Startup Stock Options – Why A Good Deal Has Gone Bad (2019)
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Re: Startup Stock Options – Why A Good Deal Has Gone Bad (2019)
#2Are there any startups that offer revenue sharing so you don’t have to rely on the mythical exit?
Re: Startup Stock Options – Why A Good Deal Has Gone Bad (2019)
#3Are there any startups that offer revenue sharing so you don’t have to rely on the mythical exit?
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Re: Startup Stock Options – Why A Good Deal Has Gone Bad (2019)
#4Are there any startups that offer revenue sharing so you don’t have to rely on the mythical exit?
The only startups that will offer this will probably be bootstrap companies. Otherwise, VC backed companies will always push for stock options because it’s a better deal for them. I hope more startups starts offering revenue sharing.
Re: Startup Stock Options – Why A Good Deal Has Gone Bad (2019)
#5Are there any startups that offer revenue sharing so you don’t have to rely on the mythical exit?
Rev share is a tricky incentive. It can incentivize people to waste money chasing revenue. Revenue isn’t always in line with the success of the business.
As a business owner and VC I’d be extremely reluctant to offer that to employees.
Re: Startup Stock Options – Why A Good Deal Has Gone Bad (2019)
#6Are there any startups that offer revenue sharing so you don’t have to rely on the mythical exit?
I've only heard of this with consulting. Multiple times I have heard traditional shops offer a 1-5?% of e-commerce revenue depending on the portion of work, but it is often since they are skeptical of their own success.
Re: Startup Stock Options – Why A Good Deal Has Gone Bad (2019)
#7Are there any startups that offer revenue sharing so you don’t have to rely on the mythical exit?
Pre-IPO the venture is likely not profitable, so you'd be getting a share of zero. Companies that are VC-backed are going to be held to an expectation of a big payoff, and will be in general discouraged from offering incentives that uncouple employee incentives from an exit. If I understand this right, it's part of why founders have started to be allowed to sell some of their vested shares at funding events, it gives them some more financial runway as the company's timeline stretches out (you don't want the optics of the CEO of your $50m series C to be eating peanut butter and ramen, etc.)
I do think profit sharing would be a good lever for a bootstrapped company that is already profitable and wants to give key employees skin in the game.
Re: Startup Stock Options – Why A Good Deal Has Gone Bad (2019)
#8> One possibility is to replace early employee (first ~10 employees) stock options with the same Restricted Stock Agreements (RSAs) as the founders.
I am sure RSA are and will always be available to those with the skilleset that commands this level of compensation. I am unclear what would motivate the founding team or investors in a start-up to act otherwise.
Re: Startup Stock Options – Why A Good Deal Has Gone Bad (2019)
#9Are there any startups that offer revenue sharing so you don’t have to rely on the mythical exit?
More startup folks should read about Tomas Bata [0], he built about 2000 of houses for his workers.
[0]: https://en.wikipedia.org/wiki/Tom%C3%A1%C5%A1_Ba%C5%A5a
Re: Startup Stock Options – Why A Good Deal Has Gone Bad (2019)
#10> One possibility is to replace early employee (first ~10 employees) stock options with the same Restricted Stock Agreements (RSAs) as the founders. I am sure RSA are and will always be available to those with the skilleset that commands this level of compensation. I am unclear what would motivate the founding team or investors in a start-up to act otherwise.
Why would anyone want to work for your startup when they can get much higher salaries working for larger companies?
Stock options used to be that differentiator for startups... now it's just an empty promise in most places.