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Silicon Valley's best kept secret: Founder liquidity

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Re: Silicon Valley's best kept secret: Founder liquidity

#71

Post by rKarpinski »

kneath wrote: post #16
josh2600 wrote: post #6

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.

> 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).

Have seen companies offer this to employee's

And companies that let employee's take money off the table at series A are also likely to be generous with meaningless titles; that is they will let early employee's call themselves founders.

Re: Silicon Valley's best kept secret: Founder liquidity

#72

Post by babl-yc »

dmitrygr wrote: post #11

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.

Founders cashing out early may be more of an "open secret" but it warrants more discussion. I don't find the title overly clickbait-y.

And a counterpoint to your perspective, I joined a startup a couple years out of college, had the most fun of my career, and the options were very much worth something. Working for a well-funded start-up is something I'd especially recommend early in your career when you can take more risk even if the equity doesn't always work out.

If anything, I'd discourage becoming a founder as a new grad more than SV typically discusses. I really appreciated taking time to build up my savings and get experience before taking a shot at that.

Re: Silicon Valley's best kept secret: Founder liquidity

#73

Post by khazhoux »

blobbers wrote: post #30

I think founders generally have 20 to 50x what the first employee has, in my experience. Employees rarely have more than 1%. Founders tend to start out with about 20-40% depending on number of cofounders.

Yeah that line in the article is completely off:

> Ask most venture-backed founders why they get 10x more equity than employee #1

Employee #1 typically gets 1%. Sometimes could be up to 2%, but 1% is standard. So then the founder gets 10%? No way.

I posit that very, very few early non-founding employees in SV startups have a true notion of how cheap they're working compared to the founders. Founders do founder-y stuff, the early engineers build and launch the full product, and if all goes well, the founders fly private the rest of their lives while early engineers make good progress towards a down payment.

Re: Silicon Valley's best kept secret: Founder liquidity

#74

Post by romwell »

sashank_1509 wrote: post #39
kneath wrote: post #16

Earlier quoted context omitted.

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.

The very first startup I joined after grad school allowed all employees to cash out significant chunks of their stock in the Series A round. Also Elon famously put 200 million of his own money into Tesla and SpaceX to keep it afloat, which is the opposite of cashing out early.

> to keep it afloat

Can't "cash out" (early or not) if your company is sinking.

Re: Silicon Valley's best kept secret: Founder liquidity

#75

Post by mapt »

sashank_1509 wrote: post #39
kneath wrote: post #16

Earlier quoted context omitted.

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.

The very first startup I joined after grad school allowed all employees to cash out significant chunks of their stock in the Series A round. Also Elon famously put 200 million of his own money into Tesla and SpaceX to keep it afloat, which is the opposite of cashing out early.

If you have 200 million "of your own money" to spare, you are no longer just a person for the purposes of this conversation, you're a walking VC fund, and you're not really risking a substantial change to your quality of life going from 250M to 50M net worth. Your living expenses are already generously compensated for by the large salary that you, the VC fund pays you, the person, out of your personal bank account, and they will be paying you those expenses until the end of your natural life. This isn't "risk" in the same sense as somebody who jumps to supplement their $150k salary with $450k of founder liquidity because it dramatically changes the material security of their life.

Re: Silicon Valley's best kept secret: Founder liquidity

#76

Post by FlyingSnake »

jmward01 wrote: post #68

I was mentally, physically and emotionally worn out when I left my previous startup after being an early employee. Despite that I really wanted to stay and be part of what my friends and I were building. Had I had the chance to 'de-risk my life' with some equity to replenish my empty bank account, which was empty from taking an early employee salary, I may have been able to stay but in the end I had to get out. Getti…

I’m really sorry to hear about your burnout, I hope you’ve made a recovery and are at a better place now.

I thought it was the prevailing wisdom here on HN that being the first employee almost always is bad for the employee. You’re right, the cards are stacked against them

Re: Silicon Valley's best kept secret: Founder liquidity

#77

Post by adastra22 »

rKarpinski wrote: post #71
kneath wrote: post #16

Earlier quoted context omitted.

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.

> 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). Have seen companies offer this to employee's And companies that let employee's take money off the table at series A are also likely to be generous with meaningless titles; that is they will let early employee's call themselves founders.

At a Series A?!?

That's insane to me. We're talking about the first priced funding round for the company, right?

Re: Silicon Valley's best kept secret: Founder liquidity

#78

Post by jmward01 »

FlyingSnake wrote: post #76
jmward01 wrote: post #68

I was mentally, physically and emotionally worn out when I left my previous startup after being an early employee. Despite that I really wanted to stay and be part of what my friends and I were building. Had I had the chance to 'de-risk my life' with some equity to replenish my empty bank account, which was empty from taking an early employee salary, I may have been able to stay but in the end I had to get out. Getti…

I’m really sorry to hear about your burnout, I hope you’ve made a recovery and are at a better place now. I thought it was the prevailing wisdom here on HN that being the first employee almost always is bad for the employee. You’re right, the cards are stacked against them

Much better now actually, thank you.

Re: Silicon Valley's best kept secret: Founder liquidity

#79

Post by adastra22 »

hn_throwaway_99 wrote: post #58
Sytten wrote: post #44

Earlier quoted context omitted.

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.

Obviously everything is local. 40k is about $20/hr, which where I live is just a tad above what new fast food workers make. Fresh CS grads make more than $100k (or at least they did, obviously the past year and a half has been brutal). This is not in SV.

In most of the world (even just considering developed nations) fresh CS grads do not make more than $100k. Senior software engineers don't even make that much anywhere in Europe or most of Canada.

Re: Silicon Valley's best kept secret: Founder liquidity

#80

Post by eru »

romwell wrote: post #74
sashank_1509 wrote: post #39

Earlier quoted context omitted.

The very first startup I joined after grad school allowed all employees to cash out significant chunks of their stock in the Series A round. Also Elon famously put 200 million of his own money into Tesla and SpaceX to keep it afloat, which is the opposite of cashing out early.

> to keep it afloat Can't "cash out" (early or not) if your company is sinking .

You totally can. That's what investor money is for.
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