[gfodor]

Even rich kids have to deal with opportunity cost. (Besides, claiming VC funded founders are all rich kids requires evidence, and you haven't provided any.)

Besides, why do you get to say what a founder "deserves" of their own company? If I bake a cake, and agree to give people small slices of it in exchange for things, you still think I don't deserve the rest of it even though I made it myself?

[pcwalton]

I don't agree with michaelochurch here at all, but I don't think I agree with your cake analogy either: early employees of startups often work very hard. Of course founders do an exceptional amount of work and take an exceptional amount of risk, and, having not been in the founder position, I won't take the position that they don't deserve the equity they receive, but they aren't baking the whole cake.

[gfodor]

The cake isn't assets or liabilities, products or customers, it is the equity of the company, and equity is created when the founders decide to incorporate the business and it belongs to them. As such it's theirs to do with as they please, from the time it is worth nothing to the time when everyone wants some of it, if they are so lucky.

It's kind of lame to say what they do with it is or isn't "fair" since the exchange of equity for something else is always done between two agreeing parties. It's extremely over-simplifying things to look at a liquidity event and then at the equity division to say if it was "fair" based upon who contributed what to the company. The equity and its distribution happens on a separate plane from the actual operating activities of the company itself, and the individual efforts or contributions of employees. There is no particular reason to believe that someone who provided huge amounts of value to a company "deserves" equity based upon this fact alone, though often founders will give up their equity to these people in exchange for their good work.

Any equity in the hands of a non-founder can be traced back to the founders giving up the equity they had up to another party in a mutual agreement, so it's quite bizarre to try to apply some external notion of fairness since nobody is forced to take such an offer.