[lostdog]

A founder's situation is very different from an employee's situation. The founder will immediately purchase their stock for peanuts, where employees usually face all the hazards of the 90-day exercise window. The founder starts out with 40%ish of the startup, which is tremendously more upside than the <1%ish of even early employees. Founders typically have a board seat and negotiating leverage over all future equity rounds, where employees are powerless and need to hope that their founders are ethical enough to protect their interests in future raises.

I'm not against founders getting these benefits. I think VC's are the ones getting too good of a deal here. Roughly, if they pay $10 million for 10% of a company, and an employee gets 1% to offset $1 million of their reduced compensation (over 4 years, vs working at Google), looks fair, right? But oh wait, we forget the many many downsides of the employee's position (not preferred shares, had to ALSO pay to exercise them, risk of AMT, 90-day exercise window, etc). Seems to me that the VC got somewhere between a 5x and 20x better deal here.

[zenlikethat]

But the VCs pony up the cash up front and they are likely to lose it in most cases. The VCs and LPs have an opportunity cost too, they could be investing in other things, including a public market with a great track record for large caps.

There’s no easy answer but founder equity seems over weighted to me. If the founders want to align the interests of the company with the interests of the employees what’s wrong with having 15% instead of 30% and doling our dramatically more options to everyone else? No doubt founders take more risk and work harder but do they work 300x harder? (Usually by employee 10 or so grants are at 0.1% or less)

[lostdog]

As an employee, giving a startup a discount on your compensation is pretty similar to a VC giving the startup cash.