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I understand giving to charity is great and all but what about employees 10, 35, 97? So someone works hard at a start-up but they weren't among the first dozen

I understand giving to charity is great and all but what about employees 10, 35, 97? So someone works hard at a start-up but they weren't among the first dozen or so to join then they likely get next to nothing from an exit. So how about, instead of a pledge to give to charity, founders pledge to give more equity to later employees so only a small handful are not the only ones to profit. Everyone takes a risk joining a start-up. Many times employees use the equity as part of their compensation (right or wrong many do this). If you're joining a start-up that has taken this pledge then you know going in you're likely not going to get as much as another start-up. I don't know this just feels like a way to neuter the company making it less attractive to future employees. How about, instead of counting our chickens before they hatch, we get founders who had a big exit to donate money to charity?

serg_chernata 10y ago
Came here to say the same thing. Donating to charities is great but why not donate and invest into your employees who may also happen to be your neighbors.
tlb 10y ago
YC also encourages companies to spread more equity among the employees, and eliminate restrictions on exercising options when employees leave. http://blog.samaltman.com/employee-equity http://blog.samaltman.com/employee-equity
nostrademons 10y ago
Andrew Mason/Detour proposed something along those lines, but I haven't heard anything more about it since: https://news.ycombinator.com/item?id=9336392 https://news.ycombinator.com/item?id=9336392
imbenclifford 10y ago
Ben from FP here. To be clear, founders aren't giving away equity - they are pledging a percentage of what they personally receive on exit. This doesn't reduce the equity that is available for other shareholders.
- splintercell 10y ago
  > To be clear, founders aren't giving away equity - they are pledging a percentage of what they personally receive on exit. Which could be construed as equity for later employees.
- BinaryIdiot 10y ago
  > To be clear, founders aren't giving away equity - they are pledging a percentage of what they personally receive on exit. This doesn't reduce the equity that is available for other shareholders. I never said they were giving away equity. A founder is taking a percentage of their money and, instead of giving it to their employees (like they should especially if you follow many of the YC essays and blog posts about giving more to your employees) they are pledging it to a charity. Charity is important but this is just the wrong advice. Why would an employee join Company A over Company B when they know Company A's founders are donating some of their money to charity versus investing it back into the company in the form of, say, more generous employee equity package (because you can't have both).
  - imbenclifford 10y ago
    I feel like this is equivalent to saying that if a founder decides she will buy a house if she exits, that she is denying employees of equity. Have I missed the point?
    - zerocrates 10y ago
      I suppose the difference is that it's pledged: everybody including the founder knows that they're reducing their share by X amount up-front. A house isn't publicly earmarked in that kind of way, and of course, it's money spent for the founder's direct benefit rather than given away. So there's a temptation for people to say, "well clearly you're OK with reducing your compensation for [purpose X], why not for [arguably superior purpose Y]?" I'm not sure it really makes sense to think of it that way but there is a distinction.
    - nugga 10y ago
      Now, a deal is a deal, and if they are not entitled to equity then so be it, and if you happen to be a little too late to the party then too bad, but employees work hard to create that value. I'd probably feel bummed, envious and left out if a founder with their double digit (or multi million dollar) equities flat out proclaimed to give a portion of that to charity, essentially burning that cash from my point of view, when they could've just as well rewarded the employees. And in the startup world they are probably not even paid proper market value.
pb 10y ago
I know that "employees get screwed" is the hn conventional wisdom, but it's generally false. If a startup is huge success, there will be many wealthy employees. Companies like Google and Facebook created thousands of millionaires. Uber and Airbnb will likely do the same. Of course if the company exits for less than money raised, then yes, common will likely not be worth much, but that's the risk of startup equity.
- kobeya 10y ago
  Most successful startups aren't huge successes.
  - pb 10y ago
    Most startups aren't successful period. If you're the 100th employee at a startup that sells for $30M, then no, you're not going to make a lot from that exit. The economics of startups are such that the vast majority of the returns for both investors and employees are from the big successes, so if you're looking for $$, that's where you need to be.
- BinaryIdiot 10y ago
  > I know that "employees get screwed" is the hn conventional wisdom, but it's generally false. It's generally true. 90% of start-ups fail within 5 years. If any employee banked on their equity as a form of compensation (which, yes we know you shouldn't, most do as start-ups typically pay below average salaries) it's now gone. Successes are rare. > Companies like Google and Facebook created thousands of millionaires. Source? I had heard it was a few dozen at Google and a few hundred at Facebook. Thousands seems a little high but I could be remembering the data wrong.
  - pb 10y ago
    If a start up fails then the equity is worthless. That's how equity is _supposed_ to work. As for Facebook and Google, you heard wrong. I worked at both companies and know quite a bit about how much equity employees got.
_andromeda_ 10y ago
Beats me why Altman is steering the yc brand towards this socialism nonsense. First UBI,now this. Just build great companies and reward employees who make significant contributions and you'll have the eutopia you're so eager to create.

serg_chernata 10y ago

Came here to say the same thing. Donating to charities is great but why not donate and invest into your employees who may also happen to be your neighbors.

tlb 10y ago

YC also encourages companies to spread more equity among the employees, and eliminate restrictions on exercising options when employees leave. http://blog.samaltman.com/employee-equity http://blog.samaltman.com/employee-equity

nostrademons 10y ago

Andrew Mason/Detour proposed something along those lines, but I haven't heard anything more about it since: https://news.ycombinator.com/item?id=9336392 https://news.ycombinator.com/item?id=9336392

imbenclifford 10y ago

Ben from FP here. To be clear, founders aren't giving away equity - they are pledging a percentage of what they personally receive on exit. This doesn't reduce the equity that is available for other shareholders.

splintercell 10y ago
> To be clear, founders aren't giving away equity - they are pledging a percentage of what they personally receive on exit. Which could be construed as equity for later employees.
BinaryIdiot 10y ago
> To be clear, founders aren't giving away equity - they are pledging a percentage of what they personally receive on exit. This doesn't reduce the equity that is available for other shareholders. I never said they were giving away equity. A founder is taking a percentage of their money and, instead of giving it to their employees (like they should especially if you follow many of the YC essays and blog posts about giving more to your employees) they are pledging it to a charity. Charity is important but this is just the wrong advice. Why would an employee join Company A over Company B when they know Company A's founders are donating some of their money to charity versus investing it back into the company in the form of, say, more generous employee equity package (because you can't have both).
- imbenclifford 10y ago
  I feel like this is equivalent to saying that if a founder decides she will buy a house if she exits, that she is denying employees of equity. Have I missed the point?
  - zerocrates 10y ago
    I suppose the difference is that it's pledged: everybody including the founder knows that they're reducing their share by X amount up-front. A house isn't publicly earmarked in that kind of way, and of course, it's money spent for the founder's direct benefit rather than given away. So there's a temptation for people to say, "well clearly you're OK with reducing your compensation for [purpose X], why not for [arguably superior purpose Y]?" I'm not sure it really makes sense to think of it that way but there is a distinction.
  - nugga 10y ago
    Now, a deal is a deal, and if they are not entitled to equity then so be it, and if you happen to be a little too late to the party then too bad, but employees work hard to create that value. I'd probably feel bummed, envious and left out if a founder with their double digit (or multi million dollar) equities flat out proclaimed to give a portion of that to charity, essentially burning that cash from my point of view, when they could've just as well rewarded the employees. And in the startup world they are probably not even paid proper market value.

pb 10y ago

I know that "employees get screwed" is the hn conventional wisdom, but it's generally false. If a startup is huge success, there will be many wealthy employees. Companies like Google and Facebook created thousands of millionaires. Uber and Airbnb will likely do the same. Of course if the company exits for less than money raised, then yes, common will likely not be worth much, but that's the risk of startup equity.

kobeya 10y ago
Most successful startups aren't huge successes.
- pb 10y ago
  Most startups aren't successful period. If you're the 100th employee at a startup that sells for $30M, then no, you're not going to make a lot from that exit. The economics of startups are such that the vast majority of the returns for both investors and employees are from the big successes, so if you're looking for $$, that's where you need to be.
BinaryIdiot 10y ago
> I know that "employees get screwed" is the hn conventional wisdom, but it's generally false. It's generally true. 90% of start-ups fail within 5 years. If any employee banked on their equity as a form of compensation (which, yes we know you shouldn't, most do as start-ups typically pay below average salaries) it's now gone. Successes are rare. > Companies like Google and Facebook created thousands of millionaires. Source? I had heard it was a few dozen at Google and a few hundred at Facebook. Thousands seems a little high but I could be remembering the data wrong.
- pb 10y ago
  If a start up fails then the equity is worthless. That's how equity is _supposed_ to work. As for Facebook and Google, you heard wrong. I worked at both companies and know quite a bit about how much equity employees got.

_andromeda_ 10y ago

Beats me why Altman is steering the yc brand towards this socialism nonsense. First UBI,now this. Just build great companies and reward employees who make significant contributions and you'll have the eutopia you're so eager to create.