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I have several friends and acquaintances whose exits as founders were in the $5-500 M gross exit value range -- far from a Google / FB outcome. Those people al

by rlucas 11y ago

I have several friends and acquaintances whose exits as founders were in the $5-500 M gross exit value range -- far from a Google / FB outcome. Those people all made an entire career's worth of money, or more, all at once* and with capital gains tax treatment to boot. (* well, after an earnout / lockup) They also exclusively held common shares. The deciding factor is whether their exit value was a meaningful multiple of the invested capital. If you raise $100 M and sell for $100 M then it's hardly fair to expect a windfall. If you raise $50k and sell for $5 M it's very fair to expect a meaningful personal outcome.

Swannie 11y ago
"> Tech employees need to wake up about common vs preferred shares" The important distinction is employee vs founder. You mention founders in your comment. Founders typically would hold a double-digit percentage of common shares. Employees that might get offered 0.1% if they are an early hire, or less assuming later stage (discounting exec hires here, because the OP of this thread was about engineers). Founders also typically got their common shares at a very low valuation - let's say they were issued pre-money, then their value to the tax man might be $200K (of a 2M pre-money valuation), but with a vesting schedule that makes them tax efficient. Employees typically get their common shares at a higher valuation, post money, with a 200M valuation. Their 0.1% is also worth $200K to the tax man. See how this is different?
- dasil003 11y ago
  You're exaggerating for dramatic effect. First of all, 1-2% is not uncommon for truly early employees. Second, it's quite typical for founders to work for free for a significant length of time to get the company off the ground. If the founders got the company to a 200M valuation with money in the bank to pay salaries, explain to me why employees deserve to be in the same order of magnitude shareholders as founders?

by rlucas 11y ago

Swannie 11y ago

"> Tech employees need to wake up about common vs preferred shares" The important distinction is employee vs founder. You mention founders in your comment. Founders typically would hold a double-digit percentage of common shares. Employees that might get offered 0.1% if they are an early hire, or less assuming later stage (discounting exec hires here, because the OP of this thread was about engineers). Founders also typically got their common shares at a very low valuation - let's say they were issued pre-money, then their value to the tax man might be $200K (of a 2M pre-money valuation), but with a vesting schedule that makes them tax efficient. Employees typically get their common shares at a higher valuation, post money, with a 200M valuation. Their 0.1% is also worth $200K to the tax man. See how this is different?

dasil003 11y ago
You're exaggerating for dramatic effect. First of all, 1-2% is not uncommon for truly early employees. Second, it's quite typical for founders to work for free for a significant length of time to get the company off the ground. If the founders got the company to a 200M valuation with money in the bank to pay salaries, explain to me why employees deserve to be in the same order of magnitude shareholders as founders?