[vtlynch]

First of all, there is not "far less personal risk" for employees. If the company you work for goes under, every employee is hurt by that, not just the founder.

The founder may have lost more money, but he had more money to gamble with. The employee does not, and losing his personal income stream is probably equally or more damaging to him.

[whatok]

So I'm a small business founder who had to take out a bank loan, mortgage the house, and forego a salary until business is good. That's somehow less risky than a standard employee who can likely walk away with no baggage after the business shutters?

[lujim]

Not everyone that starts a business is wealthy. They have take on debt or sold equity to finance their venture. They may have much less money in the bank than their employees. If you're financing your business with your retirement from a previous job or from personal savings you have much more at stake than lets say, a software dev that is getting non stop calls from recruiters for high 5 or 6 figure jobs that start tomorrow. Full disclosure, I'm the second guy who wishes I had the risk appetite to be the first guy.

[vtlynch]

"sold equity to finance their venture."

Oh yes, I forgot about the masses of un-wealthy people who have equity.

[lujim]

You can sell equity to anyone interested in buying it. Does your friends lower middle class uncle that retired from that factory job at Chrysler ten years ago have an extra 20 grand? You can sell him a chunk. You can't hold yourself out to the general public, but you can sell shares if that's what you want to do. There is a very real concept called cost of equity. It's a percentage comparable to loan interest. It's often much higher than the cost of taking a loan if your company is successful.

[whatok]

Equity in their business? You can create vtlynch LLC tomorrow if you wanted to and if you found someone to buy it, you could sell equity in it. What does that have to do with personal wealth?

[vtlynch]

Yes I'm sure thats exactly the situation lujim was describing

[whatok]

That's exactly how I read it. Taking on debt or selling equity are some of the most common ways of financing businesses. I could see if "take on debt" was not in that sentence but even then many (non-VC funded too!) businesses sell ownership in their business to finance it.