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If no equity was available, but profit sharing was? i.e if you brought in X million you get a % of that. Would you have taken the position? I'm starting a co

If no equity was available, but profit sharing was? i.e if you brought in X million you get a % of that. Would you have taken the position? I'm starting a company, but want to retain 100% ownership. I don't want to give equity as I don't want to lose control. Been there, done that. I'd much rather go down the road of profit sharing based on the results.

jobthrowaway420 7y ago
I might have been interested, depending on the startup. One way to solve for both preferences, in tech, is to create an option pool. I broached this with an executive. He said they were looking into it, but it wouldn't be available until next year at the earliest. My interest in working full-time for them declined to 0 at that point.
- retiredcoder 7y ago
  Sounds like one of jobs I had. They treated options/warrant as something really really special, like awards/gift. I couldn’t make them realize it was part of my compensation expectations and for that I wanted to know company valuation and dilution, even if a ballpark.
Roritharr 7y ago
The problem with this is defining what profits are when you're reinvesting them or take VC and burning. At the end of the day you can't control how the CEO intends to spend the profits.
Ecco 7y ago
There’s a huge difference between losing control and giving equity. Namely, 50% (and that’s assuming equal voting eight per share). Why do you not want to give equity at all then?
OJFord 7y ago
Personally I'd see that as much more attractive for any not already pretty much 'made it' startup. It's a nearer term reward, and a more direct incentive (not just because it's nearer, but because `profit => reward` vs. `profit => ceteris paribus 'worth more' => might IPO/sell => reward`).
- pault 7y ago
  How many new companies are profitable, and if they are, why would you want to work for a new company that isn't plowing all of its profits back into research, product development, and growth?
  - AznHisoka 7y ago
    Because I get a share of their profits? If they plow all of its profits back into R&D, assuming I got no equity, what do i get as a reward? A potential chance to say i worked for a company that IPO’d? More coworkers? Profit sharing means money in the pocket for me. Actual hard, green cash.
    - pault 7y ago
      That's exactly my point. Ideally, you should take a competitive salary. If you have to take some kind of alternative compensation because you believe in the mission or whatever, most startups aren't profitable even at IPO/aquihire stage, and in the case of Amazon, could have been profitable years earlier but reinvested everything and then some. I just can't see a scenario where it makes sense to take profit sharing at a new, growing, unproven company.
  - OJFord 7y ago
    Doesn't all of that apply to equity too? I'm only saying that profit sharing sounds better than equity, of an unknown unproven startup; not that it'sa guaranteed key to making you rich.
marcinzm 7y ago
Personally, no, for a variety of reasons. A founder who is a control freak is a massive red flag on it's own. Profit sharing is also easy to game either for or against someone as the movie industry proves constantly. So I don't personally feel like playing under-handed games constantly (and if I don't, other will so we're back to square one) to maximize how much revenue is attributed to me. If I wanted to play politics I'd have joined a larger company and gotten paid a lot more than any startup. edit: Also, incentives people to think short term and pump us revenue at all costs (then find another job when it comes crashing down) which is not a great environment to work in.
flyinglizard 7y ago
Equity and control are two different things. Board seats, voting rights, stock classes etc are all tools at your disposal to create the corporate structure. Furthermore, with control you can allocate yourself options as part of your compensation, which undo some of the dilution. You certainly don't want to retain 100% ownership. You need partners who treat this business as their own and share your burden. I think cofounders are vastly overrated, while hiring key personnel and granting them significant options is not emphasised enough.
pault 7y ago
Revenue, maybe. Profit? I don't have any control over how you define profit, and you have an enormous amount of control over how you manage your revenue. Additionally, even a unicorn is going to stay in the red for years. Unless you have some financing structure that is radically different from typical startups and don't plan to reinvest in the business, profit sharing makes no sense.
- ianai 7y ago
  Not to mention revenue sharing should count as an additional cost in the profit calculation. So they should be doing that regardless.
antoinevg 7y ago
Explain to me again why I want to make you rich at my own expense? Really?
blihp 7y ago
Profit sharing no, revenue sharing yes.

jobthrowaway420 7y ago

I might have been interested, depending on the startup. One way to solve for both preferences, in tech, is to create an option pool. I broached this with an executive. He said they were looking into it, but it wouldn't be available until next year at the earliest. My interest in working full-time for them declined to 0 at that point.

retiredcoder 7y ago
Sounds like one of jobs I had. They treated options/warrant as something really really special, like awards/gift. I couldn’t make them realize it was part of my compensation expectations and for that I wanted to know company valuation and dilution, even if a ballpark.

Roritharr 7y ago

The problem with this is defining what profits are when you're reinvesting them or take VC and burning. At the end of the day you can't control how the CEO intends to spend the profits.

Ecco 7y ago

There’s a huge difference between losing control and giving equity. Namely, 50% (and that’s assuming equal voting eight per share). Why do you not want to give equity at all then?

OJFord 7y ago

Personally I'd see that as much more attractive for any not already pretty much 'made it' startup. It's a nearer term reward, and a more direct incentive (not just because it's nearer, but because `profit => reward` vs. `profit => ceteris paribus 'worth more' => might IPO/sell => reward`).

pault 7y ago
How many new companies are profitable, and if they are, why would you want to work for a new company that isn't plowing all of its profits back into research, product development, and growth?
- AznHisoka 7y ago
  Because I get a share of their profits? If they plow all of its profits back into R&D, assuming I got no equity, what do i get as a reward? A potential chance to say i worked for a company that IPO’d? More coworkers? Profit sharing means money in the pocket for me. Actual hard, green cash.
  - pault 7y ago
    That's exactly my point. Ideally, you should take a competitive salary. If you have to take some kind of alternative compensation because you believe in the mission or whatever, most startups aren't profitable even at IPO/aquihire stage, and in the case of Amazon, could have been profitable years earlier but reinvested everything and then some. I just can't see a scenario where it makes sense to take profit sharing at a new, growing, unproven company.
- OJFord 7y ago
  Doesn't all of that apply to equity too? I'm only saying that profit sharing sounds better than equity, of an unknown unproven startup; not that it'sa guaranteed key to making you rich.

marcinzm 7y ago

Personally, no, for a variety of reasons. A founder who is a control freak is a massive red flag on it's own. Profit sharing is also easy to game either for or against someone as the movie industry proves constantly. So I don't personally feel like playing under-handed games constantly (and if I don't, other will so we're back to square one) to maximize how much revenue is attributed to me. If I wanted to play politics I'd have joined a larger company and gotten paid a lot more than any startup. edit: Also, incentives people to think short term and pump us revenue at all costs (then find another job when it comes crashing down) which is not a great environment to work in.

flyinglizard 7y ago

Equity and control are two different things. Board seats, voting rights, stock classes etc are all tools at your disposal to create the corporate structure. Furthermore, with control you can allocate yourself options as part of your compensation, which undo some of the dilution. You certainly don't want to retain 100% ownership. You need partners who treat this business as their own and share your burden. I think cofounders are vastly overrated, while hiring key personnel and granting them significant options is not emphasised enough.

pault 7y ago

Revenue, maybe. Profit? I don't have any control over how you define profit, and you have an enormous amount of control over how you manage your revenue. Additionally, even a unicorn is going to stay in the red for years. Unless you have some financing structure that is radically different from typical startups and don't plan to reinvest in the business, profit sharing makes no sense.

ianai 7y ago
Not to mention revenue sharing should count as an additional cost in the profit calculation. So they should be doing that regardless.

antoinevg 7y ago

Explain to me again why I want to make you rich at my own expense? Really?

blihp 7y ago

Profit sharing no, revenue sharing yes.