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A lot more founders and employees are heavily diluted than you think. I always just assumed massive exits meant people were rich. But when I calculated out how
by engineercodex 3y ago
A lot more founders and employees are heavily diluted than you think. I always just assumed massive exits meant people were rich.
But when I calculated out how much an exec would make for a diluted $1B exit compared to working at FAANG for the same amount of time... FAANG turned out better many times (unfortunately).
I think preventing dilution should be one of the highest priorities for founders for themselves and for retention. Every single dilution event sets the outcome bar higher and, thus, harder to achieve.
- steveBK123 3y agoYeah I mean, it can get diluted pretty quick right! Say you co-found with 1-2 others, so you start at 30-51%. You want to attract some good talent, so you give away 10% to early hires. Each funding round you give up 15-25%. You can see how your equity can quickly get below 10%. Zuck managed to hold onto ~30% but your typical control is much lower these days. Musk had 28% of Tesla at IPO. Kalanick had 8% of Uber at IPO. Foley had 6% of Peloton at IPO. Splunk 3 co-founders had 5-7.5% each at IPO. Butterfield had 8% at Slack IPO. So you may be foregoing 10 years of $700K FAANG comp for a ~$80M payday (8% equity of $1B unicorn exit). To me it raises the question if non-founder startup equity is basically worthless. If a founder ends up diluted down to 8% at exit, what happens to the 0.5-1% shares you get promised at hire? 0.06-0.125% ?? So your first senior engineer hire into a unicorn equity might end up worth a grand $1M at IPO? Ouch. Go grind some leetcode and work for FAANG and make that in 2 years.