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This is dumb. There are at least three sides the equity equation: founders, VCs/investors and employees. I notice that only two are considered "variable" in th

This is dumb. There are at least three sides the equity equation: founders, VCs/investors and employees. I notice that only two are considered "variable" in this article: founder and employee. The fact is, VCs/Investors are becoming less needed than they were 10-20 years ago. Why wouldn't it be logical for their stake to take a hit for the money they put in?

walshemj 12y ago
But dont a lot of emploee share options get diluted away in later rounds.
- fingerprinter 12y ago
  Yes, which is another reason they would need more initial shares or a better structure.
tptacek 12y ago
Because at the margin, of the three parties we're discussing, the investors have the least market pressure. For all the talk of valuation bubbles, top-tier VC firms still fund one company for every ten-twenty-thirty? companies they meet with.
- fingerprinter 12y ago
  That just tells me that VCs should be taking less. The fact remains that Fred only looked at two options; either the founder stake goes down or the employee pool does. A third option also exists...Investor total share goes down. I personally believe we will see this more in the future.
  - tptacek 12y ago
    The VCs are going to take what the market will bear, is my point.
malandrew 12y ago
Ironically one of the main forces keeping VCs relevant is the cost of living in the regions where the most capital is available. However, it would possibly be in the VC industry's interest to invest a team willing to create a startup that begins as a town (but owns enough surrounding land to grow into a city) that puts engineers first. Google effectively does this, but it bounded by geography and therefore can't control the cost of living for its employees. It engages with the rest of the world through capitalism while practicing some degree of socialism within the company. This would allow the VC industry to risk far less while still affording the founders and employees a very high quality of life. Honestly, I'm surprised we haven't seen Peter Thiel and Co actually bankroll a project like this himself since he is such a proponent of ideas like this.

walshemj 12y ago

But dont a lot of emploee share options get diluted away in later rounds.

fingerprinter 12y ago
Yes, which is another reason they would need more initial shares or a better structure.

tptacek 12y ago

Because at the margin, of the three parties we're discussing, the investors have the least market pressure. For all the talk of valuation bubbles, top-tier VC firms still fund one company for every ten-twenty-thirty? companies they meet with.

fingerprinter 12y ago
That just tells me that VCs should be taking less. The fact remains that Fred only looked at two options; either the founder stake goes down or the employee pool does. A third option also exists...Investor total share goes down. I personally believe we will see this more in the future.
- tptacek 12y ago
  The VCs are going to take what the market will bear, is my point.

malandrew 12y ago

Ironically one of the main forces keeping VCs relevant is the cost of living in the regions where the most capital is available. However, it would possibly be in the VC industry's interest to invest a team willing to create a startup that begins as a town (but owns enough surrounding land to grow into a city) that puts engineers first. Google effectively does this, but it bounded by geography and therefore can't control the cost of living for its employees. It engages with the rest of the world through capitalism while practicing some degree of socialism within the company. This would allow the VC industry to risk far less while still affording the founders and employees a very high quality of life. Honestly, I'm surprised we haven't seen Peter Thiel and Co actually bankroll a project like this himself since he is such a proponent of ideas like this.