39 ms·

Let's keep praying for fewer and fewer regulations, it's going great! I didn't know that VCs were ever "not cancer", I've always known them like that. Also my

by palata 1mo ago

Let's keep praying for fewer and fewer regulations, it's going great! I didn't know that VCs were ever "not cancer", I've always known them like that. Also my experience with startups is that it is a big scam for employees, but I understand it's not always the case (maybe it depends on where in the world?). I have been an early employee in multiple startups that got the founders rich, and what I got from the stocks didn't compensate for the low salary while working there. Do I understand correctly that when VCs invest, they dilute the employees and somehow the founders can get away without being diluted? That's the only way I could explain the difference between what the employees get and what the founders get if the startup is successful. And young people are super excited to work in startups because of old stories like "early employees at Google/Facebook became rich", I guess.

tistoon 1mo ago
Just move to EU, you will have all the regulations you want (maybe even more) :-)
- johnnyanmac 1mo ago
  It's an increasingly enticing offer. But they aren't exactly that open to immigration either as of late.
cratermoon 1mo ago
Startups define different classes of stock. The class A shareholders are the founders and investors. Everyone else gets class B shares. The A class shares don't get diluted, and they are inherently worth more anyway.
- palata 1mo ago
  So fundamentally, "everyone else" is scammed. Unless the class A scammers get so, so rich that everyone else gets rich as well. In which case it's still a scam, but the "everyone else" are happy anyway.
  - sershe 1mo ago
    Why is that a scam? Nobody ever promises you any specific valuation or fraction of the company. When I joined a company relatively late but well before IPO, some funny number of shares at 12 cents or whatever each did not even enter my calculation any more than "oh and they also give me a free lottery ticket". In my case depending on when one sold after IPO they would have been in the range centered around about compensating for the salary differential I think, but nobody promises you they'd ever be worth more than Monopoly money
    - palata 1mo ago
      > Nobody ever promises you any specific valuation or fraction of the company Would you mind asking before saying what I have been promised? Also it feels like you have never been in a startup. The whole language of growth everywhere, the "billion-dollar startup", the "becoming a unicorn", this is all suggesting that "you're part of it and it matters to you if it becomes a unicorn". But it doesn't, really. Because you get diluted.
      - BeetleB 1mo ago
        > But it doesn't, really. Because you get diluted. At this day and age, if you don't understand dilution before you join, it's entirely on you. This isn't a new concept - it was the case decades ago. Even when I left school over 15 years ago, the standard advice when trying to get a job with a startup was "Get a good salary and value the equity at zero." And class A vs class B isn't even a rich vs everyone else thing. I have class A shares in an LLC, where even the (richer) founders are class B. The operating agreement is that we class A folks are "guaranteed" a fixed rate of return on our investment, and the class B folks don't get anything unless we get at least that rate of return. This is very normal in that industry.
        palata 1mo ago
        > At this day and age, if you don't understand dilution before you join, it's entirely on you. I don't know what to tell you. Young graduates get an offer to work at a startup, nobody tells them how it works. They are just excited, as I was. And they don't think about "what happens if the startup is successful" because they do know it probably won't be. And when the startup is successful (happened to me) is when they realise that they got scammed. But all they can do is see their founders become rich and tell everyone why THEY deserve it because it was THEIR idea and THEY are the best. > the standard advice when trying to get a job with a startup was "Get a good salary and value the equity at zero." That does not say AT ALL that the founder gets rich when you get nothing. It says "be careful, most startups fail, so make sure you get a salary". Usually that salary is subpar.
- cyberax 1mo ago
  Anti-dilution shares were extremely uncommon.
- slowin 1mo ago
  This is not standard. Normally founders and employees get common stock and investors get preferred stock. Founders may get more stock issued in a round, and VCs/founders can pretty much rework the cap table to their liking if they really want to. The difference in return between founders and employees is down to percentages. Founders get 25-75% where employees get 0.01-1%, maybe a bit more if they're lucky.
  - palata 1mo ago
    > Founders get 25-75% where employees get 0.01-1%, maybe a bit more if they're lucky. So that's a scam by the founders to the employees, in my book. It's fine, it's just that I am not sure young professionals joining a startup know that. Said differently, if you join a startup, you should not work too much without compensation, and you should not care about making it super valuable, because you don't benefit from it. If you have a super good idea or realise you have expertise that would make the startup valuable, you should leave and become a founder yourself.
    - slowin 1mo ago
      I agree it's a scam. I just wanted to point out the way the scam works, by ownership percentage and new shares issued during new rounds (and cap table shenanigans), not generally through a different class of stock issued to founders vs employees. That's much more rare.
- robocat 1mo ago
  Founders get common stock - class A voting. VCs get preferential shares, not common. Preferential shares have economic rights to protect the investors, but more importantly they usually have extra control rights like veto abilities, board seats, IPO control, or ability to sack the founder (which may even cut out the founder's voting rights by sunsetting their class A common into class B common shares). Employees get a third tier of stock (e.g. options that convert to non-voting class B common shares). After IPO the preferential sheets becomes common shares. The dual A class may be removed or have sunset clauses because large public investors prefer one plain common share class. Not a VC - so take above as written by a student. Founders in zero sense have the same voting control as VCs. Edit: VCs play the same game over and over again, against different innocent founders. VCs know how to stack everything in their favour - especially using social cues and "norms" that benefit them. My favourite article on this is: https://siliconhillslawyer.com/2019/02/18/relationships-and-power-startup-ecosystems/ https://siliconhillslawyer.com/2019/02/18/relationships-and-...
  - cratermoon 1mo ago
    I got the details about classes of shares and preferential stuff technically wrong, it’s true. I still got the gist of the arrangement correct: VCs and founders get the pizza, everyone else gets the crusts
- barchar 1mo ago
  Pref shares do get diluted, they are however senior to common stock so they get money FIRST if there’s not enough to go around. There is some cap on this and sometimes it’s pretty high. Huge pref overhangs are, indeed, a problem. Pref shares with a 1x preference are still worth like 10x common stock in early stage companies and it’s common for employed to get fucked by this. Founders don’t get preferred shares (I think it’s really, really rare). There is founder pref stock, which is somewhat different. It’s common for founders to cash out some shares along the way, though.
  - robocat 1mo ago
    Founders that take a pay cut from a high paying job should demand preferential shares to the value they are giving up. If they were in job where they were saving $50k a year, then after becoming a founder they should be getting $50k worth of preferential shares per year because they are investing that much in the business. Not that I've actually ever heard of founders getting preferential shares to match their dollars invested.
carlosjobim 1mo ago
Everything which is not your salary is completely speculative, and should be valued at near-zero. That you wanted to gamble on that was your own decision and your own fault. You have nobody to blame but yourself. If you had gotten rich from the stocks you wouldn't have complained here.
- palata 1mo ago
  > If you had gotten rich from the stocks you wouldn't have complained here. Duh. > That you wanted to gamble on that What makes you think I gambled at all?
  - carlosjobim 1mo ago
    You said that you worked for a low salary at startups and feel scammed because of that. You could have worked somewhere else instead for a higher salary if you weren't gambling. Or if nobody would have hired you for a higher salary somewhere else, then maybe your salary at the startups wasn't so low after all?
    - palata 1mo ago
      If you want to go with that tone... I wonder if you did not understand my English or if you lack basic logic? I did not say that I felt scam because of my low salary. I said that I felt scam because the founders got rich and what I got didn't compensate the low salary. Said differently, the founders got rich and I didn't get much at all. When I say "not much", it means "not nothing, but not a lot".
      - carlosjobim 1mo ago
        You took a gamble on a lower salary with the expectation that it would be compensated by your company stock going up in value. I told you that there is no such guarantee, the only thing guaranteed is the salary you agree on. Everything else is speculative = gambling. Which is your decision, but don't cry later that you got scammed and that VC are cancer and so on. But there's no reason for me to teach you, because you already learned it the hard way.

by palata 1mo ago

tistoon 1mo ago

Just move to EU, you will have all the regulations you want (maybe even more) :-)

johnnyanmac 1mo ago
It's an increasingly enticing offer. But they aren't exactly that open to immigration either as of late.

cratermoon 1mo ago

Startups define different classes of stock. The class A shareholders are the founders and investors. Everyone else gets class B shares. The A class shares don't get diluted, and they are inherently worth more anyway.

palata 1mo ago
So fundamentally, "everyone else" is scammed. Unless the class A scammers get so, so rich that everyone else gets rich as well. In which case it's still a scam, but the "everyone else" are happy anyway.
- sershe 1mo ago
  Why is that a scam? Nobody ever promises you any specific valuation or fraction of the company. When I joined a company relatively late but well before IPO, some funny number of shares at 12 cents or whatever each did not even enter my calculation any more than "oh and they also give me a free lottery ticket". In my case depending on when one sold after IPO they would have been in the range centered around about compensating for the salary differential I think, but nobody promises you they'd ever be worth more than Monopoly money
  - palata 1mo ago
    > Nobody ever promises you any specific valuation or fraction of the company Would you mind asking before saying what I have been promised? Also it feels like you have never been in a startup. The whole language of growth everywhere, the "billion-dollar startup", the "becoming a unicorn", this is all suggesting that "you're part of it and it matters to you if it becomes a unicorn". But it doesn't, really. Because you get diluted.
    - BeetleB 1mo ago
      > But it doesn't, really. Because you get diluted. At this day and age, if you don't understand dilution before you join, it's entirely on you. This isn't a new concept - it was the case decades ago. Even when I left school over 15 years ago, the standard advice when trying to get a job with a startup was "Get a good salary and value the equity at zero." And class A vs class B isn't even a rich vs everyone else thing. I have class A shares in an LLC, where even the (richer) founders are class B. The operating agreement is that we class A folks are "guaranteed" a fixed rate of return on our investment, and the class B folks don't get anything unless we get at least that rate of return. This is very normal in that industry.
      - palata 1mo ago
        > At this day and age, if you don't understand dilution before you join, it's entirely on you. I don't know what to tell you. Young graduates get an offer to work at a startup, nobody tells them how it works. They are just excited, as I was. And they don't think about "what happens if the startup is successful" because they do know it probably won't be. And when the startup is successful (happened to me) is when they realise that they got scammed. But all they can do is see their founders become rich and tell everyone why THEY deserve it because it was THEIR idea and THEY are the best. > the standard advice when trying to get a job with a startup was "Get a good salary and value the equity at zero." That does not say AT ALL that the founder gets rich when you get nothing. It says "be careful, most startups fail, so make sure you get a salary". Usually that salary is subpar.
cyberax 1mo ago
Anti-dilution shares were extremely uncommon.
slowin 1mo ago
This is not standard. Normally founders and employees get common stock and investors get preferred stock. Founders may get more stock issued in a round, and VCs/founders can pretty much rework the cap table to their liking if they really want to. The difference in return between founders and employees is down to percentages. Founders get 25-75% where employees get 0.01-1%, maybe a bit more if they're lucky.
- palata 1mo ago
  > Founders get 25-75% where employees get 0.01-1%, maybe a bit more if they're lucky. So that's a scam by the founders to the employees, in my book. It's fine, it's just that I am not sure young professionals joining a startup know that. Said differently, if you join a startup, you should not work too much without compensation, and you should not care about making it super valuable, because you don't benefit from it. If you have a super good idea or realise you have expertise that would make the startup valuable, you should leave and become a founder yourself.
  - slowin 1mo ago
    I agree it's a scam. I just wanted to point out the way the scam works, by ownership percentage and new shares issued during new rounds (and cap table shenanigans), not generally through a different class of stock issued to founders vs employees. That's much more rare.
robocat 1mo ago
Founders get common stock - class A voting. VCs get preferential shares, not common. Preferential shares have economic rights to protect the investors, but more importantly they usually have extra control rights like veto abilities, board seats, IPO control, or ability to sack the founder (which may even cut out the founder's voting rights by sunsetting their class A common into class B common shares). Employees get a third tier of stock (e.g. options that convert to non-voting class B common shares). After IPO the preferential sheets becomes common shares. The dual A class may be removed or have sunset clauses because large public investors prefer one plain common share class. Not a VC - so take above as written by a student. Founders in zero sense have the same voting control as VCs. Edit: VCs play the same game over and over again, against different innocent founders. VCs know how to stack everything in their favour - especially using social cues and "norms" that benefit them. My favourite article on this is: https://siliconhillslawyer.com/2019/02/18/relationships-and-power-startup-ecosystems/ https://siliconhillslawyer.com/2019/02/18/relationships-and-...
- cratermoon 1mo ago
  I got the details about classes of shares and preferential stuff technically wrong, it’s true. I still got the gist of the arrangement correct: VCs and founders get the pizza, everyone else gets the crusts
barchar 1mo ago
Pref shares do get diluted, they are however senior to common stock so they get money FIRST if there’s not enough to go around. There is some cap on this and sometimes it’s pretty high. Huge pref overhangs are, indeed, a problem. Pref shares with a 1x preference are still worth like 10x common stock in early stage companies and it’s common for employed to get fucked by this. Founders don’t get preferred shares (I think it’s really, really rare). There is founder pref stock, which is somewhat different. It’s common for founders to cash out some shares along the way, though.
- robocat 1mo ago
  Founders that take a pay cut from a high paying job should demand preferential shares to the value they are giving up. If they were in job where they were saving $50k a year, then after becoming a founder they should be getting $50k worth of preferential shares per year because they are investing that much in the business. Not that I've actually ever heard of founders getting preferential shares to match their dollars invested.

carlosjobim 1mo ago

Everything which is not your salary is completely speculative, and should be valued at near-zero. That you wanted to gamble on that was your own decision and your own fault. You have nobody to blame but yourself. If you had gotten rich from the stocks you wouldn't have complained here.

palata 1mo ago
> If you had gotten rich from the stocks you wouldn't have complained here. Duh. > That you wanted to gamble on that What makes you think I gambled at all?
- carlosjobim 1mo ago
  You said that you worked for a low salary at startups and feel scammed because of that. You could have worked somewhere else instead for a higher salary if you weren't gambling. Or if nobody would have hired you for a higher salary somewhere else, then maybe your salary at the startups wasn't so low after all?
  - palata 1mo ago
    If you want to go with that tone... I wonder if you did not understand my English or if you lack basic logic? I did not say that I felt scam because of my low salary. I said that I felt scam because the founders got rich and what I got didn't compensate the low salary. Said differently, the founders got rich and I didn't get much at all. When I say "not much", it means "not nothing, but not a lot".
    - carlosjobim 1mo ago
      You took a gamble on a lower salary with the expectation that it would be compensated by your company stock going up in value. I told you that there is no such guarantee, the only thing guaranteed is the salary you agree on. Everything else is speculative = gambling. Which is your decision, but don't cry later that you got scammed and that VC are cancer and so on. But there's no reason for me to teach you, because you already learned it the hard way.