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Let’s talk about founder compensation

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Re: Let’s talk about founder compensation

#31

Post by m_ke »

cl42 wrote: post #20
nostrademons wrote: post #15

There's a weird set of assumptions in this piece that make me a bit nervous about the state of the startup ecosystem. When I was first getting into startups (late dot-com boom to about 2009), the assumption was that your startup was your identity, and an expression of your power to change the world. You owned it, or a big chunk of it, and you got rich by growing the size of the company (and hence your share value). T…

Your observation is very interesting. Mark Suster's article ("The Changing Venture Landscape"[1]) also discusses how today's startups raise significantly more early funding and how this is changing the venture landscape -- more money chasing fewer deals, raising valuations, but also non-angel investors having certain expectations of their startups. Taken together, do these observations imply a structural change to ho…

Yeah these days the best business model seems to be out raising the competition and using your cash to let you bleed long enough to gain a monopoly in your market.

Sadly this also works in favor of VCs, who get an excuse to raise 10-20x larger funds and live off of the management fees.

Re: Let’s talk about founder compensation

#32

Post by [deleted] »

m_ke wrote: post #31
cl42 wrote: post #20

Earlier quoted context omitted.

Your observation is very interesting. Mark Suster's article ("The Changing Venture Landscape"[1]) also discusses how today's startups raise significantly more early funding and how this is changing the venture landscape -- more money chasing fewer deals, raising valuations, but also non-angel investors having certain expectations of their startups. Taken together, do these observations imply a structural change to ho…

Yeah these days the best business model seems to be out raising the competition and using your cash to let you bleed long enough to gain a monopoly in your market. Sadly this also works in favor of VCs, who get an excuse to raise 10-20x larger funds and live off of the management fees.

[deleted]

Re: Let’s talk about founder compensation

#33

Post by fiddlerwoaroof »

tshaddox wrote: post #11
usui wrote: post #4

Earlier quoted context omitted.

I hear this kind of complaint so many times especially from individual contributers but honestly can you realistically imagine a world in which this wasn't the dominant form of compensation adaptation model? For the most part, your salary is affected by supply and demand. As soon as you leave your job, the demand to fill your position goes up. If you don't leave, the demand stays the same. The demand to keep your pos…

Aren’t you missing the fact that the demand can change while you’re still at your job because of the fact that you can leave at any time? I see no good reason why people need to switch jobs to get significant pay increases, other than apparently there is psychological or bureaucratic “stickiness” of compensation.

I’ve occasionally wondered if a policy of giving a 10-30% total raise over the first 3-ish years of an employees tenure would pay off: the value of the domain knowledge of someone who walks + the cost of recruiting and training a new hire is probably about $50k+ and, so, it might be less expensive in the long run to just match the raise someone could get by switching jobs.

Re: Let’s talk about founder compensation

#34

Post by majormajor »

k__ wrote: post #26
majormajor wrote: post #21

Earlier quoted context omitted.

So it's a contract but "with code"/"with crypto"? I don't understand why you'd prefer to work in a structure governed by contract-written-as-code compared to contract-written-as-anything-else. Seems like you could put any arbitrary set of rules in a regular contract too.

I think, the fact that those contracts are enforced by themselves is the USP here. It removes overhead that made a huge amount of rules prohibitly expensive and slow in the past.

But we're not talking about scams here, as far as I can tell. Contracts aren't being thrown aside and blatantly ignored. Just misunderstood, possibly even exploitative, rules. Or in the case of "go forward" comp like in the article, it's really just a negotiation thing, more than a contract thing.

Exploitative, deceptive, or otherwise malicious contract rules are still possible, here, no? I have a hard time imagining an automated code checker that is smart enough to figure out "this is a more risky investment based on how the rules are set up!" in a way that a paper contract couldn't be similarly analyzed.

After all, a public company is about as decentralized as it gets - decentralized enough that most of the owners have basically zero individual power compared to the people appointed to run it - and there have been plenty of shenanigans in those over the years (which is why they now have a lot of regulation as a result).

Is this effectively just "corporations, now with less regulations because we haven't yet seen the ways this particular form can be used maliciously?"

Consider "hollywood accounting" - if the smart contract says "profit is split 60% to 40% between the two of us" but I'm in a position to choose to classify expenses and various other costs in a way that means "profit" gets computed in the system as X instead of 5X, what happens?

Re: Let’s talk about founder compensation

#35

Post by vmception »

m_ke wrote: post #10
k__ wrote: post #2

I really hope DAOs will improve on that situation.

Yeah I'm usually very anti crypto anything but DAOs sound like a promising concept. Might be a great way to get rid of VCs and run international workers coops with initial funding though ICOs. A DAO based startup studio / incubator would be interesting too.

How about a DAO that only transacts in DAI and has no token representation of its shares, just prorata ownership and voting weight from initial funding via that decentralized stablecoin

The irony being that nobody would notice if these exist or are prevalent specifically because there is no token doing the advertising

Re: Let’s talk about founder compensation

#36

Post by quickthrower2 »

tshaddox wrote: post #11
usui wrote: post #4

Earlier quoted context omitted.

I hear this kind of complaint so many times especially from individual contributers but honestly can you realistically imagine a world in which this wasn't the dominant form of compensation adaptation model? For the most part, your salary is affected by supply and demand. As soon as you leave your job, the demand to fill your position goes up. If you don't leave, the demand stays the same. The demand to keep your pos…

Aren’t you missing the fact that the demand can change while you’re still at your job because of the fact that you can leave at any time? I see no good reason why people need to switch jobs to get significant pay increases, other than apparently there is psychological or bureaucratic “stickiness” of compensation.

When you look for another job, there may be way 10k companies recruiting.

Most will pay less than your current job. You only need to find one that pays more.

They might do that because they lack of engineers is what is holding them back from growth.

Or they desperately need a certain skill set.

There is a lot of money sloshing around and opportunities to get paid more elsewhere.

Now if you are underpaid it might be you are in the 30-percentile and 70% pay more so you can walk into a pay raise with eyes closed.

Logically you are right that the current company should pay more. I think there are too many companies whose business model can’t support all staff being paid what they can get on the market. They rely on people being loyal.

(They could survive if they became more efficient but few companies seem interested in really doing that)

Re: Let’s talk about founder compensation

#37

Post by PragmaticPulp »

nostrademons wrote: post #15

There's a weird set of assumptions in this piece that make me a bit nervous about the state of the startup ecosystem. When I was first getting into startups (late dot-com boom to about 2009), the assumption was that your startup was your identity, and an expression of your power to change the world. You owned it, or a big chunk of it, and you got rich by growing the size of the company (and hence your share value). T…

> It makes me think that the "change the world" phase of tech startup history is over, and we're now in the "fill in the gaps" phase, where a "founder" is a hired gun that slots into a VC's portfolio.

I don’t think it’s over, but it has shifted into what was previously known as lifestyle businesses.

There isn’t much room left for “change the world” startups that have broad impact unless you come prepared with a massive war chest to outspend your competition. Most famous startups still have to buy their customers often through the IPO stage, which is why we still see companies like Uber or even Gitlab being cash flow negative when they go to market. If you’re not prepared to spend your way into the market, you’re unlikely to get very far (there are exceptions, but they are rare). So yes, this space is mostly a VC game.

However, I know of more small tech startups than ever before that are bootstrapped or have minimal investment. These small companies aren’t targeting highly competitive, broad markets like ride sharing or Git hosting. They’re playing into a founder’s personal passion or addressing unmet needs in their own domains. They won’t be the next unicorn but they’re producing good work and making a difference close to home.

In many ways it has never been easier to start a small startup. Working for a decade at a FAANG job or even a good tech job with an eye toward savings can give someone plenty of savings to coast for years while they start up. Tooling has never been more accessible for rapidly assembling prototypes and gathering customers. Even knowledge about starting companies and scaling software is freely available online.

> If you're going to be a hired gun, why not work for a FAANG and probably make a bunch more money?

One of my unpopular tech opinions is that “just get a FAANG job” isn’t as easy as it sounds. I know many smart people, including some who went on to become successful entrepreneurs, failed to get FAANG jobs after years of trying. I know several more who got FAANG jobs and then burned out or failed out. If money is your goal and you can get in then it’s a good option. It’s not the easy button, though.

Re: Let’s talk about founder compensation

#38

Post by m_ke »

majormajor wrote: post #21
rgbrgb wrote: post #14

Earlier quoted context omitted.

Decentralized autonomous organization. It’s a collaboration mechanism for forming an organization wherein you can define the compensation and governance structure as open source code. Moloch DAO is one of the better known and simple to understand instances of a DAO, though it’s scope is limited to managing membership and voting on projects to fund [0]. [0]: https://github.com/MolochVentures/moloch/blob/minimal-revenu…

So it's a contract but "with code"/"with crypto"? I don't understand why you'd prefer to work in a structure governed by contract-written-as-code compared to contract-written-as-anything-else. Seems like you could put any arbitrary set of rules in a regular contract too.

Because it can be enforced without being tied to a specific jurisdiction, expensive lawyers and army of accountants.

Imagine a company the size of Google/Alphabet organized in a similar way to something like https://dxdao.eth.link/#/, where employees have more say in what they work on and don't have layers of expensive management.

Or a Y Combinator or a DAO of indie hacker businesses working as a cooperative, investing in new products, sharing resources, etc.

Or an open source alternative to Uber / Seamless / Instacart where users can vote and bid on features and reward contributors who implement them. I'm sure a product driven by customers and makers would look a lot different than the exploitative middleman businesses that dominate tech at the moment.

Re: Let’s talk about founder compensation

#39

Post by rgbrgb »

majormajor wrote: post #21
rgbrgb wrote: post #14

Earlier quoted context omitted.

Decentralized autonomous organization. It’s a collaboration mechanism for forming an organization wherein you can define the compensation and governance structure as open source code. Moloch DAO is one of the better known and simple to understand instances of a DAO, though it’s scope is limited to managing membership and voting on projects to fund [0]. [0]: https://github.com/MolochVentures/moloch/blob/minimal-revenu…

So it's a contract but "with code"/"with crypto"? I don't understand why you'd prefer to work in a structure governed by contract-written-as-code compared to contract-written-as-anything-else. Seems like you could put any arbitrary set of rules in a regular contract too.

There's the enforcement aspect that other commenters mention, but what's maybe more relevant to the OP is that every member's contract is open source. You know exactly what everyone is making and the mechanism for making decisions at the governance level is totally transparent by design.

Re: Let’s talk about founder compensation

#40

Post by equality_1138 »

rhizome wrote: post #23
nostrademons wrote: post #15

There's a weird set of assumptions in this piece that make me a bit nervous about the state of the startup ecosystem. When I was first getting into startups (late dot-com boom to about 2009), the assumption was that your startup was your identity, and an expression of your power to change the world. You owned it, or a big chunk of it, and you got rich by growing the size of the company (and hence your share value). T…

The feeling I get is that founders aren't looking to the long-term anymore, either because they aren't confident of their ability to make it on their own or they're only working toward an acquisition. I assume the latter is the dominant mentality in undergrad/MBA/GSB subcultures. Cowardice vs. greed, I suppose.

Are you suggesting that our universities are teaching short-term thinking cowardice and greed? Or is it just certain programs? For a while I thought it was "STEM" programs that alluded most to easy-money themes in academia, with business schools teaching more of the long view and social responsibility of financing then managing a business.
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