Introducing Progressive Equity – Increase employee ownership as company grows • Hacker News Board

Re: Introducing Progressive Equity – Increase employee ownership as company grows

#91

Post by blazespin » Wed, Apr 08, 2015, 5:57 AM UTC

fragsworth wrote: post #85

cyrusradfar wrote: post #51

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 flip side is that you can attract a heluva lot of superstars this way pre iPo

Re: Introducing Progressive Equity – Increase employee ownership as company grows

#92

Post by alxndr » Wed, Apr 08, 2015, 6:28 AM UTC

harryh wrote: post #75

moe wrote: post #10

I like that I can actually understand this program and don't feel like it was carefully designed to rip me off. Unlike the usual jungle of capped/uncapped notes, dilution, vesting schedules, option pools, pre/post valuation, etc...

This doesn't get rid of any of those things.

Could it reduce (or simply eliminate) the need for more complicated ownership sharing schemes?

Re: Introducing Progressive Equity – Increase employee ownership as company grows

#93

Post by rajacombinator » Wed, Apr 08, 2015, 6:38 AM UTC

fragsworth wrote: post #85

cyrusradfar wrote: post #51

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…

Presumably this already happens to a large extent. It hasn't seemed to had much effect on the trajectory of companies like Facebook and Google. Someone doing a PhD in Econ should write a paper about the effects of people leaving post IPO.

Good point about adding risk to the IPO.

edit: BTW working at companies like Facebook and Google is pretty good from a lifestyle perspective so I'm guessing most wouldn't leave.

Re: Introducing Progressive Equity – Increase employee ownership as company grows

#94

Post by mauricemir » Wed, Apr 08, 2015, 9:28 AM UTC

One better solution would be to use something similar to the UK concept of the EBT (employe benefit trust) and gift your shares to the employees collectively.

This is used by Coops to handle the owners shares in a tax efficient way (cooperators in the jargon).

You might want to look how coops are structured in the USA before trying to invent your own scheme

Re: Introducing Progressive Equity – Increase employee ownership as company grows

#95

Post by vincentperes » Wed, Apr 08, 2015, 10:12 AM UTC

fragsworth wrote: post #85

cyrusradfar wrote: post #51

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…

You don't cash in straight after an IPO, most of the time the current owners of shares have to wait X amount of time before they can sell shares. I guess this help keeping the company stable.

Re: Introducing Progressive Equity – Increase employee ownership as company grows

#96

Post by wlievens » Wed, Apr 08, 2015, 10:21 AM UTC

ChuckMcM wrote: post #71

cyrusradfar wrote: post #51

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

The whole discussion of money at this scale is ridiculous. This is the dusty trap door. Just so you know, getting rich is "weird"[1] for a lot of people. You can see examples of it in lottery winners, movie stars, and tech employees. Of course some folks tie their net worth to their self image. This is, in my experience, both common and a moral hazard. But that said, the more interesting thing is that people in a com…

> You need only imagine someone in your company, who you have a very low opinion of their contribution, become $FU rich while you see only a modest change in your personal net worth. I have seen that dynamic break people.

You probably shouldn't work in the tech industry if that upsets you :-)

Re: Introducing Progressive Equity – Increase employee ownership as company grows

#97

Post by erikb » Wed, Apr 08, 2015, 10:26 AM UTC

I think this is a very important cultural step to do. We believe that the first people to do something should be valued the highest. But taking out all the other people who come afterwards they also might not have succeeded. Therefore it's really an open argument who should be valued how much for his participation.

I also really like the idea of that, even as Founder number 1. Having a healthy, fair and equal relationship to many capable people might also be worth more to founders than another million bucks.

Re: Introducing Progressive Equity – Increase employee ownership as company grows

#98

Post by vladimirralev » Wed, Apr 08, 2015, 10:27 AM UTC

fragsworth wrote: post #85

cyrusradfar wrote: post #51

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…

These are well known risks and investors can simply demand a commitment. It is a very easy conversation to have with your employees. "Hey, if you sign this 2 year commitment we get like 10% more valuation". Everybody decides for themselves if it's worth it and the more people sign the better the valuation. And since everybody has more stock they have more interest to do it; You can also legally provision stock lock ups after IPO for 2 years or so, everybody does it. Also you can dilute the stock to allocate the 10% which represents the expected valuation hop. Then award the extra stock to those who sign. This is legal, but it's a lot of paperwork to make sure nobody can dispute the true value of the retention policy.

Re: Introducing Progressive Equity – Increase employee ownership as company grows

#99

Post by vidarh » Wed, Apr 08, 2015, 11:30 AM UTC

fragsworth wrote: post #85

cyrusradfar wrote: post #51

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…

I remember working at a large company years back, where I was told the story of some pre-IPO ops guy that was still hanging around despite clearly not needing the money.

Some more recently hired SVP brought him with her on a trip to various offices as her go-to guy to make sure she wasn't bullshitted when discussing a specific project with the local teams. He had often brought along on trips like this in the past because of years of experience he had with the company infrastructure.

To be nice, each time she would offer to get her PA to book the flights and hotels, so he could benefit from her ability to get them booked into better rooms than the standard policy would allow for his role. Each time he'd politely declined.

Finally she pressed the issue and asked why he didn't want the better rooms.

Turned out he'd done well enough out of the IPO that he soon afterwards had decided to buy apartments near the local offices in the 5-6 cities across Europe where the main subsidiaries were, so he'd not have to stress with packing etc. when travelling there.

Re: Introducing Progressive Equity – Increase employee ownership as company grows

#100

Post by hackerboos » Wed, Apr 08, 2015, 12:12 PM UTC

birken wrote: post #46

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…

If each employee received $2.5 million on average, how many would stay?

I think it's awesome to distribute money between employees like this but wouldn't it have a devastating effect on the company?