81–90 of 106 posts
The Slicing Pie model ensures that each person on the team has exactly what they deserve to have. This would avoid unfair splits at the end that would need to be readjusted.
Here is an article about how it works: http://www.slicingpie.com/how-to-use-a-dynamic-equity-split-...
Audio compressors have features such as "soft knee," which gradually eases into compression over the threshold. Easing into the threshold might be a beneficial complication to the idea of Progressive Equity.
Earlier quoted context omitted.
> 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.
Agreed. But to different degrees. In its current form this would be the strongest--since you can never leave if you want any of those shares. Also, consider this. Someone who joined one month before IPO would get more from the kicker than someone who worked for years and then left 1 month before IPO.
Here is an example I made to help me understand it. 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 Fou…
Ah, great minds think alike. We were doing the same thing at the same time. I backtested the process against Facebook's IPO so it could feel a bit more real http://kapuno.com/conversation/bblc6nqbe6qte
Once the IPO happens and you pay your employees $4.5 million, their $100-$200k salary doesn't seem worth much anymore. What actually would have happened to Facebook, if they did this? Is it possible that the company collapses, while too many employees quit so they can do their own thing, or retire? Would they have had to double or triple everyone's salaries to keep them on board?
I could see it being a disaster. It could also significantly de-value a company's IPO (or sale) because the investors would see this as a massive risk. At least until it's been tested with a company that IPOs.
If anyone has questions about how this works, let me know!
Earlier quoted context omitted.
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.
It's not just that the reward for joining early is smaller than it used to be. It's also smaller compared to joining later . The marginal utility of money is actually what's causing the problem. If I can join a company late with very little risk and a much higher chance to make a few million, I'm probably much less incentivized to join a company early with the risks associated with that.
Earlier quoted context omitted.
Ah, great minds think alike. We were doing the same thing at the same time. I backtested the process against Facebook's IPO so it could feel a bit more real http://kapuno.com/conversation/bblc6nqbe6qte
It looks like the average employee at Facebook would have received $4.5 million. Once the IPO happens and you pay your employees $4.5 million, their $100-$200k salary doesn't seem worth much anymore. What actually would have happened to Facebook, if they did this? Is it possible that the company collapses, while too many employees quit so they can do their own thing, or retire? Would they have had to double or triple…
The excruciating burden of going to work is almost non existent if you can say fuck off at any moment. A lot of folks there do lots of interesting and fun stuff.
While you could see some run away I would suppose that the numbers will be small if you have good corporate culture and policies.
Here is an example I made to help me understand it. 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 Fou…
This is super innovative and cool - provided it holds up legally and with the IRS. (I gather it's meant to be a tax-efficient approach.) I sympathize with Andrew's motivation because as a founder, if my company made it big, I would want all the employees to do well. I always figured in that case I would just pay them out of pocket and take a huge tax hit to make it happen.
On the other hand, as a founder who has not yet "made it", an extra 50% hit on top of the 50% the taxman will take, is way more than I can stomach. The potential for outlandish wealth is part of what motivates me, even though I would be fine with much less. But the percentage and threshold can be adjusted to find numbers that should be suitable for anyone.
One thing that I'm not clear on and I didn't read through all the legalese is on what basis the "taxed" amount is redistributed to the remaining employees. If it's based on share vesting like a normal system, it sounds like it wouldn't change the distribution much. If it's an even split it sounds potentially unreasonable, for instance, to give 2.5 million an employee who joined 2 weeks ago.
Either way cool stuff and I'd expect something like this to become standard in Silicon Valley.