I might be biased by personal experience, but I think this has less to do with US regulation vs Europe and more to do with direct competition between tech firms’ equity value, notably late stage private companies and recent IPOs. A recent example is circa FB’s IPO, Google would always try to match or beat the other’s comp. Over the long term, you’re hoping that most of your wealth will have come from equity, not salary, if youre an engineer in SV. Senior engineers earn ~half their comp as equity grants even at public companies. Salary is simply a knob to adjust risk.
Theres an interesting sort of recursion where companies compete with others slightly earlier and slightly later than them, where the more mature company promises less risk (in the form of cash and equity $ value as of the last round raise) compared to the less mature company. This means that e.g. Stripe must offer comparable or higher salaries than a series B or C company, and slightly “less” equity compared to the less mature companies more risky but higher potential equity. So the salary floor is driven by very early upstarts, and companies are pressured as they mature to increase that floor or employees leave to other companies with the same salary but less equity risk.
So, 2 things: early companies must be able to grow (so their equity over the long term outpaces or matches larger companies) and early companies must be able to pay something close to reasonable salary (in SV this is usually ~70% salary of top of market, so 90k from a seed startup vs 130k from a FAANG). Basically, more companies need to be started and access to initial investment is a huge part of that.
Theres an interesting sort of recursion where companies compete with others slightly earlier and slightly later than them, where the more mature company promises less risk (in the form of cash and equity $ value as of the last round raise) compared to the less mature company. This means that e.g. Stripe must offer comparable or higher salaries than a series B or C company, and slightly “less” equity compared to the less mature companies more risky but higher potential equity. So the salary floor is driven by very early upstarts, and companies are pressured as they mature to increase that floor or employees leave to other companies with the same salary but less equity risk.
So, 2 things: early companies must be able to grow (so their equity over the long term outpaces or matches larger companies) and early companies must be able to pay something close to reasonable salary (in SV this is usually ~70% salary of top of market, so 90k from a seed startup vs 130k from a FAANG). Basically, more companies need to be started and access to initial investment is a huge part of that.