[ucaetano]

Wouldn't this have the effect of changing the risk/return balance? For those joining your company early on, the risk would remain the same, but the return would fall sharply (by ~50%), while for those joining late in the game, the risk would remain the same, but the returns would increase a lot.

If everything else remains the same, people would be less willing to take risks and join early stage companies, instead trying to join near-IPO ones, where you can get a disproportional payout from minimum risk.

To maintain the same risk/return profile, you'd need to pay much higher fixed salaries to early employees and lower to late employees, which would probably drive the startup bankrupt on the early stage page.

[andrew]

I recommend setting the financial independence threshold high enough that normal people will feel like anything beyond it is useless anyway. So there's no real downside unless you have your heart set on spawning a couple of Foxcatchers. And there's tons of upside.

[baddox]

It's not just that the reward for joining early is smaller than it used to be. It's also smaller compared to joining later. The marginal utility of money is actually what's causing the problem. If I can join a company late with very little risk and a much higher chance to make a few million, I'm probably much less incentivized to join a company early with the risks associated with that.

[droopyEyelids]

But in this system the incentive to join early is still several multiples, mind boggling multiples, of what it is to join later.

[ucaetano]

Just as the risk is much, much higher. People just hear about those few who became bi/millionaires out of IPOs, not the thousands that never made it.

[ucaetano]

And how much would that be? $100M? Which would generate a few M USD per year of disposable income?

[largote]

Definitely agree, one way to balance this would be to have each person be counted for each day/week they have worked there, so If I've been around for 2 years before the IPO I'd have 104 weeks that would get distributed to, whereas someone who joined a month before the IPO only has 4.

[plumtucker]

It's impossible to determine risk in a startup. Later participants may be entering a higher-risk situation than early participants. Startups are too volatile

http://www.slicingpie.com/the-magic-of-mutipliers/

[hkmurakami]

The thesis/argument in support of "Progressive Equity" would be that the risk/reward balance is still skewed strongly towards founders (and to a much less extent early employees).

One's position with respect to this thesis would determine whether you believe this equity structure is a step forward or not.

[ryandrake]

Where is it written that returns should necessarily so heavily be tied to risk? Many enterprises are structured this way, but there's no law that says it must be so.

[harryh]

Because people won't generally buy high risk low return investments.

[venomsnake]

Zynga?

[ucaetano]

Because if they are not tied to risk, they will be flooded by candidates, who will drive returns down to the same risk-adjusted levels again.

[cauterized]

Because it's the only way to incentivize people to take that risk?