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YC and Founders Pledge

blog.ycombinator.com

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Re: YC and Founders Pledge

#61

Post by loeg »

icebraining wrote: post #55
loeg wrote: post #21

Earlier quoted context omitted.

Islam has lots of very different (from a Western perspective) personal finance rules. Just two examples: * Lending with interest is forbidden (which also rules out investment in traditional bonds) * Zakat is a mandatory annual 2.5% wealth tax As you might imagine, the latter makes it very difficult to retire without some sort of pension system. https://en.wikipedia.org/wiki/Islamic_banking_and_finance https://en.wiki…

Planet Money did a story on a small US bank whose owner was convinced to start offering Islamic-compatible financial products: http://www.npr.org/2016/05/12/477758545/michigan-bank-discov...

Yeah.

> There are banks in the Muslim world that have thought about this, and one thing you can do is replace interest with something like a rent payment. The customer, the person who wants to buy the house, doesn't own it right away. Instead, the bank buys the house and puts it in a legal entity called a trust. Then, the customer makes monthly payments for, say, 30 years. Each month, they own a little bit more of that trust until, finally, the house is all theirs.

So that's pretty much a conventional mortgage, except you don't own it immediately. So it's not a loan because you only own the portion you've paid for, I guess.

> Now, not all Muslim scholars are OK with this. Some say this is just interest by another name. It's a religious loophole.

Re: YC and Founders Pledge

#62

Post by e1g »

kobeya wrote: post #57
imbenclifford wrote: post #33

Earlier quoted context omitted.

Ben from FP here. To be clear, founders aren't giving away equity - they are pledging a percentage of what they personally receive on exit. This doesn't reduce the equity that is available for other shareholders.

It is effectively the founder saying "I don't need/want as many shares as were allocated to me, but I value more than the people who helped me reach this outcome." It's a big screw you to the later employees.

Do you feel the same about the Gates Foundation or executive managers who donate to Doctors Without Borders? To me both are admirable ways of treating private wealth, while splitting money with employees, investors, family etc is the step that happens before you end up with the private sum.

Re: YC and Founders Pledge

#63

Post by BostonEnginerd »

cperciva wrote: post #60
lifeisstillgood wrote: post #58

Earlier quoted context omitted.

I would similarly like to encourage founders to build a ethos of "giving back to the community" in their day to day companies. Even if the start up does not set the world (and stock market) on fire, the accumulated talent and energy would be of immense use in hack-a-days, in food shelters and of course in open source projects and conferences We want your money tomorrow, of course, but just in case you don't make any,…

Right. And at Tarsnap I do exactly that -- but Tarsnap is designed to be profitable. For startups which lose money hand over fist, it may be hard to justify making such contributions until after they're acquired.

And thank you for both of those things -- making a small profitable business and giving back to the community!

Re: YC and Founders Pledge

#64

Post by pb »

kobeya wrote: post #56
pb wrote: post #50

Earlier quoted context omitted.

I know that "employees get screwed" is the hn conventional wisdom, but it's generally false. If a startup is huge success, there will be many wealthy employees. Companies like Google and Facebook created thousands of millionaires. Uber and Airbnb will likely do the same. Of course if the company exits for less than money raised, then yes, common will likely not be worth much, but that's the risk of startup equity.

Most successful startups aren't huge successes.

Most startups aren't successful period. If you're the 100th employee at a startup that sells for $30M, then no, you're not going to make a lot from that exit.

The economics of startups are such that the vast majority of the returns for both investors and employees are from the big successes, so if you're looking for $$, that's where you need to be.

Re: YC and Founders Pledge

#65

Post by BinaryIdiot »

pb wrote: post #50
BinaryIdiot wrote: post #8

I understand giving to charity is great and all but what about employees 10, 35, 97? So someone works hard at a start-up but they weren't among the first dozen or so to join then they likely get next to nothing from an exit. So how about, instead of a pledge to give to charity, founders pledge to give more equity to later employees so only a small handful are not the only ones to profit. Everyone takes a risk joining…

I know that "employees get screwed" is the hn conventional wisdom, but it's generally false. If a startup is huge success, there will be many wealthy employees. Companies like Google and Facebook created thousands of millionaires. Uber and Airbnb will likely do the same. Of course if the company exits for less than money raised, then yes, common will likely not be worth much, but that's the risk of startup equity.

> I know that "employees get screwed" is the hn conventional wisdom, but it's generally false.

It's generally true. 90% of start-ups fail within 5 years. If any employee banked on their equity as a form of compensation (which, yes we know you shouldn't, most do as start-ups typically pay below average salaries) it's now gone. Successes are rare.

> Companies like Google and Facebook created thousands of millionaires.

Source? I had heard it was a few dozen at Google and a few hundred at Facebook. Thousands seems a little high but I could be remembering the data wrong.

Re: YC and Founders Pledge

#66

Post by BinaryIdiot »

imbenclifford wrote: post #42
BinaryIdiot wrote: post #41

Earlier quoted context omitted.

> To be clear, founders aren't giving away equity - they are pledging a percentage of what they personally receive on exit. This doesn't reduce the equity that is available for other shareholders. I never said they were giving away equity. A founder is taking a percentage of their money and, instead of giving it to their employees (like they should especially if you follow many of the YC essays and blog posts about g…

I feel like this is equivalent to saying that if a founder decides she will buy a house if she exits, that she is denying employees of equity. Have I missed the point?

I know others already hit on it but since you replied to me: I would say those are not equivalent. With buying a house on exit you're planning on taking your money and doing something personal with it. When you're giving it to charity it's money you didn't need. If you didn't need the money, why wouldn't it go to the first employees (or even later employees) in the form of equity since they helped build the company? Surely many of them joined possibly at lower salaries to gain equity and now the founder(s) are simply giving it away to others?

See the difference? Emotionally this feels awful. I was involved in something roughly sorta similar and the amount of emotion and resentment is awful. I'm now convinced more than ever that EQ (emotional intelligence) is one of the biggest parts of running a business while keeping your best talent.

I see the good that can come from Founders Pledge but I also see it putting a company in a disadvantage in finding and retaining talent.

Re: YC and Founders Pledge

#67

Post by pb »

BinaryIdiot wrote: post #65
pb wrote: post #50

Earlier quoted context omitted.

I know that "employees get screwed" is the hn conventional wisdom, but it's generally false. If a startup is huge success, there will be many wealthy employees. Companies like Google and Facebook created thousands of millionaires. Uber and Airbnb will likely do the same. Of course if the company exits for less than money raised, then yes, common will likely not be worth much, but that's the risk of startup equity.

> I know that "employees get screwed" is the hn conventional wisdom, but it's generally false. It's generally true. 90% of start-ups fail within 5 years. If any employee banked on their equity as a form of compensation (which, yes we know you shouldn't, most do as start-ups typically pay below average salaries) it's now gone. Successes are rare. > Companies like Google and Facebook created thousands of millionaires.…

If a start up fails then the equity is worthless. That's how equity is _supposed_ to work.

As for Facebook and Google, you heard wrong. I worked at both companies and know quite a bit about how much equity employees got.

Re: YC and Founders Pledge

#69

Post by BinaryIdiot »

pb wrote: post #67
BinaryIdiot wrote: post #65

Earlier quoted context omitted.

> I know that "employees get screwed" is the hn conventional wisdom, but it's generally false. It's generally true. 90% of start-ups fail within 5 years. If any employee banked on their equity as a form of compensation (which, yes we know you shouldn't, most do as start-ups typically pay below average salaries) it's now gone. Successes are rare. > Companies like Google and Facebook created thousands of millionaires.…

If a start up fails then the equity is worthless. That's how equity is _supposed_ to work. As for Facebook and Google, you heard wrong. I worked at both companies and know quite a bit about how much equity employees got.

> If a start up fails then the equity is worthless. That's how equity is _supposed_ to work.

Correct. I never said anything to the contrary...

> As for Facebook and Google, you heard wrong. I worked at both companies and know quite a bit about how much equity employees got.

Data? I'm fine with being wrong but being told that and given nothing is...a bit unsatisfying.

Re: YC and Founders Pledge

#70

Post by pb »

BinaryIdiot wrote: post #69
pb wrote: post #67

Earlier quoted context omitted.

If a start up fails then the equity is worthless. That's how equity is _supposed_ to work. As for Facebook and Google, you heard wrong. I worked at both companies and know quite a bit about how much equity employees got.

> If a start up fails then the equity is worthless. That's how equity is _supposed_ to work. Correct. I never said anything to the contrary... > As for Facebook and Google, you heard wrong. I worked at both companies and know quite a bit about how much equity employees got. Data? I'm fine with being wrong but being told that and given nothing is...a bit unsatisfying.

http://www.nytimes.com/2007/11/12/technology/12google.html
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