Equity vs Income

11110134-largeRecently a variety of companies that I am invested in have been interviewing some really amazing people who are currently working in companies where they make a solid salary.  They have responsibility, they are leaders in the company but they do not have equity so they are just hired help.

Making that entrepreneurial leap is a tough one but if you are an entrepreneur with a burning passion to start something it isn’t as scary as it sounds because you just have to do it.  If you are making that leap into a start-up making less than what you are currently making with equity making up for some of your income plus some well that is more difficult.

I left Macy’s when it went from a public trading company to a privately held company because I got zero equity.  I would have happily taken equity in the company that I grew in the garment center but it wasn’t the norm so instead of got a lot of cash.  It worked for me because it paid for our life but if I had been given equity I would have probably made a lot more and I would have had a different feeling of ownership.

There is a clear difference between people who are willing to take that leap of faith that they are part of something that is going to grow into something big.  They have to be willing to take that leap that they might make less cash but the equity will more than make up for that.  If the company succeeds it would have been the right call.  If the company fails then perhaps it was the wrong call but putting that kind of experience under your hat can never be taken away.  That is why the people who work up in the start-up world all have a little bit of that risk taking gene in their DNA.

I have been disappointed with people we thought were going to take a job in a company that I am invested in and then at the last minute turned it down for a counter-offer from their current companies but in the end I do believe that things happen for a reason.  Those people were missing the understanding of being an owner in something vs just an employee.

Personally I’d try to take more equity any day.