There are a lot of things in this post that deserve to be addressed, like the fact that the 90 day exercise period for ISOs after termination is based on IRS rules, not arbitrary company policy.<p>But what really needs to be addressed is the fact that <i>employee</i> startup equity rarely produces the kind of reward that one would expect it to given the outsize attention that is paid to it. Sam writes:<p>> As an extremely rough stab at actual numbers, I think a company ought to be giving at least 10% in total to the first 10 employees, 5% to the next 20, and 5% to the next 50. In practice, the optimal numbers may be much higher.<p>It's worth testing these numbers against real-world data. For this, I'll use CB Insights' 2013 Global Tech Exits Report[1], which shows that:<p>1. 1,825 private tech companies exited in 2013.<p>2. Only 19 of them exited at a $1 billion-plus valuation.<p>3. 45% of exits were under $50 million, and 72% of exits were under $200 million.<p>If you assume that the first 10 employees receive 10% of a company's equity, and that each employee in that group receives 1%, a $200 million exit produces up to $2 million before taxes for each of the early employees. A $50 million exit produces $500,000. If you're making $125,000/year as a senior engineer, $500,000 gross after 4 years is the equivalent of what you earned in salary over the past 4 years. That's a nice bonus, but not life-changing wealth. $2 million is nicer, but if you plan to stay in the Bay Area, you might spend half or more of that on a modest house or condo.<p>Once you factor in the cost of exercising your options, taxes, dilution, liquidation preferences, lack of acceleration and the fact that a good portion of employees leave before fully vesting, you can see that even in a scenario where 10% of the company is given to the first 10 employees, employees aren't likely to see the type of compelling returns that Silicon Valley dreams are made of. Facebook and Twitter-like exits, where thousands of employees become paper millionaires overnight and the earliest gain tens or hundreds of millions of dollars, are the exception, not the rule.<p>What's worth considering further is the fact that 66% of the companies that exited in 2013 had raised no institutional capital according to CB Insights. So, as a prospective employee, in joining a venture-backed company (or a company coming out of a prominent accelerator), you may be putting yourself at a disadvantage even before you take into account the fact that employee equity is most vulnerable to dilution and liquidation preferences at these companies.<p>Final note: CB Insights' 2012 Global Tech Exits Report[2] shows similar trends to the 2013 report. In fact, in 2012, over half of exits were under $50 million and 76% of the companies that had an exit had not raised institutional capital.<p>[1] <a href="https://www.cbinsights.com/blog/global-tech-exits-report-2013" rel="nofollow">https://www.cbinsights.com/blog/global-tech-exits-report-201...</a><p>[2] <a href="https://www.cbinsights.com/blog/tech-mergers-acquisitions-deals-2012-report" rel="nofollow">https://www.cbinsights.com/blog/tech-mergers-acquisitions-de...</a>