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If the risk isn't being compensated, I'm with you on that point. That's Bullshit! But the... "founders have a much greater risk/reward ratio than employees", th

If the risk isn't being compensated, I'm with you on that point. That's Bullshit! But the... "founders have a much greater risk/reward ratio than employees", that is not a fallacy in most cases. In my own case, I've been working for 18 months with no salary and I don't consider myself unique. Most founders go down the same long long road before they bring on their first employee. I've learned that most employees (if they haven't gone through the process of founding a company) dismiss the amount of risk founders take on to get a company to the point of even being able to make their first hire. The whole question seems like we should create a standard model for the risk reward and set equity appropriately.

potatolicious 14y ago
> "dismiss the amount of risk founders take on to get a company to the point of even being able to make their first hire." I don't think this is really the issue. The issue is that the economics of startups don't really work if you expect below-market salaries to be a thing. Founders shoulder tremendous risk and (the smart ones) live on starvation-level salaries for months, if not years, before they bring on their first employee. Sure - and they deserve to be compensated appropriately via equity. Employees, having taken on only minimal risk, don't deserve much equity at all - equity at this point is a bonus and a motivator to act in the company's best interests. This works great. The problem comes along when we bring in sub-market salaries. The reduction in salary or benefits demands an increase in equity - equity coming directly out of the founders. And here's where it all falls apart: to make up for below-market compensation, the amount of equity that would be rationally required would mean too little equity to account for founder risk. The numbers simply do not add up.
- seeingfurther 14y ago
  I agree, the risk vs reward has to be fair and make sense. Below market salary AND very little equity is just plain wrong. You better be curing cancer, going to space or some intangible that makes that sort of equation worthwhile. Most startups don't. Space X comes to mind though :-)

potatolicious 14y ago

> "dismiss the amount of risk founders take on to get a company to the point of even being able to make their first hire." I don't think this is really the issue. The issue is that the economics of startups don't really work if you expect below-market salaries to be a thing. Founders shoulder tremendous risk and (the smart ones) live on starvation-level salaries for months, if not years, before they bring on their first employee. Sure - and they deserve to be compensated appropriately via equity. Employees, having taken on only minimal risk, don't deserve much equity at all - equity at this point is a bonus and a motivator to act in the company's best interests. This works great. The problem comes along when we bring in sub-market salaries. The reduction in salary or benefits demands an increase in equity - equity coming directly out of the founders. And here's where it all falls apart: to make up for below-market compensation, the amount of equity that would be rationally required would mean too little equity to account for founder risk. The numbers simply do not add up.

seeingfurther 14y ago
I agree, the risk vs reward has to be fair and make sense. Below market salary AND very little equity is just plain wrong. You better be curing cancer, going to space or some intangible that makes that sort of equation worthwhile. Most startups don't. Space X comes to mind though :-)