A Case Study in Hiring in the Unicorn Era.

There was a recent article on business insider that described how an engineer managed to get an annual salary of 250k.

What is interesting is not the negotiations, what is interesting is how fake valuations for an illiquid stock are being used to raise wages.

The lead of the article is that the engineer got 250k. The interesting  bit is at the bottom:

On all but two of his offers, he negotiated. The base salary was mostly the same at around $130,000 a year. He negotiated more aggressively on RSUs and signing bonuses.

Fascinating.

Non-Unicorns have a hard time competing for talent. 

No company was offering more in cash. Every company was offering more in equity. And here’s where Unicorn valuations help. A Unicorn can make a salary offer that is worth a lot through their RSU’s, an offer that can compete favorably with Google even though – in practice – the liquidity of Google and the values of the stocks is an apple to oranges comparison.

And so if you are not a Unicorn, you can’t compete. You simply don’t have the valuation necessary to get people to join. And this forces more and more companies to become unicorns so they can compete for talent.

 

Unicorns have to compete on dollars with Google

AirBnb could not offer less equity than Google and convince the employee to join. Theoretically, AirBnb should be able to offer less equity and win because of the growth potential. And yet AirBnb was unable to close this deal.

The net is that Unicorns are treating their private valuations as public valuations and using the face value of the valuations to attract and hire talent. Because the RSU’s are being treated as equivalent to Google stock even though they are much riskier, a down-round can be terrifying to a Unicorn. If employees are looking for a lottery ticket instead of a mission, a down round can result in a horrific wave of attrition. Stock going down in the public markets is annoying, stock going down in the private markets may convince employees that the stock may never be liquid. In effect, a down round may convince employees that the stock is now worthless.