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Compensation in startups should align employee and company interests


Anyone who doesn’t own stock options or get their main salary from your company is de-facto misaligned with your company’s vision.

Paying employees

  • cash promotes employees claiming from the current company’s value, rather than incentivizing them to invest their time in increasing the future company’s value.
  • cash bonus incentivizes performance, but still no interest in the future of the company
  • equity incentivizes thinking of the future

It’s very hard to distribute equity fairly:

  • Giving equal shares is wrong, since not everyone has equal impact.
  • Giving different amounts upfront, is unfair, since noone has proven their impact yet.
  • Early employees get more equity since they take more risk, but later employees might have more crucial contributions to the company’s success.

Solution to this problem: Keep equity details secret.

Side note: One of the clearest patterns observed from investing in startups is that a company does better the less it pays the CEO. No more than $150.000 at an early stage venture backed startup (the book is from 2014).


  • Zero to One, Peter Thiel

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Zero to One: Notes on Startups

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