Has anyone become rich from a start up share scheme? Was it worth the stress?

Question
1

The company I’m working for is going through a challenging growth phase. We have too much work with not enough staff, even though we’re hiring like crazy.

We’ve got demanding clients and face a lot of pressure daily. I see potential in our product (if we could just find the time to develop it properly and put the right processes in place), but right now, it’s tricky to find time for anything beyond firefighting.

The product is in a lucrative niche; recently, one competitor was valued at $2 billion, and a smaller one was sold for $130 million.

All employees were recently enrolled in a share scheme that grants us options to buy shares at a discounted price in a few years, provided the company meets certain KPIs and starts generating real revenue. However, at this moment, it’s quite stressful for a reasonable (but not exceptional) base salary.

I’d like to hear any stories along these lines—has anyone hit it big from the shares at their company? Alternatively, has anyone put in substantial effort only to see no reward?

2

One of my best friends (we’re both developers) joined a startup about seven years ago in California. I won’t name it to protect his privacy.

He received low pay with equity. The company was eventually acquired, but the new owners were able to dissolve his previous equity agreements through some complicated legal actions I’ll never fully understand. After working 70 hours a week for a year and a half, and helping build a $410 million company, he ended up with nothing and was let go at the acquisition.

The tech startup scene functions in cliques. If you’re not in the circle, you’d better run for the hills.

3

@Thorne
Your friend likely had options. There are so many clauses making them invalid that often they aren’t worth anything. I recall my ex-CEO wanting to change my share agreements to options that would expire under conditions I wouldn’t even be informed about. Business is cutthroat.

Alternatively, your friend may have had actual shares that got diluted. New shares can make old ones worthless. Sometimes this is tied to clauses, allowing conversion to many new shares, unless the company has share classes with different rules. Owners make up the rules as they see fit.

So yes, private shares often end up worthless. Getting a knowledgeable lawyer to decode contracts and ensure you understand your position is vital. Sometimes you might come across owners who genuinely care, but realistically, how many rich business owners would willingly sacrifice profits for their employees? Or, you might be clever enough to negotiate favorable terms yourself.

4

@Dallas
That’s been known for a while. Nowadays, whatever type of equity you have, investors can impose liquidation preferences that clear away all value during a sale.

5

@Thorne
I appreciate you sharing this. I’m nearing burnout at my job, and it’s affecting my family. Meanwhile, my CEO complains on LinkedIn about no one willing to work these days—it’s frustrating.

6

@Thorne
Tech is fuelled by venture capitalists. That’s why I expect it to remain cutthroat.

7

@Thorne
I’m not interested in working those hours.

As a senior employee, I strictly adhere to my core hours, with just an hour extra for emergencies per week. I won’t be asking any of my juniors to work extra either.

Thanks for the warning. I don’t think the company would mistreat us like that, but you can never be too cautious.

8

Nope. I’ve been involved in four startups. Worked hard but never saw anything beyond my salary.

9

Think of it as a lottery ticket.

Buy some shares if possible, but don’t forgo paychecks for them.

Sure, if the startup flourishes, it would have been great to have many shares; however, there’s a massive discrepancy between being perceived as a ‘probable billion-dollar business’ and actually becoming one.

Receiving your paycheck is always safe. Relying solely on stock grants could result in losing everything.

One steady income is preferable compared to two uncertain options.

10

The chances of getting rich at a startup are very slim as most fail, and even successful ones often dilute early employee equity to the point that any financial gain pales in comparison to a stable job at a larger corporation. The odds of hitting it big are more like playing the lottery.

11

Forget it unless you’re the founder. Either make your startup as a founder or look to join a FAANG company to maximize your career financially.

12

Has anyone gotten rich from a startup share scheme?

Yes, but it’s not common. When people aspire to ‘tech money’ as engineers, that income largely stems from stock options.

However, just hearing about it doesn’t make it typical. Every casino has a ‘winners wall’ where only a minority leave with winnings, the rest walk out empty-handed.

The product is in a lucrative niche, and one competitor was recently valued at $2 billion.

So some lucky gambler has their name on that wall, but that has little to do with your company.

All employees were recently enrolled in a share scheme where we get options to buy shares at a low price

In the US, that’s standard for private startups. You can’t do anything with shares until the company is bought or goes public. It’s a gamble. Oh, and don’t forget tax implications just from buying those shares.

I’m curious if anyone has relevant stories?

Ignore the stories. Lots of people declare ‘financial freedom.’ Focus on making the best choices for your current circumstances.

If you want a less risky choice, aim for a publicly traded company offering RSUs—those are stocks given to you, editable as and when you want, and those can turn lucrative results from companies that trend with the S&P.

Interestingly, many top professionals in leading companies have endured the stressful learning phase of a startup.

Knowing theoretical ‘best practices’ is different from experiencing the highs and lows of creating a project that demanded a lot from you. Almost everyone successful I know carries stories of failures.

I see potential in the product (if we had time to engineer it correctly)

Understand, it will never be perfectly ‘engineered’ from the start. A well-designed product is not the sole measure of success. Every member of a startup is essential; especially those in early management roles. Collaboration among engineering, marketing, sales, and legal teams is crucial. Luck, along with timing, plays vital roles as well.

Anyone worked hard to get nothing in return?

Just about anyone who wasn’t among the first 1,000 employees at a Google-like company, yes. I’ve not met a successful person lacking tales of failures. Understanding what not to do is just as critical as knowing what to aim for; sometimes luck is also a factor.

13

@Bao

When people aspire to ‘tech money,’ that comes primarily from stock options.

That depends on what you mean by ‘tech money.’ The typical big tech employee experience is likely more common.

If we’re talking about hundreds of millions, that wealth usually stems from extremely fortunate startup bets. But a net worth of $1-20 million in your 30s or 40s typically relates to negotiating and job-hopping between different public companies while managing personal spending.

14

I’ve made decent earnings from startups, but I wouldn’t say it’s made me rich. Right now, I’m in a role where it’s possible to see that happen. I’ll find out in about 20 months how that turns out, but currently, my options haven’t vested, and the company isn’t public yet—so they’re worthless. At least I’m earning a decent salary. Never trade salary for options.

15

I was the sole developer on a privately funded startup and had a decent contract—not great, but good enough. The startup didn’t make it, and the CEOs lost their investment. I ended up being the only one to profit, though it wasn’t much, just a typical salary.

16

This is an outdated mindset. People often talk about those lucky employees at companies like Microsoft or the person who painted Facebook’s HQ and ended up with millions. Nowadays, CEOs act as risk managers. They want to avoid anyone scoring big while the startup takes long to mature.

Add to that, when you have multiple engineers taking advantage, it’s understandable why CEOs play cautious.

17

Are you buying shares?

Consider option pools and RSUs granted to you. This should all be defined in a contract managed through an equity service like Carta.

They should be setting your stocks based on a vesting schedule.

Typically, you wouldn’t receive shares until after a year, with monthly increments following.

As mentioned, understand possible dilutions in your shares, so take your contract to a lawyer to clarify all clauses.

A well-funded startup typically pays you well because they know valuations can tank.

So, ensure you comprehend your founders’ and investors’ integrity.

Additionally, tackling engineering issues is a challenge that arises long after a unicorn business is formed. Don’t stop putting out fires; it’s part of growth and development.

Make sure to set boundaries to avoid overworking yourself. If you are on-call, ensure you are compensated fairly for it.

Once, a VP of engineering told us to “stop starting and just finish,” aiming to shift focus from fighting fires back to proper product development.

What happened to him? He got fired, haha.

The experimentation is crucial for achieving those valuations.

However, when customers begin demanding reliability, a good leadership team would typically bring in SREs or similar experts to address those concerns.

Enjoy your adventure, and don’t burn out—or underappreciate your salary and equity.

18

I know someone who was employee #4 at a small startup which got acquired for over $100 million. I’ve not seen him work a full-time job since and he’s started a few companies of his own. I can only assume he got a big chunk of cash and equity from the buyer.

I wouldn’t say he’s rich, but his lifestyle is covered now, enabling him to focus on his starting ventures.

19

I have a similar experience. My advice? Run.

I suspect there’s no technical lead in your company, or you’re stuck on microservices. It might be an unpopular opinion, but a decent application ought to be autonomously functional. Meaning, it should run locally without needing constant online access, still serving its primary objectives. Instead of relying on texts/emails, create an internal notification system as a base, adding email/SMS as an add-on. This way, if SMTP or SMS fails, you can fall back on your internal system. While it’s not as sophisticated without automated lookups, it avoids severe disruptions, such as halting new records due to billing issues.

Other than this, don’t merely white-label another service.

20

I’m about to graduate soon, and I got a job known for rigorously working employees, but they offer decent pay in my country.

A friend who graduated a year earlier landed a job at a startup that recently got acquired, netting him a hefty six-figure payout. He keeps trying to persuade me to join a startup for its ‘high-risk, high-reward’ potential—his words.

While many startups fail, those who succeed will share stories saying it was worth the risk.