Ali Byrd gets emails and phone calls all the time from job seekers asking whether a company's private stock is trading on SecondMarket, an exchange that matches buyers and sellers of illiquid assets. With job offers from two or more startups, the callers want to compare the private stock prices to figure out which job offer might be worth more in the long term, explains Mr. Byrd, senior vice president and head of SecondMarket's New York private company team.
Mr. Byrd can't reveal such information to the callers, but he thinks their queries illustrate how a West Coast-like "culture of equity" is beginning to take root in New York City. "They understand the economics if a company were to be wildly successful," he said. "A $100,000-a-year salary doesn't compare to being able to make tens of millions of dollars in a successful exit [through a public stock offering or buyout]."
On a day-to-day level, of course, cash is still king in New York. Salaries for top engineers are already between $150,000 and $200,000, plus bonuses. Overall, tech salaries in New York City rose 3% last year, and bonuses increased 6% on average, to $11,000, according to research by Dice Holdings Inc., an operator of online career marketplaces for technology and engineering professionals.
But now, thanks to a five-year technology boom, some high-profile IPOs and a handful of acquisitions by the likes of Google that have enriched equity holders, employees increasingly expect ownership shares as part of their packages. "Companies now know that they have to have a competitive salary and a competitive equity package," said Ian Ide, a partner and head of the New York technology division at search firm Winter Wyman & Co.
Historically, the lack of an equity culture here has been a knock against New York. Unlike the West Coast, where it's easy to find engineers and salespeople whose stock options have turned them into millionaires, New York hasn't had a lot of techies who have made a fortune in that way. That is starting to change.
"It's not uncommon now to be in a room with people who are in the online advertising space who have been part of a successful exit," said Gregg Grossman, president of search firm Vantage Point Associates. "[Equity] is what everybody wants."
Like many firms, Group Commerce, a daily deal-aggregation site that plans to add 50 employees this year, gives all staffers stock options, including the receptionist who runs the front desk, to help make them team players, said CEO and founder Jonty Kelt, a former DoubleClick executive.
At ad-tech firm Conductor, all employees receive option grants, and co-founder and CEO Seth Besmertnik has even made a practice of handing out his personal founder's shares to employees.
Similarly, at companies such as SponsorHub, eXelate and appssavvy, everyone gets stock options. "It is mandatory that you have equity here," said Chris Cunningham, co-founder and CEO of Manhattan-based appssavvy, adding that his primary motivation is giving everyone a "hand at the wheel" and a sense of motivation.
That's even more important the farther up the ranks in a tech-company hierarchy you go. "The more-senior person I hire, the more that equity becomes a component in their compensation," said Mark Zagorski, CEO of ad-tech company eXelate.
Even at the entry level, candidates and employees are asking sophisticated questions about timing and value. "They want to have clarity on day one," said Robert Johnston, founder and CEO of SponsorHub and executive director of the New York Venture Capital Association. "They want to know the restrictions, the valuation of the company, the size of the next round, what the shares are worth and what happens if they get watered down."
As much as it can be a motivator, though, equity can also be a double-edged sword. If employee expectations for liquidity don't pan out in a few years, for instance, then workers may fly the coop, no matter how successful the company.
Giving equity means walking a fine line, cautions Conductor's Mr. Besmertnik, who holds a meeting every year so employees have a rough idea of what the stock would be worth if the company can achieve its vision. "You don't want to create a culture where everybody is thinking about an exit," he said. "You want them to be thinking about building a long-term sustainable business."
Correction: Ali Byrd is senior vice president and head of SecondMarket's New York private company team. His title was omitted in a previous version of this article, published March 21, 2012.