51–60 of 943 posts
Having only worked for larger companies (RSU stage), I'm curious what the typical breakdown of founder to early employee to investor to later employee equity looks like. I'm sure it differs pretty wildly, but I'd love to know what a 'typical' case for mid-to-late-stage start up looks like.
The title of the article is mostly clickbait. Anyone who's lived in SV for a decade or so knows this well. Startups are a scam unless you are a founder. They are a meat grinder that runs on naive young new college grads who buy into the bullshit that their options are worth anything.
Even founders get shafted in later rounds where they are diluted out of their voting rights because they can't raise the capital to maintain their share. The only people not getting scammed regularly are the VC.
Not to want to sound like I'm standing up for Vulture Capital, but while it's not "getting scammed" as such - I suspect most VCs lose money on most startups they invest in. And not all VCs land enough 100x exits to make up for all those losses. (The "successful" VCs are the ones who make all the losses end up in pension fund balance sheets, while ensuring most of the profits land in their friends and their own pockets.)
In Canada even at Series A Canadian VCs will not offer you liquidity while at the same time allotting pennies in the first place. Absolutely conservative poor people.
If things are working, derisking the founder so that they can focus all in on the problem is the best thing you can do as a VC.
We are talking SV here, and that's very different from my European experience. I've known of founders in Scandinavia who walked out from startups that weren't doing so bad and that could have gone for another round of investment because they were earning as much as a bus driver, had zero savings, and were experiencing burn out after almost a decade of work. Maybe that bit of SV culture that lets founders be on par wi…
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Work a high salary job and buy lottery tickets or 0DTE options instead. Half joking. Look at the success rate of outlier comp through liquidity as an early startup employee. If professional stock pickers can’t pick better than index funds, what makes you think you can do better picking startups, spending non renewable time, working for years vesting common shares that you might get liquidity for eventually, assuming…
You're not just "picking a startup". That early, you're also a big factor in whether it succeeds. Betting on yourself is different than buying a lottery ticket. (Maybe just as irrational for a lot of people, but still.)
I’ll take the lottery ticket over me any day, not because I suck, but because I am human. Even exceptional humans fail. I don’t drink the exceptionalism koolaid.
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Does anyone restrict 83b elections? Is that even allowed?
What would this even look like? An 83b election is something I file with the IRS. Are you suggesting a company might have me sign a contract committing me to not file an 83b election? How would they ever find out if I did file, and why would they care?
Founder liquidity doesn’t make up for much in the average situation. Making $400k after making $100k for 4 years doesn’t really change much. It gets you upto junior engineer level. The underestimated play is becoming a cofounder to a great CEO 2nd time founder.
Getting out of the SV bubble this is an insane amount of money. I boostrap my business and I make 40k a year. Most senior SWE around here make less than 100k.
The best startups have a concept which is summed up thusly: “We all go to the pay window at the same time.” It’s ok for founders to take a little bit of money off of the table if they extend that to their employees as well. Asymmetry is where things get weird. I’ve seen many founders who got deep into the fundraising cycles without ever realizing they could take a cent out. VCs will constantly tell you to let it all…
I have seen a lot of companies, a lot of rounds. I have known zero founders who have turned down an option to take money off the table (and zero A raises that offered that to employees). I love the idea of your universe, though.
A: I’ve seen many founders who got deep into the fundraising cycles without ever realizing they could take a cent out.
B: I have known zero founders who have turned down an option to take money off the table [...] I love the idea of your universe, though.
A lot of startup compensation seems to rely on people not having transparency and honesty. The founders, investors, etc. all have very different risk and reward situations compared to typical employees and even non-founder executives. But for most it seems like a raw deal compared to working at a big tech company, unless you’re lucky and strike gold at a place like OpenAI or whatever.
Another area where there is a lot of obscure but important detail is in the cap table, stock plan documents, and so forth. If company financials and cap tables were transparent, and if it was clear the various ways in which a company could screw over employees through various clauses deep in their documents, no one would take those jobs.