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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

#231

Post by TimPC »

josh2600 wrote: post #6

The best startups have a concept which is summed up thusly: “We all go to the pay window at the same time.” It’s ok for founders to take a little bit of money off of the table if they extend that to their employees as well. Asymmetry is where things get weird. I’ve seen many founders who got deep into the fundraising cycles without ever realizing they could take a cent out. VCs will constantly tell you to let it all…

Assymetry makes a certain amount of sense. Employees don’t take $0 for a long time and generally aren’t having as large a pay cut as founders afterwards. Most of the founders I’ve worked with have had the seniority to justify the top salary in the company and have typically had pay at or near the bottom. Someone operating at that extreme getting to trade equity doesn’t necessarily mean that everyone should get to.

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

#232

Post by segfaltnh »

surfingdino wrote: post #139

This and my own experience with employee stock options led me to reject any work for startups that offer stock options. It is a way to make you work hard and allow to be treated like dirt for less money. The lowest point was having to walk across town to the office to eat energy bars from the office kitchenette, because I could not afford a bus fare or food as my pay was delayed by a week over Christmas. Meanwhile, t…

I don't believe a private sale entitles one to ignore a stock options legal rights. What are the relevant details here I'm missing?

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

#233

Post by FactKnower69 »

angio wrote: post #190
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.

A lot of people (esp people that performed extremely well in school and in corporate environment) find "failing" and "losing reputation" very stressful.

I guess harden the fuck up?

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

#234

Post by [deleted] »

lancewiggs wrote: post #196
laser wrote: post #188

Earlier quoted context omitted.

How is that legal and not considered self-dealing and unjust enrichment? If I was a minority common stock owner in a business I assume I would have standing to sue for damages if a majority owner or officer made my position materially worse while enriching themselves in such a manner? Are you sure such a right is typically granted? I mean even the gap between 409A valuations and preferred valuations, as well as a hug…

Flip it around - it becomes a condition of the deal happening imposed by investors, who themselves are motivated to present the best deal to founders, and to have founders less economically stressed. No secondaries - no deal, and that doesn’t help anyone.

[deleted]

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

#235

Post by FactKnower69 »

bux93 wrote: post #212
saulrh wrote: post #124

The founders I've known were already wealthy when they decided to do a startup. They aren't at risk because even if the startup falls through without making a cent they have enough money in their bank account to withdraw $200k/year for thirty years. There's no risk there.

Most can even file for personal bankruptcy and then lounge around in their parent's home for a bit. (Or a house in the name of their spouse-with-a-prenup.) My parents didn't have a garage for me to found a business in. When people helpfully suggest, why don't you start your own business, they usually have a substantially bigger than average support network and liquidity to begin with. I never get those suggestions fr…

Why, simply pawn some of Father's apartheid emeralds to Tiffany's, why didn't any of you lazy imbeciles ever think of that?

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

#236

Post by llamaimperative »

colordrops wrote: post #165
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…

I often hear about these SEC rules that explain why individual contributors get fucked, as if that's a good excuse. Either the requirements and disclosures should be fulfilled and more than 10 sellers allowed, or the rules should change, or both.

It sounds like they could’ve fulfilled the requirements and had more than 10 sellers but chose not to.

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

#237

Post by dmurray »

extragood wrote: post #125
kneath wrote: post #16

Earlier quoted context omitted.

I have seen a lot of companies, a lot of rounds. I have known zero founders who have turned down an option to take money off the table (and zero A raises that offered that to employees). I love the idea of your universe, though.

It happens. I was offered the option to liquidate up to 20% of my vested shares at my last company's Series A. It was restricted by tenure though (3 years), so it wasn't available to everyone. In retrospect, I should have liquidated the full amount, but it was a new concept to me at the time and I was more conservative with the amount. I more recently interviewed with a pre-series A company and they said that they'd…

Doing this by tenure seems like a fairer way to distribute the liquidity. The founders still get preferential access to it, but because they really have taken more risk (bigger stake for a longer time period), not just because they have a better individual negotiating position.

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

#238

Post by llamaimperative »

rmbyrro wrote: post #230
mapt wrote: post #75

Earlier quoted context omitted.

If you have 200 million "of your own money" to spare, you are no longer just a person for the purposes of this conversation, you're a walking VC fund, and you're not really risking a substantial change to your quality of life going from 250M to 50M net worth. Your living expenses are already generously compensated for by the large salary that you, the VC fund pays you, the person, out of your personal bank account, a…

You may dislike Elon, but it's pretty absurd to say that what he did is trivial.

GP didn’t

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

#239

Post by segfaltnh »

xandrius wrote: post #168
atomicnumber3 wrote: post #67

Earlier quoted context omitted.

This always seems like a huge scam to me. Employee 1 gets 1%? It seems unfair from multiple perspectives. One is just a straight up naive sense of fairness. If I'm going to be in the trenches with you, I had better be able to see my ownership % in a pie chart with my glasses off. If we're out here both making chairs and when we sell a chair for $100, you get $85 (assuming someone took one of the standard-ish seed rou…

Are you talking about 1% and no pay or 1% and a pay? If I'm getting no pay, I'm definitely a co-founder, but I'm getting a pretty good salary from day 0, I don't think that's too bad. Say you get offered $200k/y +1%, if things go well, in 4 years you got $800k in cash and your 1%. If things go south, you still got $800k, a cool title, worked on a hopefully interesting product with a nice team. Doesn't sound awful to…

Glad to see someone else say this. I feel like I'm crazy reading these replies about being ripped off. I've been working startups my whole career, earning salaries, working with good people and having fun at times. Sometimes the equity even pays out, but that's not my only financial "egg".

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

#240

Post by FactKnower69 »

selestify wrote: post #95
adastra22 wrote: post #79

Earlier quoted context omitted.

In most of the world (even just considering developed nations) fresh CS grads do not make more than $100k. Senior software engineers don't even make that much anywhere in Europe or most of Canada.

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?

This is not speculation, it is what multiple Canadians I've tried to poach have told me: they don't want to move to a country where one medical emergency can put them in 6 figures of debt
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