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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

#911

Post by jhj »

foobarian wrote: post #406
onlyrealcuzzo wrote: post #348

Earlier quoted context omitted.

Especially 5 years down the road when you own ~30% of a $100M company - but you know there's a decent chance you'll walk away with very little, if not nothing - while your peers are all making ~$1M per year working 6 hour days at FAANG with a life partner, maybe kids, and a sizable net worth that isn't going away. Sure, you've got a decent chance to rocket past them in wealth. But they've got everything they really w…

> making ~$1M per year working 6 hour days at FAANG Can you say more on this? I didn't realize FAANG TCO was quite that high. Maybe it's time to swallow some pride and take the adtech money after all...

While the median is much much lower, there are a couple of thousand individual contributor SWEs (non-managers) between Google, Meta and a few other big-ish tech companies who make >$1 million/year (steady state, does not depend upon recent run ups in stock prices), with a couple of hundred of those above $4 million/year even. The risk/reward for joining a startup is very skewed in terms of risk in these cases.

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

#912

Post by elevatedastalt »

neilv wrote: post #780
elevatedastalt wrote: post #773

Earlier quoted context omitted.

Your point is well taken but usually the bigger burden to buying a house is being able to afford the monthly payments, especially at high interest rates like right now. Esp in Bay Area where most startups are. Usually if you don't have the money for a down payment, you probably don't have the cash inflow for making monthly payments either. Especially at a startup where you are not drawing much in salary.

Maybe it depends on the area and kinds of properties one is looking at? Only a little anecdata, but the few times I've looked (affluent university town, once recommended as a place to do a tech startup)... if one could swing a downpayment on certain places, the monthly costs were lower than rent one would otherwise have to pay, on places not as nice.

In the zero interest era it could be. Much harder now.

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

#913

Post by xandrius »

inhumantsar wrote: post #451
xandrius wrote: post #158

Earlier quoted context omitted.

What would you suggest to someone who wants to work at interesting (non-evil) companies, wants a decent comp ($200k+) and doesn't mind being one of the first to lay the foundation with the possibility of upward mobility in the future?

be a founder or a consultant, not a founding engineer. build up a set of specialized skills in something you love doing, network your face off, keep lifestyle inflation under control, and keep a large amount of your savings liquid(ish). if the right people and opportunity comes along, be ready to tap those savings and live off them for at least a year while you build the company or be selective about your next consul…

That's great advice! How would you get into good consulting gigs?

Is it networking again or some other approach?

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

#914

Post by dilyevsky »

jjav wrote: post #909
dilyevsky wrote: post #828

Earlier quoted context omitted.

See my point about long exercise window - 5-10y is not uncommon now. I’d rather have that even though it converts to PSOs than gamble ~50k + amt on early exercise. Unless you’re super early ofc which changes the math

> 5-10y is not uncommon now Is it? I'd be curious on survey data on that if something is available. Personally I've never encountered a startup that had anything other than the standard 90 day after you quit exercise window. I know these long exercise windows exist but as far as I knew they are pretty rare. > gamble ~50k That's a huge number though, I'd never gamble that much either. I'm talking about very early in t…

Anecdotally, i've received more offers in the last ~5 years with extended window. I think it's just natural evolution due to increased competition for talent with high-paying public companies. Here's an incomplete list btw[0]. There are usually some strings attached - e.g additional cliff to qualify (like 2-3 years with the company) and you need to sign a separation agreement when leaving, etc

> That's a huge number though, I'd never gamble that much either.

I've been offered early exercise of 25k options with a $2 strike price. Series B startup. So yeah...

[0] - https://github.com/holman/extended-exercise-windows

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

#915

Post by palata »

kelnos wrote: post #862
palata wrote: post #340

Earlier quoted context omitted.

Maybe I should, so that I could abuse from the employees and then explain how I deserve to get rich if MY startup succeeds but my employees don't (because it is MY startup, you see? I don't need them).

I mean, you could certainly start your own company, and then be more generous with your employees around these sorts of things. Sadly, you might have more trouble attracting investment, but you could probably still pull it off.

Which would not solve the problem of startups generally being a Ponzi scheme and being toxic for employees, though.

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

#916

Post by knappe »

kelnos wrote: post #869
user_7832 wrote: post #659

Earlier quoted context omitted.

> the owners suddenly went from being doctors with a side hustle to private investors. Did the owners sell the company or get some sort of payout? I'd imagine if they were making decent money they'd have kept the business alive, right? Would you be okay sharing the name of the place?

I think that was the entire point the GP was trying to make. The founders were doctors that decided to start a side hustle, and then one day, boom, they got a huge payout and suddenly stopped "working" and became private investors. (And meanwhile, their employees didn't get all that much out of that "boom".)

Yeah, this. The doctors sold the company for an undisclosed amount and the employees were left to reapply for their new jobs at the new company while they quit and walked away with enough money to suddenly become private investors.

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

#917

Post by jjav »

dilyevsky wrote: post #914
jjav wrote: post #909

Earlier quoted context omitted.

> 5-10y is not uncommon now Is it? I'd be curious on survey data on that if something is available. Personally I've never encountered a startup that had anything other than the standard 90 day after you quit exercise window. I know these long exercise windows exist but as far as I knew they are pretty rare. > gamble ~50k That's a huge number though, I'd never gamble that much either. I'm talking about very early in t…

Anecdotally, i've received more offers in the last ~5 years with extended window. I think it's just natural evolution due to increased competition for talent with high-paying public companies. Here's an incomplete list btw[0]. There are usually some strings attached - e.g additional cliff to qualify (like 2-3 years with the company) and you need to sign a separation agreement when leaving, etc > That's a huge number…

> https://github.com/holman/extended-exercise-windows

This is a nice list, thanks!

No idea how complete that is, but it lists roughly ~160 companies. Which is nice, but according to [1] there are about 71K startups in the US. (Of course both of these counts might be wrong but let's go with these numbers.)

So about 0.2% of startups have extended exercise windows. Not a lot ;-(

[1] https://github.com/holman/extended-exercise-windows

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

#919

Post by fragmede »

kelnos wrote: post #859
fragmede wrote: post #591

Earlier quoted context omitted.

to put it bluntly asf, you're being poor (and I'm being insensitive). what's $500k going to do for you if you come from a rich family? you already have your rent paid for until you die, and vacations paid for. all you have to do to do is put up with your annoying family, which isn't the worst if you've been through therapy. your mom or dad's abusive? if you've been through enough family therapy, that's not a problem.…

> what's $500k going to do for you if you come from a rich family? Perhaps not much, but most people -- even most startup founders -- don't come from a rich family.

Elon Musk's father owned an emerald mine, Bill Gate's father was a high-powered lawyer and his mother was on the board of directors for United Way, Mark Zuckerberg's parents are a dentist and a psychiatrist. I don't know the numbers of "even most", but I think it'd be interesting to get some numbers.

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

#920

Post by robocat »

pilingual wrote: post #197
extr wrote: post #154

Earlier quoted context omitted.

I recently applied to a seed stage YC company that was offering me 1.5% equity for a founding eng role which they felt was generous. So basically I get to do all the work for like 1/50th of what the founder has? Get real lol. I even pointed this out to them and they said "it's totally normal, that's the way it's done". Like oh okay, as long as everyone else is getting ripped off too.

What amount of equity would be fair?

In my experience, "fair" is almost irrelevant within a capitalist business.

Good capitalist businesses buy at the cheapest price they can, and they owners focus on balancing competing resources (control, dividends, ownership, status, information, etcetera...). However: people run businesses and people are not rational economic actors.

A good question is: what amount of equity can you negotiate? What do you have that will convince owners to share their ownership with you?

If you are negotiating with VC, then I think the game board and the rules of the game are already rigged against founders and employees. VC sets the rules and the mileau to play the long game, and employees are lucky to get a few leftovers.

You can be a founder or join a self-funded startup, that will give you a better chance of "fair" treatment, especially if you have the skills to join people that have high integrity.

In theory if you can marginally add 10% to the business value you should be able to argue to get some amount of that. However measuring an individuals effect on a business is usually really difficult (even consultants or businesses that specialise in increasing value usually only capture a tiny percentage of the value they add).

Also different people bring different resources to a business, and anyone with a monopoly on a resource can negotiate for more shareholding. There are idealistic economic theories for how people should bid in multi-party negotiations. Note that even though multiple people may each increase the value of a business by more than 50%, that doesn't mean each should get 50% of the shares (and obviously can't if more than two want >50%).

Generally if you need to ask for shares then you have already lost the game. Either found a business and put yourself in charge, or have something the owners want and demand ownership.

Disclosure: made small amounts of money as part of a self-funded startup joining high integrity co-founders. I've had little experience of VC funded companies or employee shares. Our SaaS business was doing something we'd done before and it was started decades ago when things were "easier".

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