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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

#711

Post by smcin »

dclowd9901 wrote: post #679
smcin wrote: post #676

Earlier quoted context omitted.

> 2. Going from L5-L7 ... a lot of opportunities for showy work and your own gamesmanship around corporate politics. Can you say more about that?

A lot of the FAANG companies (all?) have promotion processes that are basically a combination of both peers and managers strongly pulling for your promotion. It often takes a few years just to end up on people’s radars, and that’s a few years of delivering lots of high visibility work and doing lots of tech talks and other sort of corpo-social tasks to get your name out. In a lot of ways, it’s like you’re constantly…

I meant say more about the gaming the politics part, not so much the showmanship and self-promotion part. Say there are several people who meet the criteria to get promoted, which ones tend to get it and which not, based on which political behavior?

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

#712

Post by [deleted] »

WalterBright wrote: post #553
corry wrote: post #488

Three interesting part of the discussion: (1) The opportunity cost to the founder of taking early liquidity: If a founder cashes out 10% of their position for $500k @ $25M Series A valuation, that de-risks a lot of their personal life. But when the startup ends up selling for $250M, that $500k of 'early' selling would have been worth $5M (less any dilution between rounds) - hard not to regret the choice in that case…

For me, it's always regret: 1. If I buy stock, and the stock goes down, I regret buying 2. If I buy a stock, and the stock goes up, I regret not buying more There's no winning :-/

[deleted]

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

#713

Post by [deleted] »

reportgunner wrote: post #308
doodda wrote: post #247

This post has managed to piss off everyone: employees who didn't realize founders were getting liquidity events while they're still sitting on their more-often-than-not valueless equity, and founders who feel they've earned it and don't like the implication they haven't.

Oh yes it's time to shoot the messenger.

[deleted]

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

#714

Post by lumost »

romanhn wrote: post #427
lumost wrote: post #386

Earlier quoted context omitted.

I recall a discussion where a founder kept insisting that a 10% offer for a pre-funding startup was beyond standard and that I should be lucky to get such an offer.. the experience left a bad taste in my mouth. Ultimately, this individual needed someone to shape and build the core of their product and the net of a series B would have been at most a wash compared to current employment.

They're not wrong though? 10% is more late cofounder territory, you won't find anyone giving up so much equity for an early employee.

A pitch deck in ppt does not make a company. It really wouldn’t/couldn’t have been an employee type of relationship.

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

#715

Post by hn_throwaway_99 »

corry wrote: post #652
gwbas1c wrote: post #627

Earlier quoted context omitted.

I think the most interesting part of the discussion is that the early employees almost always get the worst end of the deal: Going in they have a lower salary than if they work for a more established company. Then, either their shares end up being worthless, or at the final exit, they make less money than if they worked for a more established company the entire time. IE: Being an early employee in a startup is a lose…

I'm curious why you think these employees -- who are getting the worst end of the deal -- are working for startups in the first place? Either they have the skills to be a founder themselves or to work at BigTech... or they are financially ignorant/disinterested enough to not understand how equity in corporations work? Or is the charming and misleading founder who is to blame? My point is that considering the high avg…

I think the other thing to realize is that the change in this "startup calculus" has happened only relatively recently.

The "old" calculus was that, being an early employee in a startup, you'd make less cash money than at a "big corp", but if the company "hit" you'd end up doing much better. Just look at the stories of early Microsoft employees, or the Google chef whose stock options ended up being worth tens of millions. Obviously those are outliers, but it was still common that early employees of "home run" startups would be doing great.

But the thing that really changed the calculus is that the FAANGs started paying extremely well, especially as the value of their RSUs skyrocketed. So the new problem was that even if your startup hit, you'd be doing about as well as a senior engineer who was at Google for 5 years.

I know in the past YC itself has commented about this dynamic, basically arguing that early startup employees deserve more equity.

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

#716

Post by llmblockchain »

indoordin0saur wrote: post #709
llmblockchain wrote: post #704

Earlier quoted context omitted.

Yes-- and worth more today. I don't think it's an ordinary path. The founder had success before, and the company I was a part of skipped seed and started with a series A before raising more pretty quickly. edit: From the looks of it, they have 500+ employees now.

Seems like you would have had a good case to a lawsuit, at least enough to give them a headache settle in court. Strange that they dumped you if you were valuable to the effort. Did they just squeeze you for what you were worth and decided they could get by with other engineers or did they not see your work as valuable?

> Strange that they dumped you if you were valuable to the effort. Did they just squeeze you for what you were worth and decided they could get by with other engineers or did they not see your work as valuable?

Yes and no? I was certainly brought on as a valuable asset to the company.

I was introduced to the founder via a mutual acquaintance. I had other job offers at the time and had no intentions of joining, but the acquaintance asked me to speak with the founder and hear him out. I was basically tossed an offer that was silly to refuse.

I provided a lot of value and was responsible for building the most successful product the company offered.

I think things went a bit south when they wanted to raise even more money and bring in more investors. I think I was a bit of a black sheep in the company (I didn't have the phd+company pedigree as the other founding members). I felt like maybe I didn't look so good when they presented to investors. They certainly pitched the company as being built by the elites of AI and machine learning... and yet there I was ;p

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

#717

Post by ishan0304__ »

rybosworld wrote: post #590
earnesti wrote: post #573

Earlier quoted context omitted.

I don't think it needs any justification, really. The investor decides, whom to sell to and how much. If the founder doesn't want to organize a sale for employees, then he doesn't do that. He would probably have to pitch it and include it in to an already complicated funding round. I totally understand why a typical founder doesn't want to do that. If for you as an employee it is a deal breaker, then you can complain…

> I don't think it needs any justification, really From a founder's perspective sure, you can do what's best for you. That's not what this article is about. This article is highlighting that there's a tendency in SV for founders to cash out early, and secretly . And along with that, there's a tendency to paint a narrative that the founders haven't sold a share. It's hard to see that as anything other than deceptive.…

I mean I think it depends, why is it needed, the founder is not working for his employees, it's the other way around and he has the most risk involved, founders don't make a lot of money in cash anyway and this is not pre COVID, investment rounds r smaller, so u r basically saying that a founder should only think about making company and his team rich and if he fails he can die poor while his employees can always jump ship with the cash incentives they got

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

#719

Post by ishan0304__ »

yuliyp wrote: post #575
cashsterling wrote: post #550

Earlier quoted context omitted.

Great points... as to #3, investors are often happy to be buyers. They are buying shares anyways that would otherwise have to be created. Allowing founders and employees to sell shares lowers dilution vs. creation of new shares... usually this is not a large effect, but still not bad for current & future investors.

I mean it effectively means that the amount of cash going into the business is less than it otherwise would have been. The company wanted $5M of cash. With the owner selling $500k worth of shares it means they had to find $5.5M to be invested. The only reason it happens is that the founder is negotiating both on behalf of the business and a bit for themselves.

I mean it basically means that the founder is not some dude in early 20s who can crash on a couch and work off coffee shops, they r going thru life as well and they r the one's who drove success so they rightfully expect a piece of that success

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

#720

Post by dclowd9901 »

smcin wrote: post #711
dclowd9901 wrote: post #679

Earlier quoted context omitted.

A lot of the FAANG companies (all?) have promotion processes that are basically a combination of both peers and managers strongly pulling for your promotion. It often takes a few years just to end up on people’s radars, and that’s a few years of delivering lots of high visibility work and doing lots of tech talks and other sort of corpo-social tasks to get your name out. In a lot of ways, it’s like you’re constantly…

I meant say more about the gaming the politics part, not so much the showmanship and self-promotion part. Say there are several people who meet the criteria to get promoted, which ones tend to get it and which not, based on which political behavior?

Tends to be the one with more friends. That’s pretty much it. That’s the politicking.
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