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Comment by walshemj

6 years ago

I think you need to reform employee stock options - in the UK there are far less possibilities to screw employees over stock options.

20 comments

walshemj

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munk-a  6 years ago

Absolutely, stock options in the US are super strange, they can be performance tied and for non-qualified shares. The thing I'd actually like to see is a better default governance for companies - companies are wholly owned by founders and I think there is just something fundamentally wrong with treating all employees as contractors by default until it's decided to grant them options or actual ownership.

A bunch of people gather together and build a thing - why is the first person to the table the person who takes home all the profit? Sure employees are technically signing away their rights by agreeing to work without being compensated with a portion of their work, but it'd be really hard to actually pursue proportional ownership in the current labour market.

  • dcow  6 years ago

    This. There is really no reason a founder deserves as much equity as they generally give themselves (I know the investors also have a say in what an acceptable cap table looks like so it’s not just on founders). If early stage startup founders split equity more evenly I think the numbers would start to make more sense. Maybe like 10% founder, 5% first 5, 2.5% next 5, and then 15% equity pool as you grow from 10 to 50. And that still leaves you with half your company left to raise capital with.

    Then there’s advisors and execs. You can enter into an A stage startup as an exec or an advisor and generally expect ~1% equity post dilution. This easily eclipses all but the first few early employees who have been working their asses off with much less comp for a much longer time. Maybe really good execs and advisors are game changers but I haven’t seen it play out in practice. More often than not success of the early few hides failure of the new leadership to do anything remotely resembling what they’re paid so preciously to do.

    So in the current market the only valuable part of working at a small gig becomes the alignment of risk profiles and consequential networking, and the do or die environment that accompanies an 18 month runway. I think these are good experiences for anybody to have at some point in their career. But since most people are rational they look at the numbers and it just doesn’t add up.

    • manigandham  6 years ago

      "deserve" doesn't really mean anything. As for why founders get the most equity, it comes down to the most risk. They have the most to lose and are usually are paid last compared to employees who get cash and benefits. It's easy to claim the profits and yet ignore all the risks and losses incurred by founders.

      I've yet to see someone who thinks otherwise actually go out and start a company. Perhaps it's because the calculus changes when it's your business and livelihood on the line.

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  • manigandham  6 years ago

    Employees get cash, that's the compensation like any other worker.

    Why should equity be a default option? Most startups fail so that's like saying workers should get something that has a high probability of being worthless while suffering all the tax implications. If anything equity should be decreased. Startups are better off competing on cash and other benefits like work flexibility and increased responsibility.