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Then in that case, the employees aren't actually providing value to be worth the favorable terms in term sheets and aren't providing a real competitive edge and

Then in that case, the employees aren't actually providing value to be worth the favorable terms in term sheets and aren't providing a real competitive edge and so aren't worth negotiating better terms for. I don't think that's the case, and if employees provide a real competitive advantage, then companies will need to be able to attract them to survive. I don't see a world where in the long run (and I admit that could be decades - it took that long for terms to become founder friendly) employees don't get more power if they actually bring value. All it takes is a few years of wework style Fiasco's where the founder walks away with a huge payday and workers get screwed before workers start negotiating harder, and founders that can oblige would be in a better position. And frankly, if that ends up not mattering for company success, then the employees clearly aren't worth getting employee friendly terms. I don't think that's the case though.

UweSchmidt 7y ago
That world would be one with an oligopoly. In this scenario less overall value would be created (through the absence of good startup employees), but oligopolists benefit (as each of their deals is safe and profitable).
- vikramkr 7y ago
  That isn't a stable equilibrium though. Just one has to break and have their portfolio companies outcompete the other funds (LPs are also always looking for the highest returns) - or a new fund can enter (there's plenty of capital to go around) - it's just not a market where there are few enough firms with strong enough incentives to hold an unstable equilibrium forever. Especially when there are LPs competing for returns. If everyone performs the same, they can't charge higher fees for their funds, they need to compete for LP money, and so on. I'm not saying it'll happen within a few years, but I'm saying on the decades (or almost century) long scales it took for the funding market to evolve to where it is, it'll evolve to take all those factors into account as well. There just aren't enough incentives to keep that sort of unstable equilibrium.

UweSchmidt 7y ago

That world would be one with an oligopoly. In this scenario less overall value would be created (through the absence of good startup employees), but oligopolists benefit (as each of their deals is safe and profitable).

vikramkr 7y ago
That isn't a stable equilibrium though. Just one has to break and have their portfolio companies outcompete the other funds (LPs are also always looking for the highest returns) - or a new fund can enter (there's plenty of capital to go around) - it's just not a market where there are few enough firms with strong enough incentives to hold an unstable equilibrium forever. Especially when there are LPs competing for returns. If everyone performs the same, they can't charge higher fees for their funds, they need to compete for LP money, and so on. I'm not saying it'll happen within a few years, but I'm saying on the decades (or almost century) long scales it took for the funding market to evolve to where it is, it'll evolve to take all those factors into account as well. There just aren't enough incentives to keep that sort of unstable equilibrium.