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I'm not so sure about the analogy, but I get your point. I think you're right that transparency is a big problem here. As long as others have perfect knowledge

I'm not so sure about the analogy, but I get your point. I think you're right that transparency is a big problem here. As long as others have perfect knowledge of the situation, they can factor the extra risk into their negotiations (e.g. Ask for more equity, because common shares are worth less if there are others with preferred shares). The terminology surrounding this is quite misleading too - as you mentioned in the grandparent, having 1% of a company sold for 1M, doesn't mean you'll get 10k, which is pretty weird. Not sure what the solution is though - maybe it's just for everyone to be aware of how preferred stock works and make the cap table public. It would also be nice if there were a standardised way for a company to say "We won't offer preferred stock for at least X years". Something like that would make me much more confident in taking equity in a company. Which, in principle, is actually what I want to do - but all these kinds of tricks essentially mean I can't (because I can't properly estimate the value of what I'm offered). Public cap tables would help, but wouldn't protect against future investment rounds with preferred shares.

conanbatt 9y ago
If it were of public knowledge that when a company IPO's, employees in total collect less than 10% of the gains, the public outrage would soon ban the practices that we see everyday. Today we have a lottery where we dont know the winners and so they are protected. I dont have animosity against investors for protecting their gains, that is fine (for them, ofc, but they are reacting to their incentives). The main reason cap tables are hidden is because the only person that can buy shares is an accredited investor, which means the company has to cater to them, not to capital. If you as an employee were able to buy and sell the shares with liberty, companies would almost immediately make cap tables public to get cheaper funding from the general public. Suddenly, investors capacity to ask for things like privacy and preferred shares would dissipate: there are millions of employees in the bay area alone that would pour considerable money into it. Increased capital means less concentrated gains, larger absolute gains, considerable increase in wages and overall greater investing efficiency.
- kelnos 9y ago
  > If it were of public knowledge that when a company IPO's, employees in total collect less than 10% of the gains, the public outrage would soon ban the practices that we see everyday. What do you mean? Of course this is public knowledge. Anyone accepting an equity grant as an employee who doesn't know this isn't doing their due diligence. Asking about the cap table of a small startup while interviewing is an entirely reasonable thing to do, and I've immediately discounted an interview at a company where they've been cagey about giving me details. I mean, I'm fine with them not breaking it down into what percentage each investor owns, but telling a prospective employee how much of the company in total is owned by VCs vs. founders vs. employees/option pool is pretty uncontroversial. > If you as an employee were able to buy and sell the shares with liberty, companies would almost immediately make cap tables public to get cheaper funding from the general public. This doesn't really make sense. You've just described a publicly-traded company, and obviously an early-stage startup can't afford to be one of those.
  - conanbatt 9y ago
    > What do you mean? Of course this is public knowledge. Anyone accepting an equity grant as an employee who doesn't know this isn't doing their due diligence. Really. Can you tell me what were the employee gains of facebook, google and twitter on stock divided by the market compensation at the time that the engineers got? Where the engineers back then at every single founding round making a proper decision based on the information they had? Please. > Asking about the cap table of a small startup while interviewing is an entirely reasonable thing to do, and I've immediately discounted an interview at a company where they've been cagey about giving me details. I mean, I'm fine with them not breaking it down into what percentage each investor owns, but telling a prospective employee how much of the company in total is owned by VCs vs. founders vs. employees/option pool is pretty uncontroversial. Its not always available on the decision for the employee. The cost of acquiring that information is orders of magnitude different from the employee than the founders/investors. Its still asymmetry of information, even if it is provided, which it isn't always. In any case, if thats what you believe, then you would have no concerns of making it public, since it already is. > This doesn't really make sense. You've just described a publicly-traded company, and obviously an early-stage startup can't afford to be one of those. Why cant it afford to be "one of those"?

conanbatt 9y ago

If it were of public knowledge that when a company IPO's, employees in total collect less than 10% of the gains, the public outrage would soon ban the practices that we see everyday. Today we have a lottery where we dont know the winners and so they are protected. I dont have animosity against investors for protecting their gains, that is fine (for them, ofc, but they are reacting to their incentives). The main reason cap tables are hidden is because the only person that can buy shares is an accredited investor, which means the company has to cater to them, not to capital. If you as an employee were able to buy and sell the shares with liberty, companies would almost immediately make cap tables public to get cheaper funding from the general public. Suddenly, investors capacity to ask for things like privacy and preferred shares would dissipate: there are millions of employees in the bay area alone that would pour considerable money into it. Increased capital means less concentrated gains, larger absolute gains, considerable increase in wages and overall greater investing efficiency.

kelnos 9y ago
> If it were of public knowledge that when a company IPO's, employees in total collect less than 10% of the gains, the public outrage would soon ban the practices that we see everyday. What do you mean? Of course this is public knowledge. Anyone accepting an equity grant as an employee who doesn't know this isn't doing their due diligence. Asking about the cap table of a small startup while interviewing is an entirely reasonable thing to do, and I've immediately discounted an interview at a company where they've been cagey about giving me details. I mean, I'm fine with them not breaking it down into what percentage each investor owns, but telling a prospective employee how much of the company in total is owned by VCs vs. founders vs. employees/option pool is pretty uncontroversial. > If you as an employee were able to buy and sell the shares with liberty, companies would almost immediately make cap tables public to get cheaper funding from the general public. This doesn't really make sense. You've just described a publicly-traded company, and obviously an early-stage startup can't afford to be one of those.
- conanbatt 9y ago
  > What do you mean? Of course this is public knowledge. Anyone accepting an equity grant as an employee who doesn't know this isn't doing their due diligence. Really. Can you tell me what were the employee gains of facebook, google and twitter on stock divided by the market compensation at the time that the engineers got? Where the engineers back then at every single founding round making a proper decision based on the information they had? Please. > Asking about the cap table of a small startup while interviewing is an entirely reasonable thing to do, and I've immediately discounted an interview at a company where they've been cagey about giving me details. I mean, I'm fine with them not breaking it down into what percentage each investor owns, but telling a prospective employee how much of the company in total is owned by VCs vs. founders vs. employees/option pool is pretty uncontroversial. Its not always available on the decision for the employee. The cost of acquiring that information is orders of magnitude different from the employee than the founders/investors. Its still asymmetry of information, even if it is provided, which it isn't always. In any case, if thats what you believe, then you would have no concerns of making it public, since it already is. > This doesn't really make sense. You've just described a publicly-traded company, and obviously an early-stage startup can't afford to be one of those. Why cant it afford to be "one of those"?