4 ms·

You don't know what future funding rounds there'll be. Maybe you raise a seed investment and then decide to sell the company two years later. Maybe you'll raise

You don't know what future funding rounds there'll be. Maybe you raise a seed investment and then decide to sell the company two years later. Maybe you'll raise 5 more rounds and IPO. Also, if you sell your own shares the money goes to you, not the company. I guess you could then loan the money to the company, but you'd still be liable for tax. Going from owning 1% of a 1M company to owning 0.5% of a 2M company isn't unfair. The extra value comes directly from the new shareholders investing their money. Employees believing their ownership percentage will not change is a problem though, and founders should not suggest that to be the case.

nathan_f77 8y ago
> Also, if you sell your own shares the money goes to you, not the company. I'm a bit confused about the distinction. I'm a solo founder, so I own 100% of my company with no vesting schedule. Although I did set aside a pool of shares for employees. But even if those shares are just sitting there in the company, I still technically own them until I give them to someone else (because I own 100% of the company.) So that's just what I mean. I guess it becomes a lot more complicated when you have some cofounders and a vesting schedule.
pragmacoders 8y ago
> Going from owning 1% of a 1M company to owning 0.5% of a 2M company isn't unfair. The extra value comes directly from the new shareholders investing their money. If this we're true, investors wouldn't be adding things like dilution protection to their contracts and special stocks that have further liquidation protections (and potentially voting rights) wouldn't be the norm for non-employees. Investments are not one-to-one exchanges and employees take up most of the personal risk in the exchange due to lack of any protections as well as lack of a (personal financial) safety net if things go wrong. Though I agree with you in that whether this is fair or not has nothing to do with what modern companies will do. The reason that employees do not get these protections and rights is because they lack the leverage to demand them from the people who make those decisions within the company.

nathan_f77 8y ago

> Also, if you sell your own shares the money goes to you, not the company. I'm a bit confused about the distinction. I'm a solo founder, so I own 100% of my company with no vesting schedule. Although I did set aside a pool of shares for employees. But even if those shares are just sitting there in the company, I still technically own them until I give them to someone else (because I own 100% of the company.) So that's just what I mean. I guess it becomes a lot more complicated when you have some cofounders and a vesting schedule.

pragmacoders 8y ago

> Going from owning 1% of a 1M company to owning 0.5% of a 2M company isn't unfair. The extra value comes directly from the new shareholders investing their money. If this we're true, investors wouldn't be adding things like dilution protection to their contracts and special stocks that have further liquidation protections (and potentially voting rights) wouldn't be the norm for non-employees. Investments are not one-to-one exchanges and employees take up most of the personal risk in the exchange due to lack of any protections as well as lack of a (personal financial) safety net if things go wrong. Though I agree with you in that whether this is fair or not has nothing to do with what modern companies will do. The reason that employees do not get these protections and rights is because they lack the leverage to demand them from the people who make those decisions within the company.