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Let’s talk about founder compensation

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Re: Let’s talk about founder compensation

#51

Post by josh2600 »

rogerkirkness wrote: post #45
bluishgreen wrote: post #30

Earlier quoted context omitted.

"For the last few months, I've been cautiously testing a radical-sounding hypothesis on smart people: entrepreneurs are the new labor. Or to put it in a more useful way, the balance of power between investors and entrepreneurs that marks the early, frontier days of a major technology wave (Moore's Law and the Internet in this case) has fallen apart. Investors have won, and their dealings with the entrepreneur class n…

My experience has been the opposite: investors are very smart late career people who defer, encourage and support. Compared to the "CEO fired for missing the quarter" days, it's very civilized, arguably strongly biases towards founders tbh.

This mirrors my experience.

Strong investors now will literally assign their voting shares to the ceo and not take board seats even in a Series B round.

Re: Let’s talk about founder compensation

#52

Post by tyre »

bluishgreen wrote: post #30
nostrademons wrote: post #15

There's a weird set of assumptions in this piece that make me a bit nervous about the state of the startup ecosystem. When I was first getting into startups (late dot-com boom to about 2009), the assumption was that your startup was your identity, and an expression of your power to change the world. You owned it, or a big chunk of it, and you got rich by growing the size of the company (and hence your share value). T…

"For the last few months, I've been cautiously testing a radical-sounding hypothesis on smart people: entrepreneurs are the new labor. Or to put it in a more useful way, the balance of power between investors and entrepreneurs that marks the early, frontier days of a major technology wave (Moore's Law and the Internet in this case) has fallen apart. Investors have won, and their dealings with the entrepreneur class n…

This couldn’t be further from the reality.

Valuations on early stage companies have never been higher—we’re talking eight figures for pre-revenue businesses—which means millions of dollars before hitting the ~20% equity for a round.

Founders sometimes have shares worth multiple votes, the board is entirely them (since the huge supply of money gives them leverage), and VCs are so afraid of being labeled “founder unfriendly” that they defer almost entirely to founders.

Whether it’s good or bad is a much longer thing (some of each, of course) but it’s certainly not founders working for investors. It’s never been less so.

Re: Let’s talk about founder compensation

#53

Post by sk5t »

motohagiography wrote: post #47

What do you mark founder value/salary to though? My impression spending time with investors has been that they need productive assets for their portfolio of depreciating cash, and they need exposure to companies in markets where they perceive growth. To get that exposure, they're usually in a few companies in a space already, so as a founder, your company is just one of many. I'd like to propose what a more cavalier…

> If a founder took the money from a round and put half of it in a pile on a beach and set it on fire, it literally shouldn't matter to an investor because the investor now owns something better than cash, which is equity in something that is growing.

Come on now, do you really believe this? Investors absolutely should be extremely upset if the company is squandering the resources it purportedly requires in order to execute on strategy and grow.

Re: Let’s talk about founder compensation

#54

Post by chejazi »

> Some founders create structured equity that only pays out after the company’s stock appreciates significantly. Other CEOs have out-of-the-money options (Elon Musk is famous for this).

I looked up OTM options and it looks very similar to the first sentence. Basically, you (the founder) tie your compensation to the success of the company. You win big if the company wins big. Can anyone disambiguate the two situations in the quote further?

Re: Let’s talk about founder compensation

#55

Post by motohagiography »

sk5t wrote: post #53
motohagiography wrote: post #47

What do you mark founder value/salary to though? My impression spending time with investors has been that they need productive assets for their portfolio of depreciating cash, and they need exposure to companies in markets where they perceive growth. To get that exposure, they're usually in a few companies in a space already, so as a founder, your company is just one of many. I'd like to propose what a more cavalier…

> If a founder took the money from a round and put half of it in a pile on a beach and set it on fire, it literally shouldn't matter to an investor because the investor now owns something better than cash, which is equity in something that is growing. Come on now, do you really believe this? Investors absolutely should be extremely upset if the company is squandering the resources it purportedly requires in order to…

I'm saying you as an investor don't know which half is being squandered, and if the company has non-linear growth, you aren't going to care. You only notice waste when you aren't getting value, and if you're getting growth, you aren't going to notice the waste. See: WeWork

Re: Let’s talk about founder compensation

#57

Post by glitchc »

PragmaticPulp wrote: post #37
nostrademons wrote: post #15

There's a weird set of assumptions in this piece that make me a bit nervous about the state of the startup ecosystem. When I was first getting into startups (late dot-com boom to about 2009), the assumption was that your startup was your identity, and an expression of your power to change the world. You owned it, or a big chunk of it, and you got rich by growing the size of the company (and hence your share value). T…

> It makes me think that the "change the world" phase of tech startup history is over, and we're now in the "fill in the gaps" phase, where a "founder" is a hired gun that slots into a VC's portfolio. I don’t think it’s over, but it has shifted into what was previously known as lifestyle businesses. There isn’t much room left for “change the world” startups that have broad impact unless you come prepared with a massi…

There's plenty of "change the world" opportunities left. How about a company that mines the ocean floor for minerals? What's completely full to the brim are tiny companies that are pretending to change the world but are really just thinly veiled ad-based/subscription models, which are half-hearted attempts in various sectors to replicate the success of Google and Amazon.

The world still needs companies that are actually looking to change it, we've barely scratched the surface on what we can do with what's available to us.

Re: Let’s talk about founder compensation

#59

Post by cinquemb »

zepto wrote: post #50
m_ke wrote: post #38

Earlier quoted context omitted.

Because it can be enforced without being tied to a specific jurisdiction, expensive lawyers and army of accountants. Imagine a company the size of Google/Alphabet organized in a similar way to something like https://dxdao.eth.link/#/ , where employees have more say in what they work on and don't have layers of expensive management. Or a Y Combinator or a DAO of indie hacker businesses working as a cooperative, invest…

> Because it can be enforced without being tied to a specific jurisdiction, expensive lawyers and army of accountants. How exactly can it be enforced without using the law?

Because the code determines how funds can/or not flow from one address to another and is viewable by everyone by default.

Re: Let’s talk about founder compensation

#60

Post by bpodgursky »

ilaksh wrote: post #6

Amazing that he goes into such detail about how unequal pay should be slightly less unequal. People are always going to take advantage of other people if they can or if things are structured that way. It is traditional for VCs to take advantage of founders. It is harder for them to take advantage of people who know there is already funding and are coming in after. And VCs will go into excruciating detail rationalizin…

The value of a programmer at a startup isn't their output... it's their value relative to the second-best person the company could have hired. Sometimes the employee is a critical component, and sometimes they are a replaceable code-monkey. If you are easily replaced, code-monkeying simple code that makes $1B doesn't mean you provided $1B of value.

(I say this, as a software dev at a startup).

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