it’s own. I had an idea, several actually, but I believed the startup that I joined as employee 6 had a much larger head start and less hurdles than my own. I picked what I believed was the best investment, not of my money, but of my precious time. Will I ultimately be happy? So far so good but you don’t really know until you try.