| Two observations about his investment thesis: 1. He says you can build companies with "almost no money": $100k - $1M, if I recall correctly. 2. He says you can delay profi^H^H^H^H^H revenue almost indefinitely by looking out on the horizon. So given these two facts, when exactly do the founders/managers/employees (all of which are young kids by his own admission) start getting paid real money, like the amount required to buy a house in the Santa Clara valley? Is payoff 100% contingent on a liquidity event and/or perpetual venture capitalization, thereby diluting founders' capital stock further and further? Are his venture founders supposed to continue living in apartments indefinitely while he looks on from his mansion in Atherton and architects the final vision to be realized a decade or more from assignment of preferred stock? His whole management vision starts to look more and more like serfdom the longer you think about it. The immediate analog that springs to mind is the A&R practices of the music industry in which they sign young, naive bands to contracts that essentially bind them into a period of servitude under the guise of a promise of fame and fortune (to be realized in spades at a later date TBD, just trust us guys, you're gonna be rich and famous!!!) while paying for their operating costs with a future claim on earnings. This comparison only gets stronger than it already is when you realize that most financially successful musicians make their money from touring and merchandising - realizing their own revenue in small, and sometimes incremental ways until they get a successful fan/customer base. I mean the whole analogy seems rather obvious to me, and I believe we as (young entrepreneurs of) an industry should learn the lessons of the music/entertainment industry - am I totally wrong here? I see no difference between Marc Andreesen and David Geffen. Except one lives in SF and one lives in LA. |
Making it obviously includes a liquidity even, but it can also include great success pre-revenue and/or pre-profit. How do you think senior management at Ning is doing, salary-wise? Howabout Twitter? Digg?
The serfdom remark is just wrong. It's not serfdom-- it's sharing risk. He's risking a pile of (admittedly someone else's) money. You're risking... absolutely nothing if you're getting paid close to market rates. The closer you get to a sure thing that everyone is going to get rich (or at least get all of their cash back), the more entitled you are a market rate salary.
No one is forcing you to accept his terms. You lose nothing by punting your own startup a few years into it and getting a job at any time-- except whatever you haven't vested.