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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

#281

Post by _heimdall »

chatmasta wrote: post #181
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.

This assumes that the founders are aware of, or offered, the option. If anything this is an argument for why founders should be represented by a banker or lawyer at the closing of every investment round. Let the founders do the negotiating, but once it comes time to sign the papers, bring in the sharks.

Honestly if a founder isn't pulling in finance or legal experts prior to signing a funding round they really have no business being in position to begin with. They have to know VCs are leaning on their own financial experts and lawyers, why would you not have your own to protect your own interests?

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

#282

Post by api »

It’s all relative. Founders that actually make it to series A levels have options to take money off the table (usually) and often what most Americans would consider a great salary, but if you do the math vs getting a massively overpaid FAANG job and include the odds of the startup imploding founder is actually a tougher gig.

I refer to dilemmas like this as "zeroeth world problems."

Of course like I said… relative. It is nowhere near as tough a gig as schoolteacher or service industry worker, at least financially, though there can be a lot of stress and some mental health risks.

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

#283

Post by erremerre »

defrost wrote: post #179
erremerre wrote: post #176

Earlier quoted context omitted.

So you either you are neglecting your kids, or you are calling work at building legos with your kids?

Be kind. Don't be snarky. https://news.ycombinator.com/newsguidelines.html

My point is that he is not working 24/7 as he says. He just have a business to run, that does not mean they work all the time, as they try the rest to convince us.

Neither working all the time should be rewarded with a status in which they can't be critised, but even if such reward shall exist, he aint working that much.

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

#284

Post by lettergram »

sneak wrote: post #187
Finbarr wrote: post #66

Secondary at Series A is very rare. Part of the reason more early employees don't get included in secondary sales is because of the Securities Exchange Act of 1934 14e-2. If you have more than 10 sellers involved, the transaction can be considered a tender offer, which triggers additional regulatory requirements and disclosures. > As of 4 months ago I left a very successful stealth startup (which grew to 40M in ARR i…

Where would the stress come from? You get a paycheck and there is no personal downside except opportunity cost (and perhaps reputation). You don’t lose any money if your startup fails.

Starting a company myself, I took 6 months with no salary. After we raised, my salary was massively cut from where it was (30-40% of what I made the year prior). Then you have the fact I gave up guaranteed raises & promotions (to the tune of hundreds of thousands in RSUs).

There’s a pretty large risk to family security. By year two of the startup I have made 15-20% the cash I could have made elsewhere. I have stock that I trust will be worth more in the future (so imo worth it). However, I can see liquidity events being useful if you’re tight on cash after that run

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

#285

Post by nick7376182 »

petesergeant wrote: post #224
KennyBlanken wrote: post #220

Earlier quoted context omitted.

...while he was getting loaned $200,000 a month for personal expenses by his billionaire buddies. https://www.cnbc.com/2017/04/27/the-crucial-decision-teslas-... Also, that may have kept tesla and spacex 'afloat' but what really saved both companies was billions upon billions of dollars in government contracts, subsidies, preferential loans, and tax breaks. Nevada alone gave nearly two billion dollars to Tesla.

The government is expecting something in return for these breaks rather than them being some kind of gift, though.

And the government got it, in the form of a cost effective usa-based launch solution.

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

#286

Post by bigbacaloa »

nytesky wrote: post #134
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’m sorry, I think the era of “change the world” motivation in tech was eclipsed by “make 42 tons of money” about a decade ago. Along that line, I would be very surprised that there are founders who don’t seek an opportunity to set aside their nest egg to “de-risk”. You say you have seen such guileless dedication to the founding first hand, can you share what industry or type of company? Perhaps I’m just exposed to t…

[dead]

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

#287

Post by KingMob »

dumbfounder wrote: post #242

I don’t agree with this sentiment: Investors, founders, and employees all believe that founders are taking more risk than early employees (this isn’t true once founders have exclusive access to liquidity) This completely discounts how much risk and stress go into the early stages before money is raised, or before enough money is raised to pay founders properly. They often go into debt, put many aspects of their lives…

...? Much of what you described applies to early employees, too.

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

#288

Post by throwaway98797 »

sneak wrote: post #187
Finbarr wrote: post #66

Secondary at Series A is very rare. Part of the reason more early employees don't get included in secondary sales is because of the Securities Exchange Act of 1934 14e-2. If you have more than 10 sellers involved, the transaction can be considered a tender offer, which triggers additional regulatory requirements and disclosures. > As of 4 months ago I left a very successful stealth startup (which grew to 40M in ARR i…

Where would the stress come from? You get a paycheck and there is no personal downside except opportunity cost (and perhaps reputation). You don’t lose any money if your startup fails.

cause if you fail you have to let people go

cause if you fail you have to tell your investors you lost money

cause if you fail is a thought that’s always running through your head as you live it

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

#289

Post by nick7376182 »

throwbigdata wrote: post #208
jahewson wrote: post #100

Earlier quoted context omitted.

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.

I believe they are referring to a 10b5-1 plan that includes price-based sale triggers.

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

#290

Post by neilv »

sneak wrote: post #187
Finbarr wrote: post #66

Secondary at Series A is very rare. Part of the reason more early employees don't get included in secondary sales is because of the Securities Exchange Act of 1934 14e-2. If you have more than 10 sellers involved, the transaction can be considered a tender offer, which triggers additional regulatory requirements and disclosures. > As of 4 months ago I left a very successful stealth startup (which grew to 40M in ARR i…

Where would the stress come from? You get a paycheck and there is no personal downside except opportunity cost (and perhaps reputation). You don’t lose any money if your startup fails.

I tend to have large stress in startups, more than in established companies. I won't get into some of the occasional toxic-element sources that can happen anywhere, but some reasons that happen more in startups:

1. Caring about the mission -- the real-world positive impact -- and potentially able to make or break that. Not just taking a shot at making money, for some opportunity cost that I could evaluate quantitatively on a napkin, and walk away from as soon as an option with a higher expected dollars number came along.

2. Livelihoods and investments of time&effort by colleagues hinge to a large degree on decisions I make, ideas I have, and things I have to pull off, and not wanting to let them down. (A bit similar with money investors, but I care more about personal connections, and involvements where it's not just someone buying lots of lottery tickets.)

3. Low "paychecks" for my HCOLA, at that startup and earlier, so personally needing a big win financial exit, and the startup is what I decided to invest my time&energy into. If that fails, it's starting over, and a lot of wading through various startup ickiness to get another good opportunity (or doing FAANG interview BS, and then their promotion-chasing BS).

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