3 ms·

Even with $10-$100 million range exits, typical founders are doing more than okay. Assuming founders are still in charge, they’re often given substantial bonus

Even with $10-$100 million range exits, typical founders are doing more than okay. Assuming founders are still in charge, they’re often given substantial bonuses ($1-2mm or more) if an acquisition would make their equity worthless. This is done to align their incentives with getting the acquisition done, otherwise they’ll hold out. Also, founders tend to pay themselves market rate once the company has grown significantly. In your scenario they wouldn’t take the reduced $150K salary forever. The bigger risk is to employees of startups. They don’t get the generous acquisition bonuses of other companies. That said, founders of any startup that makes a mark are usually in high demand. Even if they fail, they can point to a lot of experience that few others have.

robocat 5y ago
> Even with $10-$100 million range exits, typical founders are doing more than okay. Survivorship bias. The big unknown is how many founders didn’t make enough money? I would be very interested to see some stats on YC company failures (didn’t exit, or common shares returned zero). We hear a lot about the big successes, but we don’t hear about the legions of failures. A founder needs to return somewhere between 20x[1] and 50x investment to cover risk e.g. $150k opportunity cost in first year needs 3 million to 7.5 million returns to cover risks (power distribution, so return is dominated by unicorn outcomes). > they’re often given substantial bonuses ($1-2mm or more) That is the successful startups - again what matters is the dominant number of unsuccessful startups, which most likely are not giving out big bonuses. [1] https://techcrunch.com/2017/06/01/the-meeting-that-showed-me-the-truth-about-vcs https://techcrunch.com/2017/06/01/the-meeting-that-showed-me... (a) only 5% of VC funds achieve an acceptable return*, and (b) “realistic” scenario for that 5% result is: “Five startups fail and do $0, three exit at $25 million, one exits at $200 million and our superstar does $1 billion, (c) founders get common shares, (d) many founders won’t get paid by their company much more than their opportunity cost (especially because founders of unsuccessful startups are most likely to get underperforming pay).

robocat 5y ago

> Even with $10-$100 million range exits, typical founders are doing more than okay. Survivorship bias. The big unknown is how many founders didn’t make enough money? I would be very interested to see some stats on YC company failures (didn’t exit, or common shares returned zero). We hear a lot about the big successes, but we don’t hear about the legions of failures. A founder needs to return somewhere between 20x[1] and 50x investment to cover risk e.g. $150k opportunity cost in first year needs 3 million to 7.5 million returns to cover risks (power distribution, so return is dominated by unicorn outcomes). > they’re often given substantial bonuses ($1-2mm or more) That is the successful startups - again what matters is the dominant number of unsuccessful startups, which most likely are not giving out big bonuses. [1] https://techcrunch.com/2017/06/01/the-meeting-that-showed-me-the-truth-about-vcs https://techcrunch.com/2017/06/01/the-meeting-that-showed-me... (a) only 5% of VC funds achieve an acceptable return*, and (b) “realistic” scenario for that 5% result is: “Five startups fail and do $0, three exit at $25 million, one exits at $200 million and our superstar does $1 billion, (c) founders get common shares, (d) many founders won’t get paid by their company much more than their opportunity cost (especially because founders of unsuccessful startups are most likely to get underperforming pay).