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In fact, many people don't understand the deal in detail (e.g., what may happen during an exit), nor the cap table. E.g., one person I know, an Employee #1, wa
by khazhoux 8y ago
In fact, many people don't understand the deal in detail (e.g., what may happen during an exit), nor the cap table.
E.g., one person I know, an Employee #1, was shocked to discover that investors only held ~15% of the startup he was at, which he joined just a couple of weeks after incorporation, and the founders held nearly 80%. His equity was IIRC 1%, which he thought was great, and was assuming that the founders had maybe 10% each, with a big option pool and a much-larger investor ownership. Ok, so his numbers didn't change just from learning everyone else's, but he wouldn't have agreed to 1% if he'd known.
It's not the founders' fault. They acted in their own self-interest, and did not volunteer information that would have negatively impacted their position.
But the employee still had a right to be upset, same as any of us would be if we discovered that a teammate for the last several years had been pulling in twice your salary, when you were told "sorry, this is as high as we can go."
- lovich 8y ago>It's not the founders' fault. They acted in their own self-interest, and did not volunteer information that would have negatively impacted their position. This is a super capitalist thing to say. Anyone can understand _why_ the founder acted in their own self interest here, but to say it's not their fault is to just remove all agency from them. Maybe it's in my best interest to have someone murdered so I can take over their business. Would you say it's not my fault if I did so?
- kamaal 8y agoThe Pie fallacy is false on shorter periods of time. In the real world. The Pie size is fixed. Or atleast the Pie size expands only in cycles. So in one particular cycle people try to gather as much Pie for them as they can. There fore ultimately one has to be selfish, even if not out of nature, but out of sheer compulsion. These days you have to do these things just not to get walked over.
- lovich 8y agoYou don't have to be selfish, we're not automatons that have no free will. If you're starving, or need shelter or some other basic to survival, then yes you need to be selfish. After that being selfish is a choice
- ryandrake 8y agoThis is an unfortunate symptom of a huge problem with equity compensation: Valuing a stock option is difficult, even for finance pros. You need to understand the cap table, understand the company's current (and expected future) finances, the exact legalese in your offer, and how reality is likely to change as you remain employed. It's even more difficult when founders/investors don't tell you all the information. Your typical "Employee #1 Tech Bro" hasn't got a chance vs. the sharks. It's like an amateur sitting down at the poker table with 8 other seasoned pros.