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Are founders really 1000x more valuable than their employees?

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Re: Are founders really 1000x more valuable than their employees?

#71

Post by rue »

gamble wrote: post #67

People are over-moralizing this. Why do CEOs get paid so much? Why are salesmen often better paid than engineers? Does a ditch-digger deserve less money than a lawyer? The market is basically amoral. People get what they can get, not what they 'deserve'. Founders get more money because they have ownership, and in a capitalistic system profits accrue to capital. There's no point in constructing an elaborate moral arch…

There's no problem moralising it while keeping in mind that the current system indeed is amoral. I think the point is whether it should be.

Personally, I'm of the opinion that no job worth doing is worth less than any other job, but I recognise there's “some” ways to go before that thought becomes in any way mainstream again…

Re: Are founders really 1000x more valuable than their employees?

#73

Post by dasil003 »

jasonmcalacanis wrote: post #10

This 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…

Since when do you care about reputation ;)

Seriously though, I agree that founders are taking the risk, but actually I think that is irrelevant as well.

The bottom line is that the founder started the damn company; the company would not exist without the founder. If you go and negotiate a contract with a company, you get what's in the contract. In a profitable business we can argue all day about who's creating the value, but it's subjective and irrelevant; the only thing that matters is that the founder went and started a company and offered you a job and you took it. If you weren't able to negotiate a deal for what you're "worth" then man up and start your own damn company, otherwise you're just whining.

Re: Are founders really 1000x more valuable than their employees?

#74

Post by krschultz »

gamble wrote: post #67

People are over-moralizing this. Why do CEOs get paid so much? Why are salesmen often better paid than engineers? Does a ditch-digger deserve less money than a lawyer? The market is basically amoral. People get what they can get, not what they 'deserve'. Founders get more money because they have ownership, and in a capitalistic system profits accrue to capital. There's no point in constructing an elaborate moral arch…

I agree you get what you can get based on the market and it has nothing to do with anything else. It doesn't matter how "smart" you are, or how "hard" you work, that really doesn't correlate directly with what you get paid.

But I think your second point (Founder get more money because they have more ownership) is tautological. The article is really asking, should the founders get such a great proportion of ownership?

I think that equity % is just like normal income. You get what the market will let you get.

Founders get a lot because the right combination of qualities, risk taking, and luck are rare. Being an employee of any kind makes you more common than a founder, and thus the market will always pay less.

Re: Are founders really 1000x more valuable than their employees?

#75

Post by krschultz »

idiopathic wrote: post #61
swombat wrote: post #54

Earlier quoted context omitted.

I was just about to reply something along those lines. Failing at your own startup is a bit like burying a child. You start with all these dreams of a bright future, and one day you find yourself facing the stark reality that it just didn't work out, that there's nothing you can do anymore to change that, and that basically the last X years of your life, where you sacrificed anything, were pretty much for nothing. "W…

I know I am being too literal, and I am sure you did not mean it, but... it is nothing like burying a child. I started a company 2.5 years ago and had twin girls a year ago. The thought of losing one of my kids makes me well up while the thought of losing my company just makes me sad. I have heard lots of people in the world of start-ups say that starting a company is like having a baby. It's nothing of the sort. (I…

That's true, but the phrase "burying you child" is a pretty common metaphor. When my dog died, I said something to effect of its was like "burying my child", but obviously a child will be far more important than a dog. I think his larger point is still valid (that failing at a startup is traumatic) is fair.

Re: Are founders really 1000x more valuable than their employees?

#77

Post by anon330 »

jasonmcalacanis wrote: post #10

This 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 article is very timely. I've been employee #1 at a small company for about ten months, and I'm not only making just 50-60% of my pay potential, the recently proposed employee options plan grants me just 0.8% vesting over the next four years.

"This isn't about who is more valuable, this about who took the risk."

Risk? I joined less than a year after incorporation. I feel like I'm shouldering substantial risk by taking 50% of my overall compensation as options in a venture which I have no direct control over—I'm not on the board, I'm not a director. The options are worthless until 4-5 years down the road, and even then, I have no control or say into when we sell, to whom, and for how much.

Myself and the other employee are probably going to leave, because we feel that more like 2-3% minimum is appropriate for our position, and we doubt that the founders will see it that way.

Re: Are founders really 1000x more valuable than their employees?

#78

Post by mkramlich »

tptacek wrote: post #55
natch wrote: post #26

Earlier quoted context omitted.

I call bullshit. For financial risk, this doesn't apply if the founder doesn't have much to lose, or has a stable family they can rely on, or is just starting their career, or doesn't care about money. For reputation risk, that's hardly an issue, because making mistakes in considered a legitimate (even honorable) form of learning in startup culture; it certainly does not ruin someone's reputation. The real answer is…

This is head-explodey. If the engineers don't like the deal they're getting, they can go work for other companies . If they should be getting a better deal, they will. There simply isn't a glut of dev talent right now. There is the opposite of that.

exactly. and founder vs employee isn't a species difference. it's a role difference, and only at a moment in time, and only with respect to one particular company. any employee could also (before|instead|after) be a founder for another business. Don't like the perks/negs of being a mere employee? Fine, be a founder. And vice versa.

Re: Are founders really 1000x more valuable than their employees?

#79

Post by thebigredjay »

rue wrote: post #71
gamble wrote: post #67

People are over-moralizing this. Why do CEOs get paid so much? Why are salesmen often better paid than engineers? Does a ditch-digger deserve less money than a lawyer? The market is basically amoral. People get what they can get, not what they 'deserve'. Founders get more money because they have ownership, and in a capitalistic system profits accrue to capital. There's no point in constructing an elaborate moral arch…

There's no problem moralising it while keeping in mind that the current system indeed is amoral. I think the point is whether it should be. Personally, I'm of the opinion that no job worth doing is worth less than any other job, but I recognise there's “some” ways to go before that thought becomes in any way mainstream again…

I don't think it's amoral. There are "world-shakers" in this life who aren't satisfied with how the world looks and they strive to change it. They develop an idea that provides value to others and they build a beast from nothing. With out people like this there would be no change, no progress. Founders create the world as we know it.

And, a slight adjustment to the original phrase will correct it. Founders, in general, are not 1,000 more valuable than their employees. Successful founders are 1,000,000 more valuable than their employees.

Re: Are founders really 1000x more valuable than their employees?

#80

Post by jessedhillon »

jshen wrote: post #62
timr wrote: post #56

Earlier quoted context omitted.

"I was born to a single drug addict and into a family in which no one had finished high school. I understand empathy and that I lucked out in some ways, but I had anything but disproportionate good luck. I enlisted in the army at 17 and spent a year deployed. That's how I paid for college." Fair enough. I'm not trying to take away from your accomplishments. But remember that there are kids born to single, drug-addict…

Why would I care, I'm happy with my life. Anyone that learns to program a computer and is decent at it can get a good job if they live in america barring a few extreme examples.

I don't understand how someone who has overcome so much -- and knows how hard it was to do that -- can be so glib and flippant when talking about other people who have failed to rise above the same circumstances. You obviously care, since you're going out of your way to post comments dismissing those people.
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