Lots of great founders and engineers have even less pedigree.
Ultimately being a great founder requires humility to hire people smarter than yourself, drive to face adversity, and storytelling to build allies + capital.
Doesn’t matter if you’re a high school dropout or a PhD if you can’t rally a team to believe in a mission.
Once there is a payment, it's a business relationship. You don't want to enter a business relationship with an alumni who graduated many years ago that could be anywhere in the world doing anything, unless you can handle that. (Donations are different though, for whatever reason. It actually wouldn't be a bad idea to tie email storage with donations.)
Professors, staff and registered students etc, on the other hand, is easier to deal with.
> It actually wouldn't be a bad idea to tie email storage with donations.
This could be done in perhaps the opposite direction: individual alumni donors tying donations to maintenance of email accounts for all alumni.
These email addresses, in some cases, must date back to the 90s or earlier. Cancelling them is a major, negative change to people who (like me!) who have come to rely on them.
Billing is hard. University IT pays for X amount of storage across their Google Workspace tenant. For edus, you get a 100TB pool and can buy more storage in 10TB increments. It's not metered per user either.
The Chumby with its wiki and open hardware/software philosophy was so ahead of its time and so influential to me. I started my whole career with hacking the Chumby’s user space [1]. The Chumby inspired and took me from an IT worker in a regional public school, to being a professional software engineer, making software shipped to millions of very important machines.
The lesson that I learned from the journey was that working with hardware can be fun and— if you want your career to be long-lasting— better be fun. The Chumby was one of the first devices that showed me that and bunnie was the one who showed me that. I still follow that principle to this day. No day in my life has making firmware or fucking around with hardware devices not something I enjoyed.
My brown leathery boy is still on my desk - although with light leaking from its display, sadly. As its apps slowly start getting out of date, though, I can’t justify keeping it on.
Cap is different because cap is about network planning constraints and doesn’t take into account things like security per se.
I think parts of Vitalik’s points are kinda moot and break down when you examine them through the lens of “any sufficiently complicated system can and will break.”
In the case of bitcoin, the breaks are few now because it is basically static. I’m sure there’s some bugs in that codebase though… (and they’re worth a very pretty penny if you can find them!!).
Algorand’s solution as originally stated is predicated on a non-colluding majority. At IACR when this algorithm was proposed, Silvio famously said as a counterpoint to the very apt criticisms that a colluding majority could defraud the protocol “my proof is that society exists!”
In the end I believe Algorand changed their algorithms to a more centralized approach for the sake of performance as fully distributed validation did not perform adequately. Please correct me if I’m wrong.
Yes, full relay nodes were few and very centralized historically. Source: we have been working with Algorand since the beginning. BTW: we publish updated information about the protocol that you cannot find in the original papers [1].
> Currently, Algorand blocks are produced in less than 3 seconds with instant finality. The network can process 10,000 transactions per second, and at a cost of a fraction of a cent per transaction.
My pops wouldn’t let us play on the internet at first so my brother played Warcraft and StarCraft using AppleTalk. I remember the only cable we had barely reached between the two computers so we had it hanging tight and if someone tripped over the cable we’d disconnect and have to start over.
One of the best to ever do it. I remember going to opening day at Pac Bell Park where Willie was hanging out next to his statue. It's a real good one that summarizes one of the greatest players in history.
Seeing Willie and the Giants at the games when I was a kid are some of fondest memories of when life was simple.
The best startups have a concept which is summed up thusly:
“We all go to the pay window at the same time.”
It’s ok for founders to take a little bit of money off of the table if they extend that to their employees as well. Asymmetry is where things get weird.
I’ve seen many founders who got deep into the fundraising cycles without ever realizing they could take a cent out. VCs will constantly tell you to let it all ride, and sometimes that works out, but for most people, having a little bit of financial security while you’re trying to change the world is necessary.
The best startups figure out how to manage liquidity through financing in a way that aligns incentives, keeps the goalposts at the mission, while allowing their teams to thrive.
It’s about alignment. If everyone is pulling in the same direction you’re going to execute the vision. Whether you win in the startup lottery is up to the threads of fate, but alignment is the straightest path towards a result.
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.
All 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.
I'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.
Why 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.
I’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.
I think one component of their point is that the marginal utility of money beyond $200k/year cash comp is quite small, especially if you (1) came to tech early in life (2) plan on staying in it for most of your working life.
With that perspective, $200k/year and $700k/year both reduce to "well-paid".
Also, a Staff title at a Seed or Series A startup can definitely ask for $250k/year, although they'd likely be trading off against equity grants.
Whoa, that doesn't even pass the smell test, let alone any kind of deeper analysis.
Certainly this depends on where you're going to live, but if you're in a place where startups are common (even considering the current remote work situation), $200k/yr will either be a stretch for you to meet your living expenses, or will require that you live fairly modestly, especially if you have dependents. If you are able to put any of that into savings/investments, it will be a fairly small amount.
With $700k/yr, you can live quite comfortably, while putting quite a bit away for retirement.
And I don't think your (1) & (2) points really make sense here. Investments compound over time; starting off in your early 20s putting $50k in your investment/retirement accounts every year vs $10k will give you a very different outcome once you reach retirement age. Hell, you'll reach a very different outcome in your 40s. (But honestly, if you decided to live a $200k/yr lifestyle at $700k/yr, you'll be saving so much money that you could easily retire in your 30s.)
It will also mean getting to put a down payment on that house much earlier, and/or being able to afford more of a house. And in the meantime, it will mean being able to dine at fancier restaurants, take more luxurious vacations, buy more expensive toys, etc., if that's the sort of thing you value. And I wouldn't even consider all this to be lifestyle creep (as you genuinely wisely advise against downthread of a sibling comment); this kind of lifestyle would be perfectly sustainable at $700k/yr, but not at $200k/yr.
(But really, though, who the hell is making $700k/yr in their early 20s? Very few, very exceptional people, that's who.)
I will happily die on the hill that the marginal utility at $200k vs $700k is a pure function of your lifestyle, even in high cost-of-living areas (I live in one of the highest!). Your choice of adjectives "modestly", "fairly small", "quite comfortably", and "quite a bit" that are ways for smuggling lifestyle choices into the equation, which might apply to you but are by no means universal.
This boils down to "if you have more money, you can spend more money and maybe retire early". This is not a line of reasoning I'm trying to refute.
Dependents are an interesting wrinkle that is worth discussing separately. But let's stay on the straight and narrow, we can talk about in another comment if you wish.
> And I don't think your (1) & (2) points really make sense here. Investments compound over time
The reason I invoked these points was not to compare "could you save $50k at age 22 or $10k at age 22?", it was to compare "could you save $10k at age 22 or $50k at age 32?"
If you're beginning a high-income career later in life, the time-value of money is different because you have less time.
If you start early, you actually need to earn less to hit the same comparatively "fixed" long-term savings goals, because you have more time to compound.
Again, be careful to avoid falling back on "if you have more money, you'll have more money, which is obviously good".
> And I wouldn't even consider all this to be lifestyle creep
Regularly dining at fancy restaurants (anything in the Michelin orbit), taking luxurious vacations (I'd define as anything north of $300/day), and purchasing expensive toys (I don't think this needs any qualification...) is indeed the definition of lifestyle creep, and it's A-OK that they aren't sustainable at $200k/yr.
You can live extremely comfortably without these things. Whether you perceive them as acceptable or not is a you thing, not an objective thing. We actually do get to choose our values and our hobbies!
I would revisit that calculation assuming you are drained at 45 instead of 60, including taxes and the opportunity cost of 500K x a few years at 3% rate for the next 15 years.
That's pretty much exactly the calculation I'm positing. But actually with an even earlier terminus (late 30s or 40 at most).
Assume an "effective" average pay (i.e. "net" pay + retirement and other deductions, inflation-adjusted to today's dollars and averaged over the course of your career) of $120k/year.
From age 22 to 40, you've earned $2.16mm in inflation-adjusted-to-today dollars as a single earner. With a not-unreasonable average savings rate of 30%, not accounting for tax-advantaged growth or any growth at all, you'll come out with $650k of inflation-adjusted-to-today capital in savings.
Realistically, this should end up invested in some kind of equity (housing, stocks, bonds, whatever). If you finance the purchase of a house at 30, you're only 10 years into a traditional 30-year mortgage at this point, for reference. So you're roughly 1/3rd of your way to owning all the equity in your home. That's fairly comfortably a $1mm home (home equity being 30% of your assets at 40).
Of course, if you're DCA-ing into something that yields a modest average of 5%/year in inflation-adjusted returns, that $650k is closer to $1mm inflation-adjusted-to-today capital. And you still have 25 years at that point for your retirement savings to compound. And you can work part-time in something more fulfilling until retirement to supplement your income.
YMMV, but the marginal utility of money beyond $1mm in equity at 40 and $6k/month in expendable (on rental housing, food, travel, social events) income during your 20s and 30s is pretty small for most people. If you add a partner with any kind of income to the mix, it makes the marginal stress of earning more money even less appealing.
Edit: the main thing you ought to avoid like the plague is lifestyle creep. Spending money on things with zero or vanishingly-small happiness ROI. Read this story every year or two, or whenever you get a raise at work. https://www.marxists.org/archive/tolstoy/1886/how-much-land-...
What many people don’t seem to realize is there are a lot of early stage but already well funded (10M+) startups who are desperately looking for top quality people. Once I was approached by a founder who offered 500k base salary (wasn’t a good fit for my area of expertise).
Well, in my experience, these are quite uncommon. Especially for being fully remote.
If someone's offering $500k/yr to an engineer plus stock, they're definitely trying to attain someone with very niche skills. Which begs the question: Just how applicable is this scenario for everyone else?
I haven't found many startup roles going past $200k for a fully remote engineer, almost regardless of level. I don't think they even try to get someone who would be Staff+ at FAANG because it's basically pointless.
Top quality in your scenario might mean niche skills like you've done specific computer vision work, have a PhD, and are going to a self-driving startup... Cool but not really applicable to most of us, is it?
Whereas compare as to how common it is to be a typical full stack or backend engineer with a decade of experience... join FAANG at Staff and make $600k+.
Eh, not quite your $250k number, but I was making (inflation adjusted) $200k/yr at a startup with ~$100M valuation back in 2010 (senior SWE level). Not sure if I'm typical, though.
> It’s possible you’d be making $700k+/yr if you were at google.
Possible, sure, but not likely. For a mid-tier SWE joining Google (or another FAANG) today, even $350k/yr salary+equity is probably above the median.
Also that feels like a specious comparison: most people (including those who would be otherwise joining a startup) are not joining a FAANG, and will not be getting paid as well.
It's a difficult trade off I've found. Large tech companies are boring and slow and you deal with a lot of red tape and BS, and you feel utterly powerless in the security of your own job as economic tidal waves direct the momentum of layoffs and not your personal contribution.
At a startup you have more autonomy and power over your personal position. I wrote 90% of the code that is generating company growth, released 2 months after a layoff. If I had taken longer to release that code or if my code didn't work the company would be in a worse financial position.
But that also means a lot of personal stress. There aren't 4 layers of middle management to catch flak for you. If you fuck something up, you are directly responsible and depending on the environment that can result in some heated conversations. I also work way harder at a startup than I ever did for a big company
Those are the factors that make the tradeoff easy for me. I would vastly prefer direct accountability for my own fuckups, because that means I have the agency to do something to fix it.
What makes me want to put my head through a wall is when I fuck up, and four layers of people above me are the only ones allowed to fix the thing, but they don't, so I keep catching flak for my fuckup without any way to stop it and fix the thing. I have many more heated conversations with those managers, which typically leads to the door.
When I fuck something up, rarely is anyone more upset about that than I am. Nobody's dumping more heat on me than I am on myself, so bring on the heat-- as long as I have the agency to fix the problem.
> All you’re saying is that in the contemporary context it’s exceedingly foolish to be an employee at an early startup.
As a rule, it is and always has been. For every unicorn piñata stuffed with winning lottery tickets, there are hundreds/thousands? of others whose employees walk away with nothing or less (debt, strained relationships, mental health issues, etc.) at worst or a job at AcquiHireCo at best.
There was always very high risk, so it was only ever for certain people. But in earlier iterations of SV it was possible to become generationally rich as an early employee. The VCs and founders have fixed the glitch.
To put it another way: early employee equity was always a lotto but now the payout is like some lame scratch off instead of the powerball jackpot.
The startups where employees get really rich still exist. I'm pretty sure the early employees of OpenAI are generationally rich for example.
It's just that these companies very often are the darlings since their inception, get constantly talked about. Everyone wants to to invest in them and everyone wants to join them. So they have the ability to pick out the best talent, in other words, it's unlikely you'll be able to join that specific startup.
But even 20 years ago, try getting into early Google. From what I heard they had extremely high bars for hiring as well and only lowered them once they got so large that the pool was exhausted.
I'd argue that the total comp at the established companies for engineers has increased precisely because of competition from startups: to make the startup not be the better option.
Does that mean that VCs are not taking a bigger slice than they used to? Absolutely not, but I wouldn't put the blame solely on them.
We’ll see when it happens. If I had to name a company most likely to have massive landmines buried in front of common stock cashing out, it would be at the top of the list.
> All 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.
My startup idea is a firm that uses generative AI to flood the internet with pro-startup, pro-VC, pro-founder propaganda, so that message will never reach the naive 22 year olds. Personally, I think it's like saving the environment, since naive 22 year olds are precious resource we cannot allow to be destroyed.
I wouldn't even say "contemporary"; people have been saying this (and I believe it's been true) for decades.
But overall that statement is making a lot of assumptions.
It's assuming money is the main priority for everyone. Sometimes the priority is to have a ton of autonomy and influence on product direction, not have to deal with 8 layers of management, and have an actual, large, often-measurable impact on the company's success.
It's assuming that the alternative is that anyone can work at a FAANG, and be in the higher tiers of salary they offer for their quite-above-average employees (hired today, not 10 or 20 years ago). Most competent, talented people won't pass an interview at a FAANG. Of those that do, many of them will not immediately be making $500k/yr. These points are especially true for 22 year olds, naive or otherwise.
I was going to make a comment about working your ass off at a startup vs. working 9-5 at a more established company, but I know plenty of people at FAANGs who work 50- or 60-hour weeks, every week, and often put in time on weekends. Granted, I would agree that pretty much everyone at a small/early startup is going to be working long hours, while a large number of people at a FAANG are going to enjoy a nice, relaxing life outside of work, so they're not at all equivalent in that regard.
> All you’re saying is that in the contemporary context it’s exceedingly foolish to be an employee at an early startup.
As long as naive 22 year olds think have that one friend that stuck around long enough to cash out on an IPO, then yes. On a risk-adjusted basis, this has basically always been the case - you're better off working at FAANG.
I hear this a lot, but most people -- even otherwise-startup people, even if they interview -- don't get to work at a FAANG.
And I think starting now at a FAANG is a lot less lucrative than people seem to think for the average (or even above-average) employee. Certainly nowhere near as lucrative as it was 7-10 years ago or more.
If you only care about money, sure. I have plenty of friends working in FAANG. For some mysterious reason any time I ask them about work, they say something along the lines "ehh... it's fiiiine. Paycheck is pretty good though". Okay, not all, but perhaps 95%. And half of them work massive overtime on regular basis. I can get behind working weekends when you hope to change the world. They often say things like: "yeah, I have to work 60-70h per week because I don't want my boss to yell at me". Those who work normal hours say: "there is not much work to do really, we literally have meetings about meetings to fill the day. I wish I had some real work to do". I truly hope that higher TC compensates for that.
The Bay Area housing market is too competitive for this. If you’re renting a room in your early 20s then sure just have fun, any tech job should cover it. If you want to own a place to raise a family in by your 30s, and you don’t have some exogenous source of wealth, you’re going to need every dollar of liquid compensation you can possibly get.
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.
Doing this by tenure seems like a fairer way to distribute the liquidity. The founders still get preferential access to it, but because they really have taken more risk (bigger stake for a longer time period), not just because they have a better individual negotiating position.
> The founders still get preferential access to it, but because they really have taken more risk
It's not related to risk, at least not directly. It's related to the supply of entrepreneurship as a factor of production. Entrepreneurship is scarce, so founders have leverage in any bargaining situation against early employees, who are more numerous and therefore less valuable and less powerful. If 10x the number of people tried to become founders, then founders would hold less leverage and the equity terms would become more "fair" because they'd have no choice but to give generous terms if they wished to hire people.
Your comment is somewhat buried downthread, but I think this is a super valuable insight. Ultimately it's not about fairness, it's about who has negotiating power, and about what contract terms founders and investors can get away with and still have a pool of employee talent competent enough for their needs.
But this isn't a static situation. For example, the article author points out that his startup doesn't reduce the options-expiration clock to 90 days after leaving the company, and I've read of similar cases in the past 5 years or so. I wouldn't say this practice is common now, but I feel like this was unheard of around, say, 2010.
After the company I worked at went public in 2016, they did another public offering 2 or 3 months later, before the 6-month lockup period ended. Nonetheless, they allowed employees to participate and sell up to 10% of their shares in this offering. I feel like this sort of thing is more common these days, and absolutely wasn't 20 years ago.
Established still-private companies like Stripe, and even newer ones like OpenAI, have given employees the opportunity to sell some of their equity to new investors during funding rounds, giving them some pre-IPO/pre-exit liquidity. There are certainly other examples of this in recent years. That surely was rare in the past.
I'm not sure what's driving these changes. Employees have been gaining more negotiating power somehow. Maybe that's a function of labor supply. Maybe that's a function of employees being better educated now about corporate finance and the things that are possible but historically not offered. Not sure.
Tenure/cliffs/etc should already take care of that by gating access to shares/options/etc in the first place. No need to add an extra tenure complication to liquidity as well.
How 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.
I 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.
Great, 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.
> 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.f
Oh wow, how many companies have a series A after 3 years? How did your company survive without any raises for 3 years and what made your company finally decide to raise money after going 3 year without doing so?
That policy was actually one of the major reasons I liked that company and stuck with them for so long. Their goal early on was to avoid raising money if at all possible, and they managed that for a long time by mostly being cash-flow positive/profitable. The trade off is slower, but sustainable growth.
We hit an inflection point in the early pandemic where money was cheap and we had a ton of new customers coming in, so we were able to secure very favorable terms for the Series A and used that money to expand the business. Things continued to go in the right direction for the next ~2 years and we ended up doing a Series B round, and that in retrospect was a mistake. We over-hired in 2022 and couldn't back that up with increased business. And because we had given up so much control to investors in the previous rounds, we were unable to return to the sustainable-growth strategy that had worked for us in the past, and had to adopt faster growth strategies, none of which panned out and ultimately hurt the company and led to many rounds of lay-offs.
As someone inside the tech industry, I absolutely agree.
The problem is that new startups often don't have options here. Unless you're in a market where VCs are shy about funding new companies, if you don't take the VC cash and go into high-growth mode, someone else will, and they'll end up out-competing you, at least in the short term. (Long enough that you won't be able to remain solvent, at least.) So you either fail, or take the money and often get into a situation of doing not-particularly-sustainable things.
If 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.
> If 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.
Is that what happened? I thought he had $200m, and put in $200m.
It's true that that's what I thought, which is my statement. And it's better caveated than the previous one, which implied uncaveated that he still had $50m, but hasn't attracted the eye of any budding skeptics.
Did this guy just literally ask an AI chatbot for insight on SpaceX's classified military plans?
> "It is unlikely that these gaps can be closed until the end of the decade."
I actually worked out my own BFR plan over the couple years of teasers we had leading up to the 2016 IAC presentation. It was based on a 3-part vehicle a bit like Soyuz (separate hab and capsule) of 15m diameter for the launcher and 12m diameter for the upper stage, payload, and capsule, which seemed to offer more options than a 2-part vehicle.
Musk makes some very optimistic plans, some of them clearly without doing the math, and each numerically extraordinary aspect renders the other numerically extraordinary aspects more difficult to believe. Even if you can class 80 or 90% of his ideas as "Audacious but feasible", there are frequent areas where he gets ahead of himself and projects unlikely extremes that become numerical impossibilities in conjunction with each other.
What is clear is that you can launch a colony on Mars based around Starship-like vehicles, but the number of launches per human Mars resident to sustain and switch them out is large ("100 colonists per launch vehicle" is wildly overshooting; Keeping 100 colonists alive for a return mission will require hundreds of Starship-sized launches, some of them years in advance), the risks are large, and that the missions are at minimum conjunction-class (a 3 year round trip) rather than opposition class. A colony that attempts to grow until it approaches self sufficiency demands lots and lots of automation, an expansive ISRU, mining, and agricultural industry, and a population of maybe ~10^4 people; Getting there is going to demand literally 10^5 to 10^6 launches, decades of work, and 10^4 to 10^5 reusable launch vehicles in play for decades.
But it's got to start somewhere; Hyper-timid incrementalist bullshit like "Flags and footprints" and "We can save some cost by using a once-in-a-decade Venus orbital assist" and "We can fit a manned Mars program into a 20 billion dollar NASA budget in theory" does not colonize other planets at all.
Musk & Griffin had a relationship around establishing a Mars colony even before SpaceX foundation. Musk even tried to recruit Griffin when assembling SpaceX founding team.
It depends on the kind of lifestyle you want to live, I guess. If you want to live in a $30M mansion estate with 24/7 domestic staff and have several vacation homes around the world, $50M might not cut it, while $250M should cover it just fine.
If you have a philanthropic bent and want to be able to fund various charities to the tune of $5M or $10M per year (in addition to a reasonably luxurious lifestyle, though considerably less than the above hypothetical), $50M might not be enough to sustain that over time, but $250M probably will.
I think it's fair to say that there's not much difference between net worths of $25M and $50M, or between $50M and $75M. But jumping an order of magnitude from $50M to $250M will let you live a very different kind of life, if you so choose.
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.
The 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.
For 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.
This 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.
Honestly 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?
A: 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.
> 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.
Why is it insane? Some founders take zero salary since the start, and part of the reason for raising funds is that they have to eat too. Anyone who is an "early employee" usually get lower salary than market, and some stock. It's only fair they get to cash out a little early on, or hold on if they're liquid and think it's worth a lot more.
It also works well for everyone involved if they're selling their shares to the investors for Series A - investors get shares for cheaper, founders get paid based around the value of those shares, more cash & runway in the bank.
In my industry the series A occurs in the first year of operation, and before the company has really achieved anything. A founder taking money off the table then is ludicrous.
Founders who have no need for money in the first year or two are fortunate people who are either already wealthy or have a spouse or family supporting them. Surely those aren't the only types of people worth backing.
I see. Here, the first stage is seed, which is around the level of YC and then Series A, which is around the level of getting money from YC's Demo Day investors.
We also see pre-seed, where the goal is to get into an accelerator. It's like $2000 for 3%. Enough for a domain name, a laptop, a babysitter, something that gives you the space to do a proof of concept, but not a full MVP.
Here where VC funding is dry, we also have some stage between seed and Series A, where the startup raises from friends, angels, crowdfunding. It's not really given a name because it's a signal that the company has already burned through seed and yet hasn't done enough to raise Series A from proper "professionals".
But here, by the time you've raised Series A, you're expected to be #1 in a market - best language app, best tax app, etc. And Series A is just to prove it works in other markets. Worst case I've seen was a guy raising US$500k seed (not Series A), but they had to prove they could be #1 in five countries.
US is a market of 300M people and even top companies like Amazon don't have to go far, but many countries have both low population and low spending, and investment is still US-centric.
In SV-style tech companies it's common for the first round of funding to be considered a "seed" round; it usually comes from angel investors and/or friends and family, though it's not unheard of for larger institutions to get involved at this point.
By the time they're ready for a series A (VCs/larger institutional investors, though sometimes angel investors from the seed round participate as well) they'll very often have something to show for it, and may even have paying customers. The A round can come during the first year of operation, or later.
Given this, it's not uncommon for founders to be able to have some liquidity during their series A. Granted, it's usually not going to be a ton of money, but it can be a nice bonus that allows the founders to pay off debt they might have accrued during the first stages of the company, or perhaps move out of their 1BR apartment and put a down payment on a larger house, etc.
I 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.
VCs 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.
I’m sorry, I think the era of “change the world” motivation in tech was eclipsed by “make 42 tons of money” about a decade ago.
Along that line, I would be very surprised that there are founders who don’t seek an opportunity to set aside their nest egg to “de-risk”.
You say you have seen such guileless dedication to the founding first hand, can you share what industry or type of company? Perhaps I’m just exposed to the wrong crowd.
It's not in the interest of the VC that the founders have financial security. Well at least the type of VC's that have come up in since the dot com boom where it was not about building viable businesses but getting sold to the highest bidder when the founder is under financial pressure to sell they can strong arm him into easily compared to a founder that is financially secure and interested in building and running a business
It’s not binary. Enough financial security that they don’t care what their investors think, no. Enough that they’re thinking of how to grow the company rather than how they’re going to pay their mortgage, yes.
> It's not in the interest of the VC that the founders have financial security.
It's also not in the interest of the VC that the founders are worried about making their rent or mortgage payments, or paying off the credit cards they maxed out paying their AWS bills in the early stages of their company.
The VCs want their founders to be hungry for more, and see their company's growth as a vehicle for that. But they don't want founders to be stressing over basic human needs, either.
Any VC that would refuse to let you take some liquidity in these situations is not a VC you want to make a deal with. And if you can only find VCs like that, your company is probably doing poorly enough that you might want to rethink what you're doing.
Assymetry makes a certain amount of sense. Employees don’t take $0 for a long time and generally aren’t having as large a pay cut as founders afterwards. Most of the founders I’ve worked with have had the seniority to justify the top salary in the company and have typically had pay at or near the bottom. Someone operating at that extreme getting to trade equity doesn’t necessarily mean that everyone should get to.
Asymmetry is common in startups, though. Consider one of the complaints from the article, and discussed here: founders get to keep several tens of percent ownership of their companies (at least initially), while early employees get a small fraction of a percent. Founders are generally not taking two orders of magnitude more risk, or doing two orders of magnitude more work.
I think giving founders liquidity but not employees is maybe ok for series A: the founders may have been working for $0 for a couple years at that point, and may have taken out a second mortgage or ran up a bunch of credit card debt to keep things going. An early employee is not going to do any of that once they join, even if they're getting paid a below market rate salary. That is definitely an asymmetry! Getting some liquidity at the series A allows the founders to pay down debt and replenish their savings, financial issues that are probably directly related to their time working on their company.
But after the series A, founders should be able to pay themselves a livable salary. The founders and employees should be on much more equal (or at least comparable) footing when it comes to their regular income. By the time the series B comes along, if the founders are going to get some (more) liquidity, the employees should get some too. That only seems fair.
>>It’s ok for founders to take a little bit of money off of the table if they extend that to their employees as well. Asymmetry is where things get weird.
Yeah, if the founders don't do this I wouldn't want to work for them (not that I'm the target demographic anyway).
That's not quite how it works. Certain people are required (or strongly encouraged) to sell on a 10b5-1 plan. These plans can trade outside of open trading windows, but they have a meaningful cooldown period before they go into effect and can only be entered into during open trading windows. So it's not necessarily "better."
That’s really about not falling foul of insider trading laws. Regular employees are free to set up limit orders within their trading windows (eg sell if stock hits $200) if they want. Can’t subsequently cancel it though! It makes way more sense to just sell on the day of vesting and then trade shares that you’re not restricted from trading. No tax or other reason not to do this.
We couldn't at Twitter, which is the only company I've worked at that had a blanket trading blackout policy. The closest we could do was elect to sell all RSUs as soon as they vested (even if outside an open window).
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