6 ms·

You do it as a partnership where new employees buy into the company when they get hired.

by Benjaminsen 2y ago

shawabawa3 2y ago
It would be very hard to find talent willing to do that
- righthand 2y ago
  I doubt it if everyone is leaving mega tech corps at 30-40 years old nearly ready to retire.
- dkekenflxlf 2y ago
  Actually, some of the Big4 has a partner model where you can buy in if you are promoted to partner level
WrongAssumption 2y ago
No one is doing that. Reality is employees want the upside without the downside risk.
- righthand 2y ago
  But VC backed companies have way more risk for average employees. How can that be true if you might never get a non-diluted share or any compensation when sold off?
  - datavirtue 2y ago
    Employees are always at great risk.
- ghaff 2y ago
  It happens with partnerships sometimes. But it's generally a pretty risky move for a would-be partner to make unless there's already a money-making engine.
csa 2y ago
> You do it as a partnership where new employees buy into the company when they get hired. Practically speaking, this does not work in most businesses. But maybe you have an idea that I haven’t seen. What would some numbers look like for a company and what would the buy in be for a new employee?
- righthand 2y ago
  There is a base package of employee shares you get upon being hired. The investment portion would be separate from the base package as part of adding the investor-employee to the company.
  - csa 2y ago
    > There is a base package of employee shares you get upon being hired. Where do these shares come from? Do you dilute the pool? Will people who are no longer part of the company (but are still partial owners) want their ownership pool diluted? If so, how fast can you grow before they start saying no? > The investment portion would be separate from the base package as part of adding the investor-employee to the company. Where does that money come from? Employee stock ownership plans where money is taken from their salary? How much has to be invested before they feel like owners? And again, where do these shares come from? Is there a market? Is the share pool diluted? If dilution occurs, what’s the mechanism for this?
    - righthand 2y ago
      > Where do these shares come from? This is obviously decided by the employees. One option is that the company reserves a pool of shares for hiring, another is to dilute. Again voted and agreed on by the people that work there. > The investment portion… > Where does that money come from? “The investment portion” is the portion of the package you’re giving your investor in exchange for the money being invested. That part of the package could include: more shares, a later lump sum payment, etc. I imagine the share dilution or split or whatever would be tied the continued success of the business, requiring everyone to understand how adding a person would financially change their risk/ownership pool.
closeparen 2y ago
That is basically the 1% equity founding engineer model! You "buy in" with free labor, the delta between your compensation and market rate. Some of the problems are: * You can only "invest" in one company at a time this way, so the risk profile is much worse for you than for a VC with a lot of different portfolio companies. * It's rare for a 100-person company to be valuable enough that a 1% equity stake is competitive with the levels.fyi payscale.

You do it as a partnership where new employees buy into the company when they get hired.

shawabawa3 2y ago

It would be very hard to find talent willing to do that

righthand 2y ago
I doubt it if everyone is leaving mega tech corps at 30-40 years old nearly ready to retire.
dkekenflxlf 2y ago
Actually, some of the Big4 has a partner model where you can buy in if you are promoted to partner level

WrongAssumption 2y ago

No one is doing that. Reality is employees want the upside without the downside risk.

righthand 2y ago
But VC backed companies have way more risk for average employees. How can that be true if you might never get a non-diluted share or any compensation when sold off?
- datavirtue 2y ago
  Employees are always at great risk.
ghaff 2y ago
It happens with partnerships sometimes. But it's generally a pretty risky move for a would-be partner to make unless there's already a money-making engine.

csa 2y ago

> You do it as a partnership where new employees buy into the company when they get hired. Practically speaking, this does not work in most businesses. But maybe you have an idea that I haven’t seen. What would some numbers look like for a company and what would the buy in be for a new employee?

righthand 2y ago
There is a base package of employee shares you get upon being hired. The investment portion would be separate from the base package as part of adding the investor-employee to the company.
- csa 2y ago
  > There is a base package of employee shares you get upon being hired. Where do these shares come from? Do you dilute the pool? Will people who are no longer part of the company (but are still partial owners) want their ownership pool diluted? If so, how fast can you grow before they start saying no? > The investment portion would be separate from the base package as part of adding the investor-employee to the company. Where does that money come from? Employee stock ownership plans where money is taken from their salary? How much has to be invested before they feel like owners? And again, where do these shares come from? Is there a market? Is the share pool diluted? If dilution occurs, what’s the mechanism for this?
  - righthand 2y ago
    > Where do these shares come from? This is obviously decided by the employees. One option is that the company reserves a pool of shares for hiring, another is to dilute. Again voted and agreed on by the people that work there. > The investment portion… > Where does that money come from? “The investment portion” is the portion of the package you’re giving your investor in exchange for the money being invested. That part of the package could include: more shares, a later lump sum payment, etc. I imagine the share dilution or split or whatever would be tied the continued success of the business, requiring everyone to understand how adding a person would financially change their risk/ownership pool.

closeparen 2y ago

That is basically the 1% equity founding engineer model! You "buy in" with free labor, the delta between your compensation and market rate. Some of the problems are: * You can only "invest" in one company at a time this way, so the risk profile is much worse for you than for a VC with a lot of different portfolio companies. * It's rare for a 100-person company to be valuable enough that a 1% equity stake is competitive with the levels.fyi payscale.