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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

#271

Post by KingMob »

dmurray wrote: post #237
extragood wrote: post #125

Earlier quoted context omitted.

It happens. I was offered the option to liquidate up to 20% of my vested shares at my last company's Series A. It was restricted by tenure though (3 years), so it wasn't available to everyone. In retrospect, I should have liquidated the full amount, but it was a new concept to me at the time and I was more conservative with the amount. I more recently interviewed with a pre-series A company and they said that they'd…

Doing this by tenure seems like a fairer way to distribute the liquidity. The founders still get preferential access to it, but because they really have taken more risk (bigger stake for a longer time period), not just because they have a better individual negotiating position.

Tenure/cliffs/etc should already take care of that by gating access to shares/options/etc in the first place. No need to add an extra tenure complication to liquidity as well.

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

#273

Post by blitzar »

throwaway2037 wrote: post #207
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.

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

You drop them a bunch of messages to get signoff for the thing that absolutely had to go live on Thrusday and dont hear from them till Sunday because they are tripping on Ayahuasca in the desert.

There's a "serious discussion" to be had next time about your work ethic.

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

#274

Post by temp90210 »

pojzon wrote: post #192
khazhoux wrote: post #73

Earlier quoted context omitted.

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 stuf…

And what happens in case it does not work out well ?

Employee gets fired and founder may get something or nothing but get “fired” last and turn off the lights on the way out I would guess.

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

#275

Post by ethagnawl »

bradleyjg wrote: post #258
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.

All you’re saying is that in the contemporary context it’s exceedingly foolish to be an employee at an early startup. The VCs and founders have optimized away all the incentive. Eventually the message will reach even naive 22 year olds.

> All you’re saying is that in the contemporary context it’s exceedingly foolish to be an employee at an early startup.

As a rule, it is and always has been. For every unicorn piñata stuffed with winning lottery tickets, there are hundreds/thousands? of others whose employees walk away with nothing or less (debt, strained relationships, mental health issues, etc.) at worst or a job at AcquiHireCo at best.

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

#276

Post by temp90210 »

kolinko wrote: post #117
atomicnumber3 wrote: post #67

Earlier quoted context omitted.

This always seems like a huge scam to me. Employee 1 gets 1%? It seems unfair from multiple perspectives. One is just a straight up naive sense of fairness. If I'm going to be in the trenches with you, I had better be able to see my ownership % in a pie chart with my glasses off. If we're out here both making chairs and when we sell a chair for $100, you get $85 (assuming someone took one of the standard-ish seed rou…

If you don’t believe a startup can be the next Stripe, then you definitely shouldn’t take 1% and work as one of the first employees. Also, the risk profile and expectations are vastly different between founders and first employees. E.g. founders are expected to not quit unless the company collapses completely, first employees can quit whenever they wish. Also, if the runway is short, founders work for free and can ev…

Outside US but I never regret getting equity/options and usually it went hand in hand with the higher paying jobs (paltry compared to US standards!) rather than being a salary/equity tradeoff. Atlassian is a great example though I have not worked for them.

I think companies here tend to have less fuck you over terms in employment share schemes but OTOH are less likely to get rich but one company made several employees rich (does 8 figures count?) here.

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

#277

Post by bradleyjg »

ethagnawl wrote: post #275
bradleyjg wrote: post #258

Earlier quoted context omitted.

All you’re saying is that in the contemporary context it’s exceedingly foolish to be an employee at an early startup. The VCs and founders have optimized away all the incentive. Eventually the message will reach even naive 22 year olds.

> All you’re saying is that in the contemporary context it’s exceedingly foolish to be an employee at an early startup. As a rule, it is and always has been. For every unicorn piñata stuffed with winning lottery tickets, there are hundreds/thousands? of others whose employees walk away with nothing or less (debt, strained relationships, mental health issues, etc.) at worst or a job at AcquiHireCo at best.

There was always very high risk, so it was only ever for certain people. But in earlier iterations of SV it was possible to become generationally rich as an early employee. The VCs and founders have fixed the glitch.

To put it another way: early employee equity was always a lotto but now the payout is like some lame scratch off instead of the powerball jackpot.

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

#278

Post by sunk1st »

sokoloff wrote: post #180
joeblubaugh wrote: post #151

Earlier quoted context omitted.

After the Series B for my last company the three founders owned something like 45% of the outstanding shares, and when they sold took out something like 40% of the price. What were the rounds like that led to less than 10% after 3ish rounds?

I read GP as very few founders individually have double-digit ownership, not collectively.

45 divided by three is 15 is double digit.

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

#280

Post by robertlagrant »

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…

> 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.

Is that what happened? I thought he had $200m, and put in $200m.

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