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How exactly does someone who takes on very little risk being rewarded with 100k translate into them getting 'fucked?'
It doesn't; rather, it's the weird result of people transposing value judgments on purely economic phenomena.
Are founders really 1000x more valuable than their employees?
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Re: Are founders really 1000x more valuable than their employees?
#12no, but the founders founded something. The emploees just got a job. btw A job that didnt exist before the founders did their thing.
This is the key. For founders who are not intrinsically fundable, an incredible amount of risk is removed between the time of initial founding and when a third-party assigns a value to the company. 1000x seems reasonable.
Re: Are founders really 1000x more valuable than their employees?
#13Of course it's fair: it was determined by the market, no?
Re: Are founders really 1000x more valuable than their employees?
#14The article only deals with equity, which isn't the only way to compensate people. In equity terms, the founders are worth whatever they choose because they created the company: 100% of the equity is theirs to give away on the terms they decide.
Re: Are founders really 1000x more valuable than their employees?
#15"Valuable" isn't the right word - because the article is being used for current compensation and equity comparisons but the justification is past events. In the present, it is quite possible that a founder could be detrimental to a company (negative value) while an employee could be nearly irreplaceable (I've even read rumors of such situations here on HN).
The question is one of compensation - which is a fool's game, e.g. are founders really 2000x more valuable than 3rd grade teachers?
Re: Are founders really 1000x more valuable than their employees?
#16I'm not a "founder" in the startup sense, but I did start my own indie development and consulting shop, and I think the startup founders can relate to my experience. For example, 16, 18, even 20 hour days are common. Keeping the business going becomes the major focus in your life. You think about it all day and dream about it if you manage to get some sleep at night. You hope and you dream and scratch and claw and fight and work your butt off every single day with no end in sight. It's your idea, your vision, your baby.
For an employee, it's a job. They do the work, they get paid. They may care, and they may care a lot, but they'll never have the kind of commitment you have as a founder. Someone recently asked me if when I hire my first employee, if I'll be able to double my productivity. I wish it were true, but I would never ask an employee to work the kind of hours I do.
So are founders always worth 1000x more than the employees? Maybe not always, but I can sure see the argument being made.
Re: Are founders really 1000x more valuable than their employees?
#17This isn't about who is more valuable, this about who took the risk . Employees take little or no risk in 99% of cases. You are not taking a risk making 75% of your max pay at Google/Facebook/Zynga/Twitter by going to a startup. You are taking a 25% haircut to be part of something new/small/etc. However, starting something from scratch, incorporating and putting your reputation on the line is a major risk. If you are…
And to make it more concrete: those who take the risk are rewarded because investors need people who take risks, otherwise they'd have nothing to invest in.
Re: Are founders really 1000x more valuable than their employees?
#18I see the 1000x as a reflection of the risk they undertake.
Employees, for 100% probability of receiving a specific amount of money exchange their time and effort while founders for a 10% probability of receiving a unspecified amount of money exchange their time and effort.
Essentially, for a lower chance of success they make it possible to receive unlimited rewards or go broke(losing years of work and to be despised by all and suitably fit for ridicule and to be made into a parable.).
Life is indeed fair, hence you can't have your cake and eat it. You can't have security and unbounded success, something has to give.
Fortune favors the bold - Virgil
Re: Are founders really 1000x more valuable than their employees?
#19I think this is just a free market equilibrium.
If employees were unwilling to work for anything less than 10% of the company than employees would have more stock.
If founders were able to get away with keeping 100% of the company, then they deserve to have it.
There is no fairness here. It's just the free market. If employees want founder economics, then start a company. It's that simple. Welcome to America.
Re: Are founders really 1000x more valuable than their employees?
#20This isn't about who is more valuable, this about who took the risk . Employees take little or no risk in 99% of cases. You are not taking a risk making 75% of your max pay at Google/Facebook/Zynga/Twitter by going to a startup. You are taking a 25% haircut to be part of something new/small/etc. However, starting something from scratch, incorporating and putting your reputation on the line is a major risk. If you are…
This seems a weak argument, it's only applicable once you've actually got a reputation to protect. The vast majority of founders aren't celebrities.
Given that many entrepreneurs just keep failing and then trying again and again and again it doesn't make much sense to me at all. There is no risk. Maybe it will be embarrassing if Malhalo fails, but I'm sure that won't stop you trying again.
Personally I think there's no good reason, founders aren't actually worth much more than the employees, it's just the way capitalism works. To the victor goes the spoils. Hence the occasional Marx being thrown into the mix to try and keep the worst excesses in check (overall I think capitalism's been a greater good for humanity). I think we're due a Marx soon if the earnings divide keeps growing as it is.
Don't try and rationalize it, it's just natural greed. But it has benefits too, all those jobs that wouldn't have existed.