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How Wizards of the Coast distributed equity as a startup

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Re: How Wizards of the Coast distributed equity as a startup

#61

Post by [deleted] »

tptacek wrote: post #47
alexose wrote: post #38

The next generation of startups is going to have to address some employee equity problems, I think. This notion that early hires are going to share a small piece of the 10% employee pool needs to stop. Being employee #1 of a startup can be one of the worst positions a young developer can ask for. Long hours, high stress, low job security, and for what? 0.5% of a company that, if it survives, will most likely dilute i…

Probably not, or that already would have happened. It hasn't. One problem is that a lot of people look at equity grants as a meritorious service award. But that's not at all what they are; they're compensation for risk. Developers look at risk compensation and say, "well, I undertook a lot of risk to work long hours for a lower wage". That's true, but the market prices that kind of risk, and the market cares a lot ab…

[deleted]

Re: How Wizards of the Coast distributed equity as a startup

#62

Post by NewHermes »

alexose wrote: post #38

The next generation of startups is going to have to address some employee equity problems, I think. This notion that early hires are going to share a small piece of the 10% employee pool needs to stop. Being employee #1 of a startup can be one of the worst positions a young developer can ask for. Long hours, high stress, low job security, and for what? 0.5% of a company that, if it survives, will most likely dilute i…

Completely agreed. I recently applied to YCombinator and one of the questions asks how you plan on sharing equity.

Here was my response:

Everything I have seen, read, watched and smelled has made it clear that it is much better to be over generous with equity than to be stingy.

With that in mind I plan on following the Sam Altman model as follows:

Founder(s): 10%

First 10 employees: 10%

Next 20 employees: 5%

Next 50 employees: 5%

Vesting would happen after 5 years with a 1 year cliff.(I chose 5 instead of the 4 in Altman’s model because of the growing trend of companies taking longer to reach liquidity)

Not only would this model differentiate a startup from competitors to potential hires, like you mentioned, sharing the growth with those who put in the work is the right thing to do.

Besides, what can the gal who owns 10% of Google do that the guy who owns 1% can't?

Re: How Wizards of the Coast distributed equity as a startup

#63

Post by applecore »

tptacek wrote: post #47
alexose wrote: post #38

The next generation of startups is going to have to address some employee equity problems, I think. This notion that early hires are going to share a small piece of the 10% employee pool needs to stop. Being employee #1 of a startup can be one of the worst positions a young developer can ask for. Long hours, high stress, low job security, and for what? 0.5% of a company that, if it survives, will most likely dilute i…

Probably not, or that already would have happened. It hasn't. One problem is that a lot of people look at equity grants as a meritorious service award. But that's not at all what they are; they're compensation for risk. Developers look at risk compensation and say, "well, I undertook a lot of risk to work long hours for a lower wage". That's true, but the market prices that kind of risk, and the market cares a lot ab…

If you model the entrepreneurial/tech ecosystem as a market, you'll find inefficiencies and mispricing of risk everywhere, not just in hiring at early-stage startups.

Re: How Wizards of the Coast distributed equity as a startup

#64

Post by [deleted] »

tptacek wrote: post #47
alexose wrote: post #38

The next generation of startups is going to have to address some employee equity problems, I think. This notion that early hires are going to share a small piece of the 10% employee pool needs to stop. Being employee #1 of a startup can be one of the worst positions a young developer can ask for. Long hours, high stress, low job security, and for what? 0.5% of a company that, if it survives, will most likely dilute i…

Probably not, or that already would have happened. It hasn't. One problem is that a lot of people look at equity grants as a meritorious service award. But that's not at all what they are; they're compensation for risk. Developers look at risk compensation and say, "well, I undertook a lot of risk to work long hours for a lower wage". That's true, but the market prices that kind of risk, and the market cares a lot ab…

[deleted]

Re: How Wizards of the Coast distributed equity as a startup

#65

Post by tptacek »

applecore wrote: post #63
tptacek wrote: post #47

Earlier quoted context omitted.

Probably not, or that already would have happened. It hasn't. One problem is that a lot of people look at equity grants as a meritorious service award. But that's not at all what they are; they're compensation for risk. Developers look at risk compensation and say, "well, I undertook a lot of risk to work long hours for a lower wage". That's true, but the market prices that kind of risk, and the market cares a lot ab…

If you model the entrepreneurial/tech ecosystem as a market, you'll find inefficiencies and mispricing of risk everywhere, not just in hiring at early-stage startups.

How else would you model companies and their staffing?

Re: How Wizards of the Coast distributed equity as a startup

#66

Post by acconrad »

alexose wrote: post #38

The next generation of startups is going to have to address some employee equity problems, I think. This notion that early hires are going to share a small piece of the 10% employee pool needs to stop. Being employee #1 of a startup can be one of the worst positions a young developer can ask for. Long hours, high stress, low job security, and for what? 0.5% of a company that, if it survives, will most likely dilute i…

As a former employee #1 I can attest that even 2-3% of a company at a paltry wage is unsustainable. I know when I start my own business someday it will closer model what was done at WotC - this really resonated with me.

Re: How Wizards of the Coast distributed equity as a startup

#67

Post by jacalata »

tanzania wrote: post #57
alexose wrote: post #38

The next generation of startups is going to have to address some employee equity problems, I think. This notion that early hires are going to share a small piece of the 10% employee pool needs to stop. Being employee #1 of a startup can be one of the worst positions a young developer can ask for. Long hours, high stress, low job security, and for what? 0.5% of a company that, if it survives, will most likely dilute i…

Yikes this hits close to home for me. I am employee #1 for a rapidly growing startup, been here nearly two years. It's my first developer position, I'm definitely underpaid (until our A-round apparently), but I have .5%. I feel like pretty soon it'll be apparent whether this is going to ~really~ take off (I honestly feel it will). Any advice on what steps I should take to prevent getting shafted?

You say you think it will "really take off" - what's that mean, it's going to be a billion dollar company? Ok then, your 0.5% is going to make you 5 million dollars. That's a net win.

But maybe you mean it's a 50 million dollar company - then, best case (no dilution, you stick it out until they IPO, let's say 5 years working there total) you could walk away with $250,000, or the equivalent of having been paid an extra $40k-$50k per year each year you worked there. That sounds like about break-even financially, with some great experience but shitty lifestyle for several years. Up to you if that was a good deal.

Or maybe you mean it's a 10 million dollar company. Would you be at this job if you had no equity and an extra $10k or would you feel screwed?

Re: How Wizards of the Coast distributed equity as a startup

#68

Post by ugh123 »

tanzania wrote: post #57
alexose wrote: post #38

The next generation of startups is going to have to address some employee equity problems, I think. This notion that early hires are going to share a small piece of the 10% employee pool needs to stop. Being employee #1 of a startup can be one of the worst positions a young developer can ask for. Long hours, high stress, low job security, and for what? 0.5% of a company that, if it survives, will most likely dilute i…

Yikes this hits close to home for me. I am employee #1 for a rapidly growing startup, been here nearly two years. It's my first developer position, I'm definitely underpaid (until our A-round apparently), but I have .5%. I feel like pretty soon it'll be apparent whether this is going to ~really~ take off (I honestly feel it will). Any advice on what steps I should take to prevent getting shafted?

If this is your first dev position then you're probably replaceable and won't have much negotiating power in the end.

Re: How Wizards of the Coast distributed equity as a startup

#69

Post by JoeAltmaier »

ObligatoryRef wrote: post #51
JoeAltmaier wrote: post #44

Earlier quoted context omitted.

There's more to it than that. They've re-released edition after edition to obsolete the previous. Used to be 1 mana got you a 1/0 or 1/1 creature with nothing else. Now you can get cards with 1 or two features, flying etc. Anybody using the old ones is a sucker. Its easy to think its all about the money, you have to buy new cards to keep competitive. In fact this is why our game club designed their own card game (Ori…

WotC, especially Mark Rosewater, has addressed this issue many many times. I would recommend checking out some of his columns and podcasts. Short answer: the game has evolved quite a bit (I've been playing for 17 years). Long answer: > Anybody using the old ones is a sucker. There are several different Constructed formats, each with its own restrictions on which cards can be played. The three most popular are Legacy,…

That sounds pretty much like what I said: card inflation keeps people buying new cards. I was being a little cynical, but if they cop to it, then great.

I don't see it as a 'natural progression'. Its lazy; you can think of new cards without obsoleting old ones, but it takes effort. I know; we've got an edition and 3 expansions so far (500 cards) and they took a lot of work.

As for being around; I see people come into our local card shop for tournaments, but nobody is 'playing Magic' any more. There has to be a gimmick, like a contest or draft tournament or some such. The kids in my Scout Troop were crazy about it 10 years ago; now its dropped off the radar. So maybe its still around, but its 30 year olds with money that keep it going.

Re: How Wizards of the Coast distributed equity as a startup

#70

Post by Qworg »

tptacek wrote: post #65
applecore wrote: post #63

Earlier quoted context omitted.

If you model the entrepreneurial/tech ecosystem as a market, you'll find inefficiencies and mispricing of risk everywhere, not just in hiring at early-stage startups.

How else would you model companies and their staffing?

For new startups? A cult (of personality or of the religious persuasion)? A warparty? A pirate crew? All are good options.
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