There are founders [owners] and investors. Fact that there are people who 'work for' startup is irrelevant to the interplay between the investment risk/return.

There are founders [owners] and investors. Fact that there are people who 'work for' startup is irrelevant to the interplay between the investment risk/return. True, one can be not-a-founder and work for startup. But this person would be just working for salary, and hopefully at market rate. So it is irrelevant to the investment risk/return equation. Now if one is not working at MARKET RATE - here we have some muddy waters. Because this person would be essentially making a monthly investment. This investment would likely go towards COMMON [not restricted] stocks, WITH vesting/cliff, with NO CAP. If this is the case, one can just assume that startup would have an angel investor doing a monthly investment on these terms. This would go into risk/return equation. Again fact that somebody is working is irrelevant to risk/return. That's why I've said that your 2x2 matrix doesn't make sense. Now, you can replace 'work for' with 'founder' and it would make sense. And by the way, if you read the original pg article, he doesn't mention people who 'work for' startups at all. He is talking about founders and VCs.