Startup equity
After some research and soul-searching, I realized that we as candidates have to do something about the disparity between founder/investor shares and the employee pool. Apparently the founders of GitHub have retained at least 50%, while investors around 28%. Meanwhile, more than 700 employees get less than 22% if it were exercised. Early employees will certainly do well in the exit, however if it were not such an overvalued acquisition it would not be the case. Now, it’s true that founding a startup and taking risk should be incentivized. However, startups and their founders are abusing the leverage in getting employees on board while the outcomes are not close to proportional to their own risk and contribution. They can abuse the leverage by refusing to disclose cap tables and other key information. The issue may be due to demand/supply and marketplace. We need to do our part in getting equal pay and full information. And we also need to be founders who care about capturing and caring for talented employees.
Nobody is stopping the employees from doing their own startups. They just have to deal with the risk, coming up with an idea, figuring out mvp, raising funds, iteration, direction, doing first hires, dealing with company structure and pressure for being the final say/direction/culture. So easy.
I get your point, and yes the incentives are certainly skewed towards doing this instead of building out teams. I’ve seen too many startups fail for not hiring. Also the idea/funding/hiring is all cookie cutter stuff that incubators and VCs help with now. That’s also what hiring is for.
It will always be this way. Any other model will fail. People that take disproportionate risks get disproportionate rewards. This is needed for the gold rush mindset and DNA that tech has.
Try starting a company if you feel it's cookie cutter stuff !!
Cry us a river please.
Forbes wrote an article that indicated 90% of startups “fail”. I think what their definition of success was positive revenue stream. Meaning... it’s damn hard. Who loses money? The founders and investors. The employees don’t any real substantial risk, not like the aforementioned does.
Employees don’t take risk? They are there commonly from MVP. And nowadays founders pay themselves handsomely from Day 1 with shorter vesting schedules (and $0 strike price).
+1 not the same risks for employees
Best thing you can do is not work at a startup and educate people. Pay will only increase once they run out of suckers to buy their lottery tickets.
Yeah, this is what I was trying to say.
As a former founder and someone who has been at three startups, I concur with OP. Only way to solve it is if good talent realize this sooner rather than later and stop joining startup unless equity proportionately compensates for risks.
Not everyone is an engineer and not everyone joins early
What do you think is a good equity for employees then? You have a limited pool to share ?
That's too bad then. Suck it up. The moment you are coming into a company and they are paying you a reasonable base your risk is reduced while they had to struggle to get there. Only fair.
Yeah, it basically never makes sense to be employee #1. Almost same risk as founders, significantly less reward.
Start your own startup.