41–50 of 106 posts
This is very cool. One thing I've also wondered about is letting talent adjust compensation on floating scale between $$$ and equity... also, as in "earn-in"! I thought this could be an great way to attract high-impact team members. It's tough sell to leave a high-paying stable job for a risky lower paying job... but what if you could adjust your salary and "earn-in" more equity... It could lower the burn and align i…
This is really interesting, and I always like rethinking of equity distribution--since it's so lopsided currently. Some questions off the top of my head - Since employees leaving don't receive from the kicker pool. Doesn't this incentivize people who are unhappy and want to leave to stay? There are some benefits to this, but seem like a ton of costs too (and part of what Pinterest's change was addressing) - How is th…
> Doesn't this incentivize people who are unhappy and want to leave to stay? So does any other kind of "golden handcuff" stock option or time-vested stock grant.
You could even recognize higher risk of earlier employees by issuing special shares which have some mechanism by which if they leave, those shares may still deflate, but at a slower rate than later ones. e.g. for every time-period distribution of shares, these shares receive some fraction of the new distribution.
Wouldn't this have the effect of changing the risk/return balance? For those joining your company early on, the risk would remain the same, but the return would fall sharply (by ~50%), while for those joining late in the game, the risk would remain the same, but the returns would increase a lot. If everything else remains the same, people would be less willing to take risks and join early stage companies, instead try…
Where is it written that returns should necessarily so heavily be tied to risk? Many enterprises are structured this way, but there's no law that says it must be so.
Wouldn't this have the effect of changing the risk/return balance? For those joining your company early on, the risk would remain the same, but the return would fall sharply (by ~50%), while for those joining late in the game, the risk would remain the same, but the returns would increase a lot. If everything else remains the same, people would be less willing to take risks and join early stage companies, instead try…
Where is it written that returns should necessarily so heavily be tied to risk? Many enterprises are structured this way, but there's no law that says it must be so.
This is very cool. One thing I've also wondered about is letting talent adjust compensation on floating scale between $$$ and equity... also, as in "earn-in"! I thought this could be an great way to attract high-impact team members. It's tough sell to leave a high-paying stable job for a risky lower paying job... but what if you could adjust your salary and "earn-in" more equity... It could lower the burn and align i…
+1 to Megadonk as the currency of choice for my next job.
Say SuperAwesomeStartup had a system like this, and the threshold was an ungodly high amount of 50 million dollars. The company IPOs and is worth 100 billion dollars.
Founder X owns 10%, Founder Y owns 8%, Founder Z owns 6%, Early Employee A owns 1%, Early Employee B owns 0.5%, Early Employee C owns 0.25%
And there are 5,000 employees of the company
Before After
Founder X 10B 5.02B
Founder Y 8B 4.02B
Founder Z 6B 3.02B
Early Employee A 1B 525M
Early Employee B 500M 275M
Early Employee C 250M 150M
Amount Distributed to each employee: 12.72B / 5,000 = 2.5 million each on avg
Wouldn't this have the effect of changing the risk/return balance? For those joining your company early on, the risk would remain the same, but the return would fall sharply (by ~50%), while for those joining late in the game, the risk would remain the same, but the returns would increase a lot. If everything else remains the same, people would be less willing to take risks and join early stage companies, instead try…
Where is it written that returns should necessarily so heavily be tied to risk? Many enterprises are structured this way, but there's no law that says it must be so.
Also, could the redistribution of equity at the time of sale have more cost in tax obligations than earlier redistribution?
While I really appreciate the legal docs, the truth is in a longer description that remains easily comprehensible. I think the main barrier to most of these alternative equity structures is a lack of understanding from all parties.
[1] https://blog.wealthfront.com/the-right-way-to-grant-equity-t...
Wouldn't this have the effect of changing the risk/return balance? For those joining your company early on, the risk would remain the same, but the return would fall sharply (by ~50%), while for those joining late in the game, the risk would remain the same, but the returns would increase a lot. If everything else remains the same, people would be less willing to take risks and join early stage companies, instead try…
I recommend setting the financial independence threshold high enough that normal people will feel like anything beyond it is useless anyway. So there's no real downside unless you have your heart set on spawning a couple of Foxcatchers. And there's tons of upside.
If anyone has questions about how this works, let me know!
I like the idea of something being pre-determined, set from the get-go, however as you mentioned different individuals have and bring different value and have different impact in the company. Does it make sense for high impact people to get a 1 megadonk increase, along with a low impact employee?
There's another model I was hoping to be able to explore, though I don't have a lawyer nor could afford putting the resources towards writing any draft for it - which takes more of a convertible notes with a cap -- you give employees higher equity initially, so if the company doesn't do as well then those employees gain more, and that equity comes with a cap - so say it's 2.5% of the company with a $5 million cap and that employee has agreed they'd be happy with that outcome. The company exits for $1 billion which would require a lot more effort from a lot of people - save if it's some automatic viral scaling company with only a small team, e.g. WhatsApp with ~35 employees before selling to Facebook ... under this model then employees 30-35 in WhatsApp scenario could gain $100s of millions of dollars for very little time and energy invested?