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If you go into a casino, put 1000 on green at the roulette table and win, did you get a good deal? The fact that some people win at startup roulette doesn't me

If you go into a casino, put 1000 on green at the roulette table and win, did you get a good deal? The fact that some people win at startup roulette doesn't mean that it's a good financial decision to join a startup, especially considering that you can make the same sort of money without the risk elsewhere.

chadash 8y ago
Parent started with "It's bad for most people, but when it's good it's really good.". So yes, roulette is similarly bad for those who don't win and good for the few who do.
- deleted 8y ago
  [deleted]
- aliston 8y ago
  Article is titled "why a good deal has gone bad." My point is that winning does not make it a good deal. To expand on it further, even if you are lucky to have joined a unicorn, you still didn't get a good deal in comparison to virtually everyone else involved in the company. The founders are likely billionaires and you made off with a low 7 figure outcome while taking on only marginally less risk. That's not a good deal by any reasonable definition.
  - jerguismi 8y ago
    > To expand on it further, even if you are lucky to have joined a unicorn, you still didn't get a good deal in comparison to virtually everyone else involved in the company. The founders are likely billionaires and you made off with a low 7 figure outcome while taking on only marginally less risk. That's not a good deal by any reasonable definition. I wouldn't see the risk of being an employee and founder as similar. Typically often founders are for time periods without salary etc. Early employee should just consider it as a job with more risk of the company going down under (that risk also exists in more established company). You can request more salary for the job or some additional perks (such as options). I think for the employee the risks of joining to startup are quite easy to manage compared to a founder.
    - wolco 8y ago
      The issue is you can't ask for more money. Increased risk of a startup should mean increased salary. What it has turned into is lower salary with options to get rewarded if all goes extremely well. If things go only okay then the salary is about the same. The risk can be higher for a founder but could be more risky for an employee based on personal situations. The reward ratio is higher for founder and control over risk is in their hands.
  - nostrademons 8y ago
    The rational comparison is whether you got a good deal relative to the other options open to you, not whether you got a good deal relative to the other people involved in the startup. By the time a startup has raised VC and hired employees, they've usually already passed several risky filters: they've found a market, they've built an initial proof-of-concept themselves, they've convinced investors to give them money, and they convinced you to work for them. You have the option to swap places with the founders and become a founder yourself. But if you do that, you have to clear the same hurdles the founders did - validate a market, build an initial product, convince people to give you money. And you bear the financial risk that any one of these steps won't work out yourself. One (productive, IME) way to look at the founder/investor/early-employee/late-employee divide is to think of it as risk apportionment. The founder risks their time & effort for a potentially large payoff if those risks succeed. The investor risks their money on the assumption that the founder can turn it into more money. The employee trades away the financial risk that the venture as a whole might not succeed for reasons outside his control in exchange for ceding most of the rewards if it does. Depending on your risk tolerance and belief in whether the company will succeed, you might choose to occupy different roles in that ecosystem. But understand that what you're being compensated for, when you have an outlandish success that nets a big payoff, is all the ways that payoff could have gone wrong and you might've ended up with nothing.
    - lostcolony 8y ago
      I disagree. If that's the only consideration, it creates incentive for the super rich to ensure all other options are bad; that'll ensure you pick the least bad option, the one that benefits them the most. You have to include whether you are enabling greater income disparity, to ensure there is a disincentive for those in power to create that sort of environment for you. It is rational to consider both what benefits you, -and- what benefits society at large, and if you have sufficiently not terrible options to choose from, picking the one that does not greatly enrich another on your effort is a positive.
  - chadash 8y ago
    A founder takes far more risk than an employee. It's easy to look at extremely successful outliers and say in retrospect that they are unfairly wealthy, but for every Sergey Brin or Elon Musk, there are many many people who slave away at a company for years at a very small salary, burning through their savings and getting loans (or "investments") from friends and family. Take Jeff Bezos. He was a fairly wealthy guy, having worked at D.E. Shaw before founding Amazon. Still, he took a $250k investment from his parents to help found the company. Yes, it turned out to be a great investment, possibly worth $30 billion today, but at the time, the more likely outcome was that it would be worth $0. So not only did he risk his own money, but that of his friends and family on his new venture. Contrast this to an early employee who starts after the first round of outside money is made. That employee often gets paid a competitive salary (maybe not a FAANG level salary, but something that's fairly easy to live comfortably on). They certainly are not expected to raise money for the company. It's just a much safer thing to do, that really doesn't involve nearly as much sacrifice as the founder. Now, I agree that there is a point where the rewards may not justify the risks, which is joining a company in the pre-series A stage. At this point, you might be asked to take a very significant salary/benefits cut, while your share of the company is likely to be in the low single digits (percent-wise). At that stage, I personally don't think the risk/reward ratio is fair (i.e. i think that stock grants to these early employees should generally be higher than they are).
    - maxxxxx 8y ago
      "Still, he took a $250k investment from his parents to help found the company." Seems he is another wealthy guy who "made it on his own". I couldn't raise even a 10th of that from my family.

chadash 8y ago

Parent started with "It's bad for most people, but when it's good it's really good.". So yes, roulette is similarly bad for those who don't win and good for the few who do.

deleted 8y ago
[deleted]
aliston 8y ago
Article is titled "why a good deal has gone bad." My point is that winning does not make it a good deal. To expand on it further, even if you are lucky to have joined a unicorn, you still didn't get a good deal in comparison to virtually everyone else involved in the company. The founders are likely billionaires and you made off with a low 7 figure outcome while taking on only marginally less risk. That's not a good deal by any reasonable definition.
- jerguismi 8y ago
  > To expand on it further, even if you are lucky to have joined a unicorn, you still didn't get a good deal in comparison to virtually everyone else involved in the company. The founders are likely billionaires and you made off with a low 7 figure outcome while taking on only marginally less risk. That's not a good deal by any reasonable definition. I wouldn't see the risk of being an employee and founder as similar. Typically often founders are for time periods without salary etc. Early employee should just consider it as a job with more risk of the company going down under (that risk also exists in more established company). You can request more salary for the job or some additional perks (such as options). I think for the employee the risks of joining to startup are quite easy to manage compared to a founder.
  - wolco 8y ago
    The issue is you can't ask for more money. Increased risk of a startup should mean increased salary. What it has turned into is lower salary with options to get rewarded if all goes extremely well. If things go only okay then the salary is about the same. The risk can be higher for a founder but could be more risky for an employee based on personal situations. The reward ratio is higher for founder and control over risk is in their hands.
- nostrademons 8y ago
  The rational comparison is whether you got a good deal relative to the other options open to you, not whether you got a good deal relative to the other people involved in the startup. By the time a startup has raised VC and hired employees, they've usually already passed several risky filters: they've found a market, they've built an initial proof-of-concept themselves, they've convinced investors to give them money, and they convinced you to work for them. You have the option to swap places with the founders and become a founder yourself. But if you do that, you have to clear the same hurdles the founders did - validate a market, build an initial product, convince people to give you money. And you bear the financial risk that any one of these steps won't work out yourself. One (productive, IME) way to look at the founder/investor/early-employee/late-employee divide is to think of it as risk apportionment. The founder risks their time & effort for a potentially large payoff if those risks succeed. The investor risks their money on the assumption that the founder can turn it into more money. The employee trades away the financial risk that the venture as a whole might not succeed for reasons outside his control in exchange for ceding most of the rewards if it does. Depending on your risk tolerance and belief in whether the company will succeed, you might choose to occupy different roles in that ecosystem. But understand that what you're being compensated for, when you have an outlandish success that nets a big payoff, is all the ways that payoff could have gone wrong and you might've ended up with nothing.
  - lostcolony 8y ago
    I disagree. If that's the only consideration, it creates incentive for the super rich to ensure all other options are bad; that'll ensure you pick the least bad option, the one that benefits them the most. You have to include whether you are enabling greater income disparity, to ensure there is a disincentive for those in power to create that sort of environment for you. It is rational to consider both what benefits you, -and- what benefits society at large, and if you have sufficiently not terrible options to choose from, picking the one that does not greatly enrich another on your effort is a positive.
- chadash 8y ago
  A founder takes far more risk than an employee. It's easy to look at extremely successful outliers and say in retrospect that they are unfairly wealthy, but for every Sergey Brin or Elon Musk, there are many many people who slave away at a company for years at a very small salary, burning through their savings and getting loans (or "investments") from friends and family. Take Jeff Bezos. He was a fairly wealthy guy, having worked at D.E. Shaw before founding Amazon. Still, he took a $250k investment from his parents to help found the company. Yes, it turned out to be a great investment, possibly worth $30 billion today, but at the time, the more likely outcome was that it would be worth $0. So not only did he risk his own money, but that of his friends and family on his new venture. Contrast this to an early employee who starts after the first round of outside money is made. That employee often gets paid a competitive salary (maybe not a FAANG level salary, but something that's fairly easy to live comfortably on). They certainly are not expected to raise money for the company. It's just a much safer thing to do, that really doesn't involve nearly as much sacrifice as the founder. Now, I agree that there is a point where the rewards may not justify the risks, which is joining a company in the pre-series A stage. At this point, you might be asked to take a very significant salary/benefits cut, while your share of the company is likely to be in the low single digits (percent-wise). At that stage, I personally don't think the risk/reward ratio is fair (i.e. i think that stock grants to these early employees should generally be higher than they are).
  - maxxxxx 8y ago
    "Still, he took a $250k investment from his parents to help found the company." Seems he is another wealthy guy who "made it on his own". I couldn't raise even a 10th of that from my family.