Silicon Valley's best kept secret: Founder liquidity • Hacker News Board

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

#201

Post by dubbel » Wed, Jun 12, 2024, 8:53 AM UTC

adastra22 wrote: post #79

hn_throwaway_99 wrote: post #58

Earlier quoted context omitted.

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.

Senior software developers definitely can make that much in parts of Europe, and not just at banks or the big 5. But also 100k USD isn't what it was 5 years ago.

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

#202

Post by throwaway2037 » Wed, Jun 12, 2024, 8:54 AM UTC

jensneuse wrote: post #162

As a founder with multiple years of experience I can say that this post and a lot of other comments are coming from people who don't understand the life of a founder. It's not so much about risk. My peers earn 5-10x my salary. I'm paying my employees more than myself. I have to provide for 3 kids and we have a lot of debt on the house. I'm working day and night, 24/7. I don't like the phrase "taking money off the tab…

It's sad this post was so downvoted. You speak the truth from your view. We need more of that here.

    > My peers earn 5-10x my salary.

I need to troll a little bit here. So... their package sounds much better. Way lower risk. Are you shooting for the moon (want to be 1B+?)... or what?

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

#203

Post by phlo » Wed, Jun 12, 2024, 8:54 AM UTC

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 .

Adam Neumann begs to differ.

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

#204

Post by blitzar » Wed, Jun 12, 2024, 8:57 AM UTC

JumpCrisscross wrote: post #119

varenc wrote: post #84

I always thought there was another reason for VCs encouraging founders to sell shares: giving them a taste of wealth. If you're a founder that sold 2M in stock a year ago and a 200M acquisition offer comes along, you'd be less tempted now that you appreciate the difference between small millions and big millions. If you thought you had a real chance of going much bigger, having cash already makes you more willing to…

> another reason for VCs encouraging founders to sell shares: giving them a taste of wealth VCs are wealthy. Some of them weren't born wealthy. The best among them recognise that removing the worry about e.g. paying rent will make a better CEO.

> removing the worry about e.g. paying rent

Only once the startup has matured at least a little, too much money too early and your hungry founders become lazy.

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

#205

Post by captaincaveman » Wed, Jun 12, 2024, 8:58 AM UTC

matthewsinclair wrote: post #128

lumost wrote: post #90

Earlier quoted context omitted.

This is the model, you can see a lot of early stage founders looking for a "founding engineer" which is really just an excuse to pay founder salaries for 1% of the company rather than 50%. If the founding engineer quits without buying their options, then the founding team recoups the 1% equity. Its a recipe for the founding engineer to be burned out and pushed out.

This reminds me of how I have seen a few asks lately for roles where a company is looking for a CTO for their “AI startup”. How an “AI startup” (whatever that might actually mean) can _start up_ without a CTO is beyond me, and raises some very big red flags about what that company might be up to.

Mostly someone has a Phd and convinced people to give them money to 'change the world', then need someone who has actually built things beyond a script in a python notebook.

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

#206

Post by throwbigdata » Wed, Jun 12, 2024, 8:59 AM UTC

mapt wrote: post #75

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.

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, a…

Life is very different at $50M v $250M

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

#207

Post by throwaway2037 » Wed, Jun 12, 2024, 9:00 AM UTC

throrway12 wrote: post #129

I worked at a preseed company recently. Here's my experience: - Work 9 to 7 everyday. 6 days a week. - People are working 9 am - 5 am in crunch time. Then joining again at 10 am. - Monetary Comp is exactly market average. - Equity Comp is even more paltry since founders raised at a huge valuation. - Founders make unrealistic promises. Eg: It took a competitor with 7 people, 3 months to make a product. The founder tol…

This is a great post. No need for the throwaway account!

   > Founders message you 24 x 7. If you don't reply, there's a "serious discussion" to be had next time.

That one is my favourite.

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

#208

Post by throwbigdata » Wed, Jun 12, 2024, 9:01 AM UTC

jahewson wrote: post #100

darth_avocado wrote: post #35

Earlier quoted context omitted.

It’s like trading windows and blackout periods for employee RSUs, but equity selloff on a schedule for the c suite.

That’s really about not falling foul of insider trading laws. Regular employees are free to set up limit orders within their trading windows (eg sell if stock hits $200) if they want. Can’t subsequently cancel it though! It makes way more sense to just sell on the day of vesting and then trade shares that you’re not restricted from trading. No tax or other reason not to do this.

I’ve never worked at a public company that allowed limit orders to survive blackout periods.

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

#209

Post by throwaway2037 » Wed, Jun 12, 2024, 9:03 AM UTC

adastra22 wrote: post #107

mtremsal wrote: post #102

Earlier quoted context omitted.

A significant portion of startups that raise a Seed round (or equivalent) never get to a Series A. Maybe 30 to 50% fail at this stage.

Are we talking about just YC-style internet/app startups? Two of my startups have been deep tech where you can't do shit without a Series A, and the third was crypto in the start of that boom where VCs were begging to lead your Series A. So maybe I just work in a vastly different field.

What is "deep tech"? Like, not a CRUD web app? Hardware? AI/ML?

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

#210

Post by tinco » Wed, Jun 12, 2024, 9:04 AM UTC

pilingual wrote: post #197

extr wrote: post #154

Earlier quoted context omitted.

I recently applied to a seed stage YC company that was offering me 1.5% equity for a founding eng role which they felt was generous. So basically I get to do all the work for like 1/50th of what the founder has? Get real lol. I even pointed this out to them and they said "it's totally normal, that's the way it's done". Like oh okay, as long as everyone else is getting ripped off too.

What amount of equity would be fair?

In my opinion, you should take the difference between their market salary and the salary they're being offered, and consider that an investment by the employee at the upcoming (not past) valuation.

For example if they're in SF and they're hiring a senior first engineer that would maybe make 250k elsewhere, and they're offering them 125k, and they would take the classic 7% for 125k, then 7% is a good starting point. (Of course if they already have the YC investment, then that would go down dramatically)

If that equity vests over 4 years, then frankly maybe 28% is a better starting point.

But what's fair isn't really relevant. What's relevant is what the market demand and supply is. If there's some dolt who would happily take 1.5% as a first engineer ("founding engineer") for a $125k salary cut, then the founders would be idiots not to take that deal. And frankly, if that $125k salary cut gets them their dream job, then maybe they're not even dumb for doing it.