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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

#301

Post by palata »

> Founders often feel guilty that they are getting liquidity (they shouldn’t)

Well they should not feel guilty that they are getting liquidity, but I think they should feel guilty that their employees get pretty much nothing in comparison.

> 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)

As an employee in multiple startups, I can tell you that I never thought that. One startup went well, the founders got rich and I did not even compensate the salary compared to being in an established company (and I'm not even talking FAANG). When the startup goes bad, then the employees are screwed as well.

Employees actually have the risk of getting fired, of being lied about the finances of the company, etc.

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

#302

Post by gafferongames »

palata wrote: post #295
carliton wrote: post #89

Many companies don’t get to Series A and very few companies get to Series B. Even if they do get to Series A or B, they won’t be able to raise the amounts you see in the news and have heavy dilution. Very few founders have double digits percent ownership by Series B and Series C. Liquidity of $400k or more is a lot and isn’t available for many founders. All of this after 7 to 10 years of working 80+ hours week, no so…

> I think the OP should work on his company for more than 4 months and have more than 10 employees for at least a year to truly understand what it is to be a founder. Have you been an employee in a startup? Because in my experience it has a lot of the downs of the founder, but none of the ups.

So start your own company then.

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

#303

Post by JonChesterfield »

blitzar wrote: post #269
doodda wrote: post #247

This post has managed to piss off everyone: employees who didn't realize founders were getting liquidity events while they're still sitting on their more-often-than-not valueless equity, and founders who feel they've earned it and don't like the implication they haven't.

You managed to make both parties sound like absolute tools.

Not the founders clearing life altering capital returns from the pre-revenue company seeking product market fit. They're winning.

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

#304

Post by p_l »

burutthrow1234 wrote: post #300
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…

> Please let us all know how that's working out for you in 5-10 years. 4 months in and no stress? Must be easy riding from here! Honestly VC-funded startups seem like a cake walk compared to actually starting a small business. Your biggest challenge is walking into a room full of rich dudes and schmoozing for your pay cheque. If you fail you get acquired and get golden handcuffs. If you start a real business you can…

Running with VC funds? Oh god, that would be cakewalk compared to even just figuring out how to ensure there's food if you spend money on some necessities for prototype...

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

#305

Post by sleepingreset »

throwailearner wrote: post #297

Posting from throwaway so I can be very open. I joined a YC startup as engineer #1 with close to $200k salary and 2% options vesting at the usual 4 years, with a 10 year window. I feel like this was bettern than usual, and for a while felt like I struck an awesome deal, but as time went on I realised I was building everything single-handedly, while getting (at best) 2%, which started to annoy me deep down. Over two y…

out of college directly, would you recommend a similar position? looking for early career options

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

#306

Post by gafferongames »

jahewson wrote: post #92
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…

90 day exercise window is a big part of the problem here.

If you're certain the stock is worth something, just take some risk and exercise.

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

#307

Post by shortrounddev2 »

throwaway98797 wrote: post #288
sneak wrote: post #187

Earlier quoted context omitted.

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

My primary motivation as an employee of a startup is fear of personal financial ruin. That the company won't be able to make payroll and I won't be able to pay my rent, that I'll be evicted eventually or that if the company goes under I won't be able to find a new job. There is no mission or any other soft carrot that I care about. I also don't have any faith in stock options.

I can't imagine caring about reputational damage with rich people unless that reputation is in service of not starving in the streets.

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

#308

Post by reportgunner »

doodda wrote: post #247

This post has managed to piss off everyone: employees who didn't realize founders were getting liquidity events while they're still sitting on their more-often-than-not valueless equity, and founders who feel they've earned it and don't like the implication they haven't.

Oh yes it's time to shoot the messenger.

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

#309

Post by sleepingreset »

throwaway98797 wrote: post #291
titanomachy wrote: post #171

Earlier quoted context omitted.

I went through exactly the same discussion in my last job search, and was assured that the offer was in line with industry standards. Even if this tiny company somehow became worth a billion dollars, I’d still make less money than if I’d worked as a senior engineer at Google or wherever. I liked the team and I think it would have been a fun job, but not quite fun enough to work nearly for free. I don’t think I’ll eve…

you should work at google startups are about the work

OP wants to get PAID for their work and rewarded for the all-in effort they'd put in. re-read their comment

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

#310

Post by gafferongames »

benjaminwootton wrote: post #152

I think it’s entirely reasonable for a founder to take money off the table. The founder possibly walks away from a 6-7 figure opportunity cost working for a big corporate or FAANG. In return they take zero salary. All of the money that begins to come in is then used to pay employees. Maybe they raise some funds and pay themselves a below market salary for years. A few years later they are over $1 million in opportuni…

^--- This
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