Startup CEOs who gave up fortunes to turn employees into millionaires(businessinsider.com) |
Startup CEOs who gave up fortunes to turn employees into millionaires(businessinsider.com) |
"And when Jobs (in the movie, but really a board does this) denied stock to the early garage team (some not even shown) I'm surprised that they chose not to show me giving about $10M of my own stock to them because it was the right thing. And $10M was a lot in that time."
[1] Woz's entire post is on this page:
1. People in Atari generally considering him an oderous hairy hippie who once disappeared from work to go to India for self-enlightenment, but returned with Hepatitis.
2. He (Steve) was once offered $100 per transistor he could eliminate below the 100-transistor mark for an arcade game (I believe it was mid 150 count at the time), so he went to Woz and paid him on the order of $100 to eliminate the transistors (Woz was woefully unaware of the deal between Steve and Atari). Woz got it down in the low 30's or high 20's, Steve got the large sum of money and Atari wound up adding transistors back because while it worked they couldn't figure out how.
Jobs was absolutely an asshole, but to say he "set us all back" is preposterous.
What I don't understand is if the company does sell, and I only get my 0.1%, I should be upset or call the founder "greedy" if he doesn't give me more money than what was in my contract?
If I'm going to take less than what I believe to be the "market rate" for my services in lieu of some equity and my motivation is to make money, then I'm going to do the math and weigh the probabilities of my equity and the lower-than-market salary being more lucrative than taking a job with no equity and a market rate salary.
I just don't see how founders who honor contracts that employees sign as being greedy. Arguments that the founders take more risk or work harder or whatever seems to me to be beside the point. If the employee doesn't think the percentage of equity is good, then they shouldn't sign the contract. That's how I see it. And maybe if more of us took that stance we wouldn't have to hope that founders would just give us money out of the goodness of their hearts and instead have satisfactory agreements already in writing.
Really Really doesnt make sense unless you enjoy the atmosphere you are not going to get rich as an employee in a start up, even if the start up sells for 500 million. you are going to get back the 30% a year you lost by not going to bigco unless the founders just feel like making everyone rich.
I did some time at a large financial institution making great money, but absolutely hated how empty it all felt. Nothing got done, nothing changed, nobody listened to me.
I work at a much smaller company now, and almost everything I do on a daily basis has a measurable impact. I can literally watch the things me and my team do increase the bottom line. I derive value from this myself, as it allows me to grow my team, hire new employees, give people responsibility of their own, etc.
Have you tried working for a big software company instead of a financial institution? I know that banks don't treat software devs all that well, but shops like Google, FB, Rackspace etc. have a pretty good reputation of having a great culture and work environment.
Personally, I've only worked for small shops. Nearly all the places I'm currently interviewing are BigCo's though, and I'm not sure how that is going to turn out.
Bullshit work created by people with bullshit titles for bullshit reasons.
5MM means you're flying business/first with your family anytime/anywhere. You may have a pied a terre somewhere.
10MM means you're angel investing, vacationing, and not generally "working" anymore.
15M++ means you bank with The Private Bank of Wells Fargo, have a ridiculous line of credit // no checking account, multiple properties, trust, etc.
That's only $250,000 per year, pre tax. Good money, but certainly not enough to not have to think about money anymore.
So, I'm the sole founder here with investor. The dude's awesome, but the contract we signed puts me in significant financial risk if the company doesn't turn up profitable.
I have more than several employees (some of them will probably read this) who I pay regular and competitive money though I'm not particulary pleased with their output (but hey, it's improving, and there's not much of a talent pool here). Most work on their hourlies, and if milestones/deadlines are not met, I try to find somebody else and handle all the consequences of that myself. Basically, I handle entire risk and stress.
Now, if what we work on turns profitable, or has a successful exit or whatnot, you know how much of that money do I think it's fair to give to them?
Nada. Zilch. Zero. Go through the shit I'm going through yourself if you want a big payout and then we'll talk.
What do you think?
> There’s a startup in New York everyone talks about, and the things they say aren't very nice. The startup sold for ~ $80 million and the founders got rich. But, as the rumors go, no other employee made more than $50,000.
Does anyone know which startup they are referring to? carrentals.com? something else?
Not sure that "everyone talks about" it (though that applies even more so for carrentals.com, IMO). Maybe they meant "everyone in NYC talks about it".
That said, Invite Media was acquired by Google for $81MM a couple years back.
In the 1980s a decent IPO would be about $100K for workers. It would go towards a home down payment.
(1) the missions
(2) the investors
(3) founder(s) history and attitudes
equity is always a nice thing honestly there are startups that will never go IPO and there are the ones that will fail in a year or two, and there are ones that will go on for a very long time and held privately by founders and there are ones that will be acquired within a few years. The chances are, before your company is sold, you might be looking for another job already.
Also, read the equity/stock agreement CAREFULLY before you sign one and understand what you are signing up for.
But good signalling involves some additional factors. Signalling is usually used when you want to say something about yourself, but it's something that people would want to say about themselves whether it was true or not, so you have to say it in a way that is difficult or impossible to fake. A good signal is one that is highly visible (in the context where it matters; clothes are good for in-person signaling, profiles or photos are good for online signaling), and either cannot be sent without having the quality they're supposed to signify (you can't afford expensive things to show off if you don't have money), or are much easier to send if you have that quality than if you don't (it's easier to get a high StackOverflow score if you're good at programming and communicating than if you're not).
If you're giving employees extra stock to signal loyalty and trustworthiness, it's "cheaper" to do that if you actually value being loyal and trustworthy (rather than just wanting others to think that of you), because then you get value from being the sort of person you want to be and being thought well of by others. At least, that's the theory; you could just want other people to think you're a loyal person really, really badly.
It's worse than that. By the time you factor in preferred shares and other investment dilution, your 0.1% will be more like 0.00001%[+]. Few people think about that, and unless someone is actively looking out for your interests (e.g. someone giving retention grants -- or you demanding them), it's difficult to make a lot of money as an early startup employee. You can easily find yourself in a situation where you vest your grant, leave the company, and later find out that a new hire is making an order of magnitude more money than you in an exit. That's startup life.
The game here is predicting the expected value of an extremely improbable future event, and sacrificing present day money in favor of that event. There's no "fair" way to do it, so if a founder is asking that kind of commitment of you, they should be looking out for your interests over the long term as well.
[+] edit: I overstated my case here. You can probably expect 1-2 orders of magnitude dilution, but it doesn't really change the argument.
That's assuming a positive outcome that clears preferences of course - if the company goes in a fire sale you're not going to make anything at all. But assuming a billion dollar exit means you're assuming not a fire sale.
It's preference which turns a $200mm exit on a company which has raised $150mm into essentially a non-event for common stockholders (i.e. employees).
There's no way to predict the outcomes. Options are little more than signals of intention. At point of exit, everything is in the air and you are not part of the negotiation. What's it worth? Do you have to move? Do you report the Chief VP of Total and Complete Meanness?
You get paid because someone is looking out for you.
The way to evaluate the deal you're getting from a founder is to ask yourself whether they would pay you out of their own pockets. There will be a moment when, in effect, they make that choice. The good ones won't be able to enjoy the money unless their team shares in the wealth. The bad ones will cobble together a rationalization about risk or how smart or deserving they are. You don't assess the offer, you assess the people. I know because I'm not very good at assessing the people ;)
Ex. Salary & retention package for founders & certain execs while common stock purchase price is drastically reduced. (just one example)
Without actually knowing you, I can't say what type of person you are. But I can say the type of people I've met who had similar viewpoints were very arrogant and rarely recognized the great contributions of their employees, and often took personal credit for directions or products created by others (often when they were incredibly dismissive of those ideas before a breakout success). I would ask you to re-examine your view of your employees, but if you are an example of the type I'm talking about, it most likely wouldn't do any good. Your ego will not allow you to actually recognize any contribution as anything but your own hard work. You blaming your apparent bad hiring decision on lack of talent pool rather than your own ability to seek out the best does not paint a favorable portrait.
The shit your employees have to deal with working for you just might be a magnitude order worse than what you are going through as their boss.
That's what I think solely based on your post.
Employers do take all the company's risk, however my boss (small construction company) gets to walk away with millions in savings with no personal liability. I get unemployment benefits. He gets to retire to a million dollar house, I risk losing mine.
You need to dislodge your head from your ass if you think you're the only person taking risk.
You need to realize that people are these things called humanbeings they have their own lives, their own motivations, problems and stresses. A great manager does this thing called managing where they use their knowledge of their employees to keep them motivated, something you quite clearly are not doing.
You employees sound unmotivated because you've got the attitude your company is already going to fail. FYI people can tell when a company is circling the drain and will half arse it and ride it out until the first paycheques bounce.
But the problem with your reasoning is that, in reality, growing a successful company is a team sport. No matter how brilliant you are, you alone are no match for a high-performing team. Or even a medium-performing team.
The real issue is not what you deserve should the company "turn profitable." It is that you are extremely unlikely to become successful until you figure out how to build a great team. Which is hard, by the way.
My recommendation is that, if you have established product-market fit and are now in execution/scale mode, you need to either step up as CEO and make learning how to build and manage a team to achieve real results your #1 responsibility. Or if that's not your thing, you need to accept your strengths and weaknesses and find someone else who can play that role.
"He who tells the truth will be chased out of nine villages."
If you read the article, the people in it generally liked and respected each other. That is key to making a healthy workplace. Without it you don't get nearly the output you might otherwise. My experience so far has been that when there is a lot of 'crap' that isn't getting picked up by anybody I have found issues with ownership (nobody feels like they own the results) and communication challenges.
But I'm not talking about that. I'm talking about risk. That's being picked up by only me and is _the_ determinating variable in the end game from my moral viewpoint. Risk can be in form of financial risk, time, legal... But I'm here taking all that while they're being paid market rate to, what, do regular JavaScript, Photoshop and ability to pack their suitcase and leave with no consequences at any point they feel like?
Nah, I don't think so.
My personal work experience has led me to believe that world is filled with self-entitled people without much to support it in either responsibility/risk handling/actual productive value. Mind you, we're from different cultures (Balkan).
The thing about the startup lottery is that in the small chance your startup wins it, that doesn't mean you'll also win.
Founder did take the whole company on a tropical vacation which was unexpected and even paid partially for spouses.
You also had to deal with the post-acquisition career turmoil of either losing your job or having to work for the acquiring company, neither of which would have happened had you taken a market salary at a larger company.
Go be generous with your own money, dude, and quit trying to be generous with other people's.
What really needs to happen is for new ways to organize startups to distribute the risks and responsibilities better, so that it's not up to the goodness of the founder's heart to ensure a good outcome for the employees.
Of course, this implies that the pie is being made bigger, the risks and responsibilities being spread out are actually building more value in the company so as to generate a bigger exit. So far though founder-level discipline and risk-taking is rare enough in one individual that this is the situation we have to deal with.
As much as I am a fan of startups and their founders, this statement seems excessive. In many cases, the financial risks are passed on to either angel investors or VCs (there are some startups funded by the founders' own savings or mortgages, which is a big risk, but there are still many that aren't). I don't see any significant negative consequences to the founders if a startup fails (they're not risking personal injury, bankruptcy, a lifetime of debt or anything else as severe).
During the previous bubble I was employee #20 of a company that ended up having a $900M exit 5 years later.. I got less than 100k out of the deal. Do I think I was entitled to 50 million dollars? No way.. but I certainly think I added at LEAST 1 million dollars worth of that value.
Anyone who believes the HN community is biased towards founders can see evidence here to the contrary.
In fact, I remember reading that round A is the worse time for an employee to join a startup: the large grants are gone, but the business isn't derisked, so your lottery tickets still have shit ev.
I understand that some (most) of these guys are, in fact, doing this because it's the right thing to do and they are, in fact, that invested. I merely wanted to point out, counter to the tone and implication of the article, that's not the only reason to do this and they were still handsomely rewarded for the risk they took.
Conversely, I want to point out to anyone who thinks not doing the right thing wrt your team so you can pocket a few extra percentage points can have a negative consequence.
After all there is no obligation on his part to ever do another start-up, there is no obligation on those rewarded to join in the future and the incidence of 'repeat teams' is low enough that I don't think it is a factor at all.
It's being both.
Really, the only potentially bad contracts are the ones that you've signed. So as long as you haven't signed you have negotiation room and if your choice is between being paid 'market rates' versus being paid 'half of market rate + options' and those options are subject to change without notice then you're just setting yourself up for being hurt if you chose the second.
Nothing is set in stone, that's more a matter of self-confidence and knowing when to walk away.
Have fun with that.
So I read their generosity as the first driver to do this, and that there maybe is another reason is possible but I've yet to see a repeat successful team which would allow the conclusion to be that the second reason is also a motivator.
They're doing good, and good by their people, and that's about it. No need to search for an ulterior motive.
And there are very few if any negative consequences to not doing 'the right thing' with respect to your team, because that - unfortunately - is business as usual. These are the exceptions, definitely not the rule. I hope it becomes more common though.
Don't get me wrong, $250K per year pre-tax is a very comfortable lifestyle. However, it's not so much money that you can spend without thought.
Enterprising hackers who jailbroke the devices paved the way for the App Store as we know it: not Apple.
By the way, there's also an investment opportunity, you see I've recently came into ownership of a certain bridge....
I'm not saying you shouldn't have an agreement or you shouldn't make it as solid as you can. Obviously, you should do this. I'm saying that's not enough. The perfect agreement means very little if the agreement is with someone untrustworthy.
Trustworthiness is often harder to judge than you might think because untrustworthiness and charisma seem to intersect pretty heavily to me. That leads to the unfortunate situation that assholes are likable. Boo hoo.
Sorry, I'm saving my money for this sweet deal that's coming up on the Eiffel tower.
http://www.smithsonianmag.com/history/the-smoothest-con-man-...
Say your contribution to the company is worth 1% of the company's value, would you say you added $90k to the value of the company or $9 million?
I think it's hard to put a percentage on any single employee's contribution to a company's success, but I also think it's ludicrous to say that the combined value of every employee's contribution is worth less than a single founder's contribution. It's just dishonest.
That's exactly what employees have to lose too. The way that I've always looked at it is that any employee, founder or not, should be entitled to current-valuation equity that's equal to the difference between their market rate and what they get paid by the startup.
Founders are frequently unpaid or poorly-paid at a time when the valuation is near zero, so they end up with a ton of equity. Early-stage employees should get considerable equity, since they're likely taking salaries well below market and the valuation is still tiny. Late-stage employees likely won't get much equity because they're not taking much below market and the equity is already worth a considerable amount.
Rrright. Only a founder can decide to dilute the stock while keeping that quiet, or do any number of other things. While an employee is on the receiving end.
I figured it out, but I just want to point out that there are three Steves to whom you refer.
I assume you mean odious not odorous? (P.s. Shakespeare made this pun in 'comparisons are odorous')
Even if you get 0.1% and are ultimately diluted to 0.01%, a billion dollar sale is $100k. When people sign up for below-market pay, they're not envisioning a distant eventual windfall of a year of market-rate salary.
I'm actually not concerned at all about the rewards, 'unfairness' or any other philosophical issues. What I don't like is that there's a myth "the founders bear most of the risk", while in fact, for VC-financed startups the opposite is probably true "the VCs and employees bear most of the risk."
> there are some startups funded by the founders' own savings or mortgages, which is a big risk
EDIT: Sorry, I now realize you meant startups that grow from their own income (or am I still misunderstanding?). Those don't seem very risky to me, since there's not much high gains/high losses potential to them.
Honestly, though - beyond just larger equity grants, I'd like to see companies have people get rewarded when the company does well... Through some kind of bonus (in equity or cash).
It seems like most companies either have bonuses that are pretty much an expected part of salary, or they have no bonus in any situation. I've only really been part of the latter, though.
It's a different level of hard work. And a different set of circumstances if the business fails.
Honestly as a society, we should be less focused on raising the mostly already-high ethical standards of busy founders and more on providing education and support to the next generation of startup founders and startup employees. Employees can bounce to any number of happy-to-have-them bigcos because those skills are almost as rare as those you need to be a founder.
If you're looking for a bottleneck, look in the mirror. There's always more that can be done to build the community. There's a huge hunger for tech skills, tech companies, tech products.
Courting investors does not build value. Building a product builds value.
Plenty of people can and do design products.
In the case of an acquihire, founders, unlike employees, often clear a decent chunk of money (say $.5-$1.5mm) plus get an interesting job. (I personally know of several such cases).
There is plenty of unethical behavior by founders, but most of it isn't discussed in public or on HN, but rather privately between peers.
If you're working at a startup and getting $125-150k, you're lucky. Many people work at startups for half of that or less, plus those lottery tickets.
So if you're good then you may consider moving to one of the bigger players for a substantial increase in pay.
Best of luck! And I really hope that works out for you.