> Now of course that equity is risky. It still might not be a good deal, unless you think you have at least a 1 in 2 chance of success.
Don't startups fail at a rate of 90% or so? All of the sudden that $100k/yeah in equity looks not as great.
Now of course most owners think it won't fail. But then even out of those that are rational, and understand they will probably fail, a large % will still try to convince the first employee that the startup won't fail.
Which is why it's $100k of risk-adjusted equity. Some high percentage will fail[1], but that's already accounted for in the price. In the case the equity is worth a non-zero amount, it will probably be worth much more than $100k.
Trying to decide whether the startup will fail is almost the whole game. In the end that has a much larger impact than your exact equity percentage.
[1] though if you apply a simple filter like "only YC startups" it's way less than 90%
Don't startups fail at a rate of 90% or so? All of the sudden that $100k/yeah in equity looks not as great.
Now of course most owners think it won't fail. But then even out of those that are rational, and understand they will probably fail, a large % will still try to convince the first employee that the startup won't fail.