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I have seen a lot of companies, a lot of rounds. I have known zero founders who have turned down an option to take money off the table (and zero A raises that o
by kneath 2y ago
I have seen a lot of companies, a lot of rounds. I have known zero founders who have turned down an option to take money off the table (and zero A raises that offered that to employees). I love the idea of your universe, though.
- sashank_1509 2y agoThe very first startup I joined after grad school allowed all employees to cash out significant chunks of their stock in the Series A round. Also Elon famously put 200 million of his own money into Tesla and SpaceX to keep it afloat, which is the opposite of cashing out early.
- romwell 2y ago> to keep it afloat Can't "cash out" (early or not) if your company is sinking.
- mapt 2y agoIf you have 200 million "of your own money" to spare, you are no longer just a person for the purposes of this conversation, you're a walking VC fund, and you're not really risking a substantial change to your quality of life going from 250M to 50M net worth. Your living expenses are already generously compensated for by the large salary that you, the VC fund pays you, the person, out of your personal bank account, and they will be paying you those expenses until the end of your natural life. This isn't "risk" in the same sense as somebody who jumps to supplement their $150k salary with $450k of founder liquidity because it dramatically changes the material security of their life.
- throwbigdata 2y agoLife is very different at $50M v $250M
- Tepix 2y agoIs it?
- BoorishBears 2y agoIt's not really compared to an average person's life, but in SV tradition never let the chance to subtly flaunt a wealth gap pass by freely (This is the part where you say "Yes, having lived both <insert revelation>")
- shermantanktop 2y agoHas 50M: wishes they had 250M Has 250M: wishes they had 1B
- gafferongames 2y agoTres Commas
- fooker 2y ago
- KennyBlanken 2y ago...while he was getting loaned $200,000 a month for personal expenses by his billionaire buddies. https://www.cnbc.com/2017/04/27/the-crucial-decision-teslas-elon-musk-had-to-make-when-he-was-broke.html https://www.cnbc.com/2017/04/27/the-crucial-decision-teslas-... Also, that may have kept tesla and spacex 'afloat' but what really saved both companies was billions upon billions of dollars in government contracts, subsidies, preferential loans, and tax breaks. Nevada alone gave nearly two billion dollars to Tesla.
- petesergeant 2y agoThe government is expecting something in return for these breaks rather than them being some kind of gift, though.
- nick7376182 2y agoAnd the government got it, in the form of a cost effective usa-based launch solution.
- oblio 2y agoThe government is not monolithic and politicians might except other things than what their constituents want. It's a bad test of the value of an investment.
- petesergeant 2y agoFor sure, and it may well have been a terrible investment with terrible returns, but selling to the government and responding to government incentives is an entirely legitimate thing to do, rather than some kind of inherent weakness in a company’s model. A company being “saved” by a government contract is a company being saved by making sales to its largest customer.
- kelnos 2y agoExpecting, perhaps, but in general there's little to no penalty if those expectations are not realized.
- smallnamespace 2y agoVCs will go along with or sometimes even encourage founders to take a little bit out, but employees rarely don’t have the same level of bargaining power.
- _xivi 2y agoA: I’ve seen many founders who got deep into the fundraising cycles without ever realizing they could take a cent out. B: I have known zero founders who have turned down an option to take money off the table [...] I love the idea of your universe, though. Fortunately, our universe is massive with varied different views. Even OP implied that they have experienced both sides firsthand.
- rKarpinski 2y ago> I have known zero founders who have turned down an option to take money off the table (and zero A raises that offered that to employees). Have seen companies offer this to employee's And companies that let employee's take money off the table at series A are also likely to be generous with meaningless titles; that is they will let early employee's call themselves founders.
- adastra22 2y agoAt a Series A?!? That's insane to me. We're talking about the first priced funding round for the company, right?
- fire_lake 2y agoThese days there is typically an institutional seed round before that.
- adastra22 2y agoHow long is typical for the seed round? Both my prior startups only spent a few months in the seed stage.
- quartesixte 2y agoI have witnessed small liquidity events at Series A and Series B that allowed for some small percentage of all total equity vested (around 3-5% ish, depending on the terms of your specific options grant) to be cashed out at some multiple of the FMV price. AFAIK the founders held themselves to the same restrictions (5% total, I believe?) to keep it relatively "fair". Pre-Seed, Seed, and some really really early Series A employees got to cash out fairly significant chunks of equity. Not as much as a founders' 1-2 million, enough for downpayments on homes or slick new cars all cash. The founders apparently were incredibly generous to Seed stage employees. Still doesn't compare to a Founders' equity, as this article implies.
- lmeyerov 2y ago
- extragood 2y agoIt happens. I was offered the option to liquidate up to 20% of my vested shares at my last company's Series A. It was restricted by tenure though (3 years), so it wasn't available to everyone. In retrospect, I should have liquidated the full amount, but it was a new concept to me at the time and I was more conservative with the amount. I more recently interviewed with a pre-series A company and they said that they'd include me in a liquidity event when I brought up compensation.
- anonymousDan 2y agoHow would you negotiate that in practice? Would it be reasonable to ask for it to be in your contract? How would you suggest wording it roughly? Sorry I'm inexperienced with this kind of thing and have no idea how I would go about negotiating for it.
- kelnos 2y agoI think for the most part you can't negotiate for this sort of thing, because most companies are not going to work up a one-off, custom equity comp agreement. Not just for you, someone they've just finished interviewing, seem to have some enthusiasm about, but ultimately they have only a vague idea of how you're going to perform or how long you're going to stick around. Either the company offers it, or they don't. I think more companies offering it is maybe driven by feedback loops around recruiting (prospective employees asking for more and varied opportunities for compensation, and rejecting offers that don't include them). And also perhaps by employees just simply becoming educated about and talking about this stuff, with the sometimes-tacit understanding that they're going to be looking elsewhere for other employment opportunities if their employers don't give them more than just salary bumps and occasional equity grant refreshes.
- anonymousDan 2y agoGreat, thanks for the response. That seems like a realistic perspective on what is achievable in most cases. I guess it's good to have it in mind as something to raise on the offchance it might be something a particular company is willing to be flexible on.
- chatmasta 2y agoThis assumes that the founders are aware of, or offered, the option. If anything this is an argument for why founders should be represented by a banker or lawyer at the closing of every investment round. Let the founders do the negotiating, but once it comes time to sign the papers, bring in the sharks.
- newswasboring 2y agoThat's not common? I was under the impression that everyone hires at least a lawyer to get through the paper work.
- _heimdall 2y agoHonestly if a founder isn't pulling in finance or legal experts prior to signing a funding round they really have no business being in position to begin with. They have to know VCs are leaning on their own financial experts and lawyers, why would you not have your own to protect your own interests?
- bradleyjg 2y agoAll you’re saying is that in the contemporary context it’s exceedingly foolish to be an employee at an early startup. The VCs and founders have optimized away all the incentive. Eventually the message will reach even naive 22 year olds.
- lupire 2y agoThere's a sucker born every September. You can find your comment in the HN archives as far back as 2010.
- smeej 2y agoI'd tweak this slightly: "It's exceedingly foolish to be an employee at an early startup for the money." I think there are a lot of us who struggle to fit the larger corporate mold who pretty much only thrive in the startup world. I can't speak for all of them, but I've been very willing to take the balance of lower cash compensation and a fistful of lottery tickets and not having 12 layers of middle management breathing down my neck over more liquidity. I guess I'm also blessed with inexpensive tastes, which helps, but I'm still able to live somewhere I love and do all the things I care to do, so it works out.
- p1esk 2y agoWhy does everyone thinks startups don’t pay well? I have worked for various startups all my life, most of them well funded, and competing for talent with faangs. Yes, I could probably make more at Google but I don’t feel like I’m underpaid. At the last 3 startups my base salary was above 250k. I work remotely and I rarely work more than 30 hours a week.
- bradleyjg 2y agoEarly startup is the part you seem to be overlooking. A well funded startup with few or no runway concerns is a different calculation.
- bradlys 2y agoI’d say you’re uncommon. I’ve never seen anyone who is a typical engineer making $250k/yr at a startup that’s below $1B valuation. Same for the amount of work you’re doing and that it’s remote with that compensation. It’s possible you’d be making $700k+/yr if you were at google. About triple what you are now.