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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

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.
    - _andromeda_ 10y ago
      Classic case of the socialists' mindset that is rapidly getting prevalent in the valley; take from producers (employees/shareholders) and give to non-producers. That incentive structure is messed up; I know a great deal of people who would rather be on the receiving end of that equation without putting in the sweat equity and guess what? It's never ever going to be enough to appease them.
  - BinaryIdiot 10y ago
    I know others already hit on it but since you replied to me: I would say those are not equivalent. With buying a house on exit you're planning on taking your money and doing something personal with it. When you're giving it to charity it's money you didn't need. If you didn't need the money, why wouldn't it go to the first employees (or even later employees) in the form of equity since they helped build the company? Surely many of them joined possibly at lower salaries to gain equity and now the founder(s) are simply giving it away to others? See the difference? Emotionally this feels awful. I was involved in something roughly sorta similar and the amount of emotion and resentment is awful. I'm now convinced more than ever that EQ (emotional intelligence) is one of the biggest parts of running a business while keeping your best talent. I see the good that can come from Founders Pledge but I also see it putting a company in a disadvantage in finding and retaining talent.
    - tptacek 10y ago
      It's kind of disturbing to see (what I presume to be) a member of one of the best compensated demographics in one of the richest countries in the world suggest that while it's OK for a cashed-out founder to buy houses with their money (at least that's personal), before any of that money goes to a worthy charitable cause, other software developers should get dibs on it. I feel like you could not have fully thought this statement through.
      - BinaryIdiot 10y ago
        > It's kind of disturbing to see (what I presume to be) a member of one of the best compensated demographics in one of the richest countries in the world suggest that while it's OK for a cashed-out founder to buy houses with their money (at least that's personal), before any of that money goes to a worthy charitable cause, other software developers should get dibs on it. > I feel like you could not have fully thought this statement through. I'm not sure I follow. Are you referring to myself being white, a male, my industry, the area in which I live? Why would my post, because of my race, gender, industry, area or country, make it disturbing whereas it may not have been otherwise? Where did I say other developers should "get dibs on" another founder's equity? Who mentioned "worthy charitable cause"? There are so few but I get the general impression you chose your words to try to make my comments appear worse than what they are. When you give to charity you give money you do not need, correct? So when you pledge X percentage of your equity to charity while, at the same time, paying less than the average salary for your workers who are hoping to use their equity as another way of compensation should everything go well, you're saying that because it goes to charity and because of their demographics, everyone should feel fine? I only talked about the emotions of such a decision. If someone tells you that they don't need a certain amount of money that they only made because of your and your team's hard work and you're being underpaid, you don't think you deserve to feel slighted? Because that's exactly what happens. Next time, instead of trying to make me look like a monster for talking about feelings, how about we try to understand each other's view point and talk this out?
kobeya 10y ago
It is effectively the founder saying "I don't need/want as many shares as were allocated to me, but I value <charity X> more than the people who helped me reach this outcome." It's a big screw you to the later employees.
- e1g 10y ago
  Do you feel the same about the Gates Foundation or executive managers who donate to Doctors Without Borders? To me both are admirable ways of treating private wealth, while splitting money with employees, investors, family etc is the step that happens before you end up with the private sum.
  - _andromeda_ 10y ago
    This is a classic case of expropriation from producers (employees and a corporation's stakeholders) to give to non-producers. What sort of incentive structure is being proposed here? This is bad bad bad.
  - deleted 10y ago
    [deleted]
  - _andromeda_ 10y ago
    If anything, Gates, Altman and the likes remind me of James Taggart from Rand's novel. A corporation has no duty to anyone other than employees, customers, shareholders and immediate stakeholders. It is hard enough to do right by that group of people and all forms of charity should be voluntary. What I'm getting from this is that will become some form of defacto obligation and this must be resisted lest we end up with a dystopian world while in pursuit of 'eutopia'.
  - kobeya 10y ago
    No, there's a clear difference. One is precommitted to up-front, the other is how someone responds to an unexpected or unlikely outcome.

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.
  - _andromeda_ 10y ago
    Classic case of the socialists' mindset that is rapidly getting prevalent in the valley; take from producers (employees/shareholders) and give to non-producers. That incentive structure is messed up; I know a great deal of people who would rather be on the receiving end of that equation without putting in the sweat equity and guess what? It's never ever going to be enough to appease them.
- BinaryIdiot 10y ago
  I know others already hit on it but since you replied to me: I would say those are not equivalent. With buying a house on exit you're planning on taking your money and doing something personal with it. When you're giving it to charity it's money you didn't need. If you didn't need the money, why wouldn't it go to the first employees (or even later employees) in the form of equity since they helped build the company? Surely many of them joined possibly at lower salaries to gain equity and now the founder(s) are simply giving it away to others? See the difference? Emotionally this feels awful. I was involved in something roughly sorta similar and the amount of emotion and resentment is awful. I'm now convinced more than ever that EQ (emotional intelligence) is one of the biggest parts of running a business while keeping your best talent. I see the good that can come from Founders Pledge but I also see it putting a company in a disadvantage in finding and retaining talent.
  - tptacek 10y ago
    It's kind of disturbing to see (what I presume to be) a member of one of the best compensated demographics in one of the richest countries in the world suggest that while it's OK for a cashed-out founder to buy houses with their money (at least that's personal), before any of that money goes to a worthy charitable cause, other software developers should get dibs on it. I feel like you could not have fully thought this statement through.
    - BinaryIdiot 10y ago
      > It's kind of disturbing to see (what I presume to be) a member of one of the best compensated demographics in one of the richest countries in the world suggest that while it's OK for a cashed-out founder to buy houses with their money (at least that's personal), before any of that money goes to a worthy charitable cause, other software developers should get dibs on it. > I feel like you could not have fully thought this statement through. I'm not sure I follow. Are you referring to myself being white, a male, my industry, the area in which I live? Why would my post, because of my race, gender, industry, area or country, make it disturbing whereas it may not have been otherwise? Where did I say other developers should "get dibs on" another founder's equity? Who mentioned "worthy charitable cause"? There are so few but I get the general impression you chose your words to try to make my comments appear worse than what they are. When you give to charity you give money you do not need, correct? So when you pledge X percentage of your equity to charity while, at the same time, paying less than the average salary for your workers who are hoping to use their equity as another way of compensation should everything go well, you're saying that because it goes to charity and because of their demographics, everyone should feel fine? I only talked about the emotions of such a decision. If someone tells you that they don't need a certain amount of money that they only made because of your and your team's hard work and you're being underpaid, you don't think you deserve to feel slighted? Because that's exactly what happens. Next time, instead of trying to make me look like a monster for talking about feelings, how about we try to understand each other's view point and talk this out?

kobeya 10y ago

It is effectively the founder saying "I don't need/want as many shares as were allocated to me, but I value <charity X> more than the people who helped me reach this outcome." It's a big screw you to the later employees.

e1g 10y ago
Do you feel the same about the Gates Foundation or executive managers who donate to Doctors Without Borders? To me both are admirable ways of treating private wealth, while splitting money with employees, investors, family etc is the step that happens before you end up with the private sum.
- _andromeda_ 10y ago
  This is a classic case of expropriation from producers (employees and a corporation's stakeholders) to give to non-producers. What sort of incentive structure is being proposed here? This is bad bad bad.
- deleted 10y ago
  [deleted]
- _andromeda_ 10y ago
  If anything, Gates, Altman and the likes remind me of James Taggart from Rand's novel. A corporation has no duty to anyone other than employees, customers, shareholders and immediate stakeholders. It is hard enough to do right by that group of people and all forms of charity should be voluntary. What I'm getting from this is that will become some form of defacto obligation and this must be resisted lest we end up with a dystopian world while in pursuit of 'eutopia'.
- kobeya 10y ago
  No, there's a clear difference. One is precommitted to up-front, the other is how someone responds to an unexpected or unlikely outcome.