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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

#401

Post by htrp »

icedchai wrote: post #392
onlyrealcuzzo wrote: post #348

Earlier quoted context omitted.

Especially 5 years down the road when you own ~30% of a $100M company - but you know there's a decent chance you'll walk away with very little, if not nothing - while your peers are all making ~$1M per year working 6 hour days at FAANG with a life partner, maybe kids, and a sizable net worth that isn't going away. Sure, you've got a decent chance to rocket past them in wealth. But they've got everything they really w…

Or, based on examples I've witnessed, 5 years down the road you own 20% of a $1M company because your forecasts were off by an order of magnitude. You've gone through a couple down rounds, where investors took at least 20% each time. You feel obligated to your investors and employees, while there is almost zero chance of walking away with anything.

One thing that is underappreciated in the startup mythos is just closing up shop and trying again.

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

#402

Post by hn_throwaway_99 »

adastra22 wrote: post #99
selestify wrote: post #95

Earlier quoted context omitted.

Why the disparity? Especially with Canada - no language barrier and no time zone differences. Why doesn’t the free market equalize Canadian dev wages with American ones?

The better question is why doesn't the free market lower Silicon Valley pay to be comparable to the rest of the world. SV is the outlier. Even other forms of engineering don't pay compensation anywhere near what SV software devs get.

In winner-take-nearly-all industries, it makes sense to pay top dollar for talent if that gives you a better chance of being "the winner".

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

#403

Post by bradleyjg »

est31 wrote: post #366
bradleyjg wrote: post #277

Earlier quoted context omitted.

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.

The startups where employees get really rich still exist. I'm pretty sure the early employees of OpenAI are generationally rich for example. It's just that these companies very often are the darlings since their inception, get constantly talked about. Everyone wants to to invest in them and everyone wants to join them. So they have the ability to pick out the best talent, in other words, it's unlikely you'll be able…

Re: openAI

We’ll see when it happens. If I had to name a company most likely to have massive landmines buried in front of common stock cashing out, it would be at the top of the list.

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

#404

Post by boringg »

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 mean if you don't care about the company mission (if it's mission based), you don't compare about your employees, your word, you don't care about your time or care that you sold people that you were going to take their money to build something... then yes there might be no "personal" downside.

Though if you don't care about anything in the first place what are you doing trying to build a company?

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

#405

Post by bradlys »

p1esk wrote: post #317
smeej wrote: post #265

Earlier quoted context omitted.

I'd tweak this slightly: "It's exceedingly foolish to be an employee at an early startup for the money. " I think there are a lot of us who struggle to fit the larger corporate mold who pretty much only thrive in the startup world. I can't speak for all of them, but I've been very willing to take the balance of lower cash compensation and a fistful of lottery tickets and not having 12 layers of middle management brea…

Why does everyone thinks startups don’t pay well? I have worked for various startups all my life, most of them well funded, and competing for talent with faangs. Yes, I could probably make more at Google but I don’t feel like I’m underpaid. At the last 3 startups my base salary was above 250k. I work remotely and I rarely work more than 30 hours a week.

I’d say you’re uncommon. I’ve never seen anyone who is a typical engineer making $250k/yr at a startup that’s below $1B valuation. Same for the amount of work you’re doing and that it’s remote with that compensation.

It’s possible you’d be making $700k+/yr if you were at google. About triple what you are now.

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

#406

Post by foobarian »

onlyrealcuzzo wrote: post #348
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…

Especially 5 years down the road when you own ~30% of a $100M company - but you know there's a decent chance you'll walk away with very little, if not nothing - while your peers are all making ~$1M per year working 6 hour days at FAANG with a life partner, maybe kids, and a sizable net worth that isn't going away. Sure, you've got a decent chance to rocket past them in wealth. But they've got everything they really w…

> making ~$1M per year working 6 hour days at FAANG

Can you say more on this? I didn't realize FAANG TCO was quite that high. Maybe it's time to swallow some pride and take the adtech money after all...

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

#407

Post by dasil003 »

onlyrealcuzzo wrote: post #348
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…

Especially 5 years down the road when you own ~30% of a $100M company - but you know there's a decent chance you'll walk away with very little, if not nothing - while your peers are all making ~$1M per year working 6 hour days at FAANG with a life partner, maybe kids, and a sizable net worth that isn't going away. Sure, you've got a decent chance to rocket past them in wealth. But they've got everything they really w…

Yeah I feel like successful founders natural ambition and optimism is sort of weaponized against them by the VC industry here. From a VC perspective it's worth playing the odds for moonshots. As a founder though, if you can create a $100M company that you own 30% of, you can probably create a $20M company you own 70% of with a much more realistic and sustainable growth targets.

I can't help but feel this would be better for the founders, the employees and the customers of the company. It just doesn't make as much sense for the investors.

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

#408

Post by mrkurt »

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…

This sounds like a bad job and you should find another.

At some point you were happy with $200k and 2%. Now you aren't. I don't think there's a bump that they could give you at this point that would make you want to tolerate the shit that's bad about the job.

Note that this is a bad job. Startups are more prone to creating bad jobs.

The math for employee #1 at a startup is almost never ideal if you're being completely rational about expected value. That is, I think, a separate problem than you're dealing with.

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

#409

Post by etothepii »

tinco wrote: post #210
pilingual wrote: post #197

Earlier quoted context omitted.

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. (…

I think what you are actually describing is that you should value equity at zero. If to work at a startup you would need 28% equity you are describing a founder. That's fine but there is an enormous difference between these two things. There is also the question of where the $125k comes from to pay your base.
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