4 ms·

That wasn't how things were 10-15 years ago. What changed over the last decade was the pumping up of private valuations such that by the time the startups final

That wasn't how things were 10-15 years ago. What changed over the last decade was the pumping up of private valuations such that by the time the startups finally hit a liquidity event, they were overvalued.

spamizbad 7y ago
There was also some (completely unnecessary IMO) outrage when Google went public because its cafeteria's chef was given stock options and was (eventually) able to make a nice lump sum once he was able liquidate. There's definitely a misalignment between who founders think should be on the cap table vs those further up the food chain, and these long-running deals are I think partially done to cull the herd so to speak.
- kelp 7y ago
  I have a radical idea that I’d like to see put into practice. Hopefully do it myself at some point. We tell a story about risk and innovation that justifies founders and early employees getting massively more value (equity) than later employees. And the amount of equity given out falls off a cliff as the company grows. So you have some people with ownership that is 10x, 100x or even 1000x larger than others. That leads to radically different outcomes. What if we rethought equity rewards to substantially flatten those ratios? And maybe 20:1 or something was the max ratio. Then employees truly are owners. Certainly lots of issues with this half baked idea. But my overall point is that I think the typical equity pyramid is deeply unfair. It could be more equitable.
  - ssorallen 7y ago
    One story I enjoyed discovering that is similar to what you're suggesting is the early equity grants at Wizards of the Coast (publisher of Magic: the Gathering). The founder was liberal with giving out equity to people who were helping build the company, not just the pure cash investors. I too think the value early employees add in building a company far outweigh the equity grants that have become "standard" while the founders retain the vast majority of equity. > I think it was my old friend from Walla Walla, Franc Sawatzki, who donated a drafting table that we valued at something like $100. Given that the sale to Hasbro yielded over $1,400 per share, that $100 “investment” yielded something like $280,000 a decade later. Not bad! https://www.gwern.net/docs/economics/2013-adkison-wizardsofthecostequitydistribution.html https://www.gwern.net/docs/economics/2013-adkison-wizardsoft...
    - kelp 7y ago
      I started my career at the peak of dot com, and remember one of my co-workers leaving. He’d been early at Wizards of the Coast. Someone else said he was “calling in rich”.
  - gowld 7y ago
    Sure, I'd love if people in power gave me more money. Why don't they?
kelp 7y ago
This. The bulk of the returns and growth now happens pre-IPO. Then the price at IPO is disconnected from public market expectations. But you’re also at the top of the growth S curve so growth is decelerating.
- eloisant 7y ago
  But as a early employee, when you join before valuation goes up... You still make only scraps, because you're not getting that many shares to start with and "common stock" aren't worth as much as "preferred stock".
  - leet_thow 7y ago
    Common and preferred shares start to converge as a company approaches IPO. An employees gains are likely to exceed those of VCs in such an event. When companies are acquired and when liquidation preference comes into play is when employees get screwed.
brianfitz 7y ago
I remember a friend talking about how he didn't take Youtube options for some consulting work he did for them in their very early days. This was almost exactly 10 years ago and his comment was that he could have wallpapered his entire house in all the worthless equity he had been paid over the years. It was always hard, it was always rare, but only the winners get press attention.
lotsofpulp 7y ago
The answer to the title of the article could also be "where the giant and increasing profit margins", which is nowhere. I don't see any new company printing money like Facebook or Google.
- gowld 7y ago
  Does it count if a new company gets bought by then?
  - lotsofpulp 7y ago
    Good point, but other than Whatsapp/Instagram, I haven’t seen many big ones in the scale of FB/GOOG which create tons of “zillionaire”.

spamizbad 7y ago

There was also some (completely unnecessary IMO) outrage when Google went public because its cafeteria's chef was given stock options and was (eventually) able to make a nice lump sum once he was able liquidate. There's definitely a misalignment between who founders think should be on the cap table vs those further up the food chain, and these long-running deals are I think partially done to cull the herd so to speak.

kelp 7y ago
I have a radical idea that I’d like to see put into practice. Hopefully do it myself at some point. We tell a story about risk and innovation that justifies founders and early employees getting massively more value (equity) than later employees. And the amount of equity given out falls off a cliff as the company grows. So you have some people with ownership that is 10x, 100x or even 1000x larger than others. That leads to radically different outcomes. What if we rethought equity rewards to substantially flatten those ratios? And maybe 20:1 or something was the max ratio. Then employees truly are owners. Certainly lots of issues with this half baked idea. But my overall point is that I think the typical equity pyramid is deeply unfair. It could be more equitable.
- ssorallen 7y ago
  One story I enjoyed discovering that is similar to what you're suggesting is the early equity grants at Wizards of the Coast (publisher of Magic: the Gathering). The founder was liberal with giving out equity to people who were helping build the company, not just the pure cash investors. I too think the value early employees add in building a company far outweigh the equity grants that have become "standard" while the founders retain the vast majority of equity. > I think it was my old friend from Walla Walla, Franc Sawatzki, who donated a drafting table that we valued at something like $100. Given that the sale to Hasbro yielded over $1,400 per share, that $100 “investment” yielded something like $280,000 a decade later. Not bad! https://www.gwern.net/docs/economics/2013-adkison-wizardsofthecostequitydistribution.html https://www.gwern.net/docs/economics/2013-adkison-wizardsoft...
  - kelp 7y ago
    I started my career at the peak of dot com, and remember one of my co-workers leaving. He’d been early at Wizards of the Coast. Someone else said he was “calling in rich”.
- gowld 7y ago
  Sure, I'd love if people in power gave me more money. Why don't they?

kelp 7y ago

This. The bulk of the returns and growth now happens pre-IPO. Then the price at IPO is disconnected from public market expectations. But you’re also at the top of the growth S curve so growth is decelerating.

eloisant 7y ago
But as a early employee, when you join before valuation goes up... You still make only scraps, because you're not getting that many shares to start with and "common stock" aren't worth as much as "preferred stock".
- leet_thow 7y ago
  Common and preferred shares start to converge as a company approaches IPO. An employees gains are likely to exceed those of VCs in such an event. When companies are acquired and when liquidation preference comes into play is when employees get screwed.

brianfitz 7y ago

I remember a friend talking about how he didn't take Youtube options for some consulting work he did for them in their very early days. This was almost exactly 10 years ago and his comment was that he could have wallpapered his entire house in all the worthless equity he had been paid over the years. It was always hard, it was always rare, but only the winners get press attention.

lotsofpulp 7y ago

The answer to the title of the article could also be "where the giant and increasing profit margins", which is nowhere. I don't see any new company printing money like Facebook or Google.

gowld 7y ago
Does it count if a new company gets bought by then?
- lotsofpulp 7y ago
  Good point, but other than Whatsapp/Instagram, I haven’t seen many big ones in the scale of FB/GOOG which create tons of “zillionaire”.