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"The first reason is that you want he founders to be focused on the company, and not struggling to make ends meet." Pay yourself a higher salary. If you're pay
by ztratar 11y ago
"The first reason is that you want he founders to be focused on the company, and not struggling to make ends meet."
Pay yourself a higher salary. If you're paying yourself less than 80k, bump it up. When you're selling stock, you're usually talking about tens of thousands of value at the minimum. Founders and especially employees shouldn't seek to take money off the table because it rewards them for hitting the wrong milestones. Fundraising is not the goal -- a sustainable business is. They should get rewarded for the latter and use the former as a source of fuel to achieve it.
"Secondly, every round the founders lose more and more control. They should be compensated for this."
They are compensated for this in the form of their net worth skyrocketing come fundraising event. Really, the question is should they receive liquid compensation. Sure, it would be nice for some risk to be left off the table, but if you signal to people that you're selling your own stock, what does that do to the employees mentalities? The cost is higher than the reward.
"One of the big problems with venture capital these days (and the reason I won't take it anymore) is that it disrespects the founders by demanding liquidation preferences for the VCs."
I agree! If the stock is liquid, I see no reason why VCs should get preference... the only thought that comes to mind is that they wouldn't invest if the preferred treatment didn't exist, or that the funding market would be significantly smaller. Remember... VCs are paid a lot to mostly lose money.
- AndrewKemendo 11y agonet worth skyrocketing come fundraising event Which is monopoly net worth - those billionaire charts are fantasy land when it comes to actual liquidity as we all know. but if you signal to people that you're selling your own stock, what does that do to the employees mentalities? Ok, fine. Then make the deal that employees have the option to liquidate a percentage of shares at the same time. Ends up looking like a dividend.
- socrates2016 11y agoNot all VCs are in it for sustainable businesses. Same goes for the founders. This is the case for at least one company that Google Ventures invested and made money on. I heard no outcry from Google Ventures when they made money from that business. Hypocrites.
- MCRed 11y agoYour statement about salary is right. In early funding the founders and employees should get salary bumps that bring them closer to market rates, depending on the stage of funding. So maybe A&B rounds result in salary bumps. When the company starts being worth something significant, like over $20M valuation, during funding founders should take some money off of the table-- if they want. It's prudent financial planning (don't have all your retirement in the stock of one company) and while they are giving up potential upside they are ensuring long term security for their family against failure of the company combine with an economic downturn. (A combination I've seen twice in my lifetime.) And when your company is in the billions you should have the option to take some off so that you can start angel investing on the side.