Wrong. There's a big difference between taking $20-50K less per year in salary and chugging away for years with little or no pay. Whether you're full-time as an entrepreneur trying to make a startup or slaving away in your free time, when you could be out partying, there's an inherent risk in time and money that is not the same as a simple pay cut.
In my opinion founders chug away for years with little or no pay because they love it. If someone think of it as a sacrifice towards achieving billions then they should be doing something else. You have to enjoy the process. Quantifying your sacrifices in "Fun" is harder than calculating your financial risks and I think equity should be based on that. Partying all the time is not a bad idea if you love it.
Regardless of how 'fun' something is you're choosing to risk your time and money on an idea (rather than another idea or another job). I have a ton of fun at my day job. That doesn't mean they should pay me less, because then I could go work for someone else who appreciates my value and hopefully have fun there and make better money. Fun or how much I love it is a separate issue.
I think you can't use subjective measures like 'enjoyment' when doing this sort of calculation.
I feel the best way to split equity is to make the standard salary "swappable" with equity. let me give an example:
say 1 founder, 1 early employee. At the start, there is $100k in the bank that the founder put in (or otherwise managed to get). Founder has 100% equity, so each 1% equity is "worth" $1000;
first year, lets say the employee worked and produced $100k worth of value. Lets further say the normal rate is $100k for that employee. So the company has $200k worth of value, even tho there is only $100k in the bank. The employee could take 0% equity, and $100k in money. Or, 50% equity, and $0 money (and all scale variation in between).
If you look from investment perspective, Programs like Y Combinator and other incubators take 6-10% of the equity for $20000 seed money and mentoring. Why can an early developer/designer can't ask for 6-10% for working for $20k-$50k less than their market value. They are literally investing $20k+ in your company and adding value by doing work.
It's risk/reward. Let's say it takes you 2-3 years of savings to save up enough to live 1 year without a salary. If you're committed to your startup you could take no pay at all to try to start your business. It's risky, some would say foolish, but that's why you have the upside of all the equity. Once you start offering someone enough of a salary to get by, even if it's less than market price, they still don't have as much skin in the game as someone "risking it all." I'm not saying you should risk it all, I'm just saying some founders choose to.
