In this market, I tend to think of options as incentives, and not as replacements for salary. Salary gets me in the door and work hard, great people and culture make me want to be there and evangelize, and options incentivize me to work my ass off. (I'd work my ass off without options, but the options really make it easy to say "I will do everything in my power to make this succeed" instead of "I'd rather go spend time with my friends tonight").
To put it a slightly different way, I can't pay my rent with options. You can offer me all the options in the world, but my landlord doesn't accept them as payment. Therefore, you cannot simply exchange salary for equity.
I received an offer from a company a year or two ago, and they offered me a salary almost 50% below my then-current salary, and then some equity. When I tried to negotiate on salary, the CEO berated me for ignoring the equity. The problem is that as far as equity is concerned, it's worth $0 until you exit. There's a potential for millions, but my lottery ticket is also worth potentially millions of dollars. My landlord won't accept my lottery ticket as payment.
Long story short, Aaron is correct: startups need to rethink the whole equity component. It's valuable -- but it's not valuable in the same way that salary is, especially in today's market.
To put it a slightly different way, I can't pay my rent with options. You can offer me all the options in the world, but my landlord doesn't accept them as payment. Therefore, you cannot simply exchange salary for equity.
I received an offer from a company a year or two ago, and they offered me a salary almost 50% below my then-current salary, and then some equity. When I tried to negotiate on salary, the CEO berated me for ignoring the equity. The problem is that as far as equity is concerned, it's worth $0 until you exit. There's a potential for millions, but my lottery ticket is also worth potentially millions of dollars. My landlord won't accept my lottery ticket as payment.
Long story short, Aaron is correct: startups need to rethink the whole equity component. It's valuable -- but it's not valuable in the same way that salary is, especially in today's market.