Thread by @GergelyOrosz

Transcript from a C-level crisis meeting months after the "We've raised $700M at a $6B valuation" gigantic announcement at a tech company.

A story on why the no employee equity policy hurts at the worst time. Warning: painful read ahead.

CEO: "What do you mean we can't grow?"

CTO: "Hiring is tough, but that's not the biggest issue. People are leaving like flies."

CEO: "We just raised $700M. Surely money is not a problem."

COO: "Actually, the exit surveys show that money is exactly the issue. Our competitors offer 50-100% more compensation to devs."

CEO: "That must be wrong. How can they pay twice that much? I thought we're paying top of the market?"

CTO: "Actually, the data we bought was wrong. We were paying a good salary, but we were well below 50%th market percentile based on e.g this report: blog.pragmaticengineer.com/software-engin…

CEO: "Ok, so fix it. Let's pay people more."

CTO: "This will be expensive..."

CEO: "How expensive?"

COO: "We did the math and around $20-50M/year expensive."

CEO: "I don't understand. How can our competitors pay this much?"

COO: "They actually don't. They use equity."

CEO: "Equity? What do you mean? Equity is for execs only."

COO: "Actually, our competitors offer it to all employees."

CEO: "That's a joke. Ask the Basecamp guys. Equity doesn't work."

CTO: "I concur. If we would have issued equity, we wouldn't have an attrition problem now."

CEO: "How is equity and attrition connected?"

CTO: "Our valuation went from $400M to $6B in less than three years. Most people leaving are the key people in that growth. If we would've issued only €8K/year in options years ago, that would be a €50-60K/year golden handcuff."

CEO: "Pff, €50K/year? That's a bit over the top compensation increase, no?"

COO: "Actually, seniors are leaving for €30-50K/year in compensation increase to competitors, so if we issued equity early on, this checks out. We would not have an attrition problem."

CEO: "So what are options? Can we just throw cash at the problem?"

COO: "We could, and we have it. But if we raise another round, we have the same problem if we don't issue equity now. Plus we budgeted the cash for other things."

CEO: "Dammit. So I have to go to the board?"

CTO: "I don't see any other way."

CEO: "This damn market and all other companies giving out equity. Alright. We'll give equity... now get me the numbers on how much our competitors are paying."

COO: "You won't like this, but here we go. Let's start with how Stripe issues..."

These discussions are happening at unicorns that did not allocate equity, and are seeing their key senior engineers leaving, who benefitted nothing from the company growing.

Read more about equity: blog.pragmaticengineer.com/equity-for-sof…

Advice for the job market: blog.pragmaticengineer.com/advice-for-tec…

Someone DM'd me about advice if they are at a company like this (unicorn, they helped grow it, but have no equity).

Very simple suggestion:
- Interview outside. Get an offer (without it you can't do anything). Ideally, with equity.
- Ask the company to match. Including equity.

If the company can match, or comes close *and* issue equity, consider staying.

If they say they cannot do it: you know what you're worth on the market, you have an offer... do you stay and get more frustrated when the company IPO's at $60B (you see nothing of those gains) or...?

A comparison of the same meeting at a company that issued equity from the seed stage:

CEO: "What are our biggest issues?"

CTO: "Hiring."

CEO: "What about attrition of key people?"

CTO: "Attrition? Most of them became paper millionaires with the latest round. No attrition."