[genbit]

i think vc/founders need to innovate on this topic to: provide better effort/reward incentives, and reduce risk for employees, giving that they have less voting control over equity.

Could be something like:

- companies keep lower number of employees, higher grants, but demand founder-like effort for early years

- early employees get substantial equity grants 5-10%, that must be sold to VCs on secondary offering at next rounds. In that case, employees could directly benefit from startup grows, while reducing risk compared to FAANg, and founder can keep their equity size. Yes, upside is limited, tax/legal work, but could be covered by new refreshment grants from employee pool

- YC creates/funds employee union-like organization, that funds/organize activities/benefits for early stage startups

- help legally with paying/hiring employees remote with equity package

also joining startup and buying out $$$$$ worth of stock options that could turn to 0 is a downside compared to stock grants from FAANg.

[takanori]

Idea #2 is genius. In my experience early employees become a liability as you scale and exceed their experience skill level. This makes it a win for them and for the org. Nothing worse than an early employee who is hanging on to a high level role when everyone knows they aren’t cutting it. What are some possible downsides of this?

[alain94040]

In other words, idea #2 is to have a mini-IPO (liquidity event) for the early employees, by round A or B. B might make the most sense. Kind of like a super-bonus or extra warrants. So at least the early employees don't have to wait 7-10 years to see an outcome, but can expect a (smaller) windfall within 1-3 years, to put them on par with high-paying jobs if the company is successful enough to raise a B round.

[genbit]

Downsides could be - more risk for founders raising rounds, since its unconventional - increase of tax complexity for both employees and employer - more complex cap tables and/or processes around converting stocks, since employees are usually owning common stocks, while investors are looking to get new preferred stocks issued for round

But I think big vc orgs and especially YC could pioneer / help with new approaches

[oliverx0]

I really like your second idea!