Seth's Blog: Advice on equity • Hacker News Board

Re: Seth's Blog: Advice on equity

#31

Post by run4yourlives » Thu, Mar 19, 2009, 5:15 PM UTC

I don't get this. Dividing equity is easy in the beginning, just like slicing a pie: equal shares.

The idea of 70/30 or other offset splits only suggests that one partner is more valuable than the other, hence by definition they aren't partners - they are superior and subordinate. You're already creating a situation where the person with lower equity isn't as motivated as the one with more. That has failure written all over it.

I think if you're talking about taking a business from piece of paper to something real, and you have partners involved, the only way you can ensure any measure of success is to divide things equally.

If the share isn't equal, I don't think partnership is what you should be discussing at all.

Re: Seth's Blog: Advice on equity

#32

Post by ivankirigin » Thu, Mar 19, 2009, 5:16 PM UTC

jon_dahl wrote: post #23

ivankirigin wrote: post #12

This doesn't sound like vesting, but a list of milestones to reach before granting the stock. That is a horrible idea.

I think this depends on how you implement it. I've been a part of several startups that have issued shares to founders on Day 1, and every single time issues have arisen down the road. * The partners were equal at the beginning, but down the road, their value and contributions weren't equal * Passive partners were given the same share as active partners * People were brought on out of loyalty, not because of their va…

Fire people that are passive. Grant more options to those that deserve it. Don't hire based on loyalty.

Re: Seth's Blog: Advice on equity

#33

Post by tptacek » Thu, Mar 19, 2009, 6:04 PM UTC

mrtron wrote: post #17

ivankirigin wrote: post #12

This doesn't sound like vesting, but a list of milestones to reach before granting the stock. That is a horrible idea.

It does sound like a bees nest of problems. I much prefer just splitting 50/50 and having both founders kick as much ass as possible. This does force you to be able to rely on your cofounder, but that is probably is a good idea (and unavoidable) anyways.

The bigger problem than unfairness is that if you split 50/50 between two founders, you're screwed when you want to bring a third person in to do partner-level work.

Re: Seth's Blog: Advice on equity

#34

Post by tptacek » Thu, Mar 19, 2009, 6:06 PM UTC

ivankirigin wrote: post #32

jon_dahl wrote: post #23

Earlier quoted context omitted.

I think this depends on how you implement it. I've been a part of several startups that have issued shares to founders on Day 1, and every single time issues have arisen down the road. * The partners were equal at the beginning, but down the road, their value and contributions weren't equal * Passive partners were given the same share as active partners * People were brought on out of loyalty, not because of their va…

Fire people that are passive. Grant more options to those that deserve it. Don't hire based on loyalty.

What about the large spectrum of contributions between "passive, deserving of dismissal" and "top-3 contributor"? This seems a little too black and white.

Re: Seth's Blog: Advice on equity

#35

Post by tptacek » Thu, Mar 19, 2009, 6:12 PM UTC

CWuestefeld wrote: post #5

I just say Geddy and Alex of Rush on "That Metal Show". They attributed part of the reason that the band has survived so long to having skipped any nonsense about "who contributed what and its relative value" to simply splitting everything evenly, three ways.

This would be a compelling story if Neil Peart's predecessor John Rutsey was getting an equal share of revenues from albums after '74, or if you believed that Neil Peart would happily concede his share of future Rush revenue to any drummer that replaced him. Companies are more complicated than bands, but even this story is too oversimplified; Peart is a world-famous drummer and has massively contributed to the Rush brand --- you think his hypothetical replacement would deserve a full share for filling his shoes?

(Disclaimer: though I know a bit about Rush, I do not listen to Rush, and hope to exit this thread with my indie cred intact. Go buy the new Neko Case album.)

Re: Seth's Blog: Advice on equity

#36

Post by tptacek » Thu, Mar 19, 2009, 6:14 PM UTC

run4yourlives wrote: post #31

I don't get this. Dividing equity is easy in the beginning, just like slicing a pie: equal shares. The idea of 70/30 or other offset splits only suggests that one partner is more valuable than the other, hence by definition they aren't partners - they are superior and subordinate. You're already creating a situation where the person with lower equity isn't as motivated as the one with more. That has failure written a…

I don't think you read the article carefully. He's advocating equal shares; 5% each. He's then advocating that further equity grants be structured around milestones, which is an alternative to vesting.

Re: Seth's Blog: Advice on equity

#37

Post by ivankirigin » Thu, Mar 19, 2009, 6:27 PM UTC

tptacek wrote: post #34

ivankirigin wrote: post #32

Earlier quoted context omitted.

Fire people that are passive. Grant more options to those that deserve it. Don't hire based on loyalty.

What about the large spectrum of contributions between "passive, deserving of dismissal" and "top-3 contributor"? This seems a little too black and white.

Ideally, people are vesting on a share of stock proportional to their contribution. That's all I mean. If people are "passive" compared to what they are expected to do, they shouldn't be there any more.

Some investors are passive, giving money and doing little else. They don't vest and their roll is clear.

My comment is a bit black and white, but was commenting in the context of the thread: employees getting stock and expected to contribute proportionally.

Re: Seth's Blog: Advice on equity

#38

Post by run4yourlives » Thu, Mar 19, 2009, 7:01 PM UTC

tptacek wrote: post #36

run4yourlives wrote: post #31

I don't get this. Dividing equity is easy in the beginning, just like slicing a pie: equal shares. The idea of 70/30 or other offset splits only suggests that one partner is more valuable than the other, hence by definition they aren't partners - they are superior and subordinate. You're already creating a situation where the person with lower equity isn't as motivated as the one with more. That has failure written a…

I don't think you read the article carefully. He's advocating equal shares; 5% each. He's then advocating that further equity grants be structured around milestones, which is an alternative to vesting.

But what's the point of leaving all that out there to argue about later on? He's not solving the issue, he's deferring it.

Re: Seth's Blog: Advice on equity

#39

Post by tptacek » Thu, Mar 19, 2009, 7:06 PM UTC

run4yourlives wrote: post #38

tptacek wrote: post #36

Earlier quoted context omitted.

I don't think you read the article carefully. He's advocating equal shares; 5% each. He's then advocating that further equity grants be structured around milestones, which is an alternative to vesting.

But what's the point of leaving all that out there to argue about later on? He's not solving the issue, he's deferring it.

Because people who try to "solve" this issue up front always get it wrong, because there isn't enough information to make decisions like this.

Re: Seth's Blog: Advice on equity

#40

Post by run4yourlives » Thu, Mar 19, 2009, 7:10 PM UTC

tptacek wrote: post #39

run4yourlives wrote: post #38

Earlier quoted context omitted.

But what's the point of leaving all that out there to argue about later on? He's not solving the issue, he's deferring it.

Because people who try to "solve" this issue up front always get it wrong, because there isn't enough information to make decisions like this.

Which is why I'm suggesting to split equally and get on with it as an alternative.

(Admittedly this is going further than my experience allows)