One Percent Stake

The cool thing about being a founder is that you get to choose what to do with the equity in your company. So if Stephanie Hurlburt wants to offer a greater share to late employees for reasons of fairness or justice then more power to her. As a side benefit she may attract more talented, loyal employees.

On the other hand there are probably more effective forms of philanthropy than giving your employees more money and equity than the market-clearing amount.

In the end I think the talk about what people "deserve" is a red herring, on both sides. The way I'd look at it is that a business creates value, spends some of it to grow and keep the wheels turning, and the rest is surplus which the owners get to keep, spend or give away as they see fit.

There are valid points here. Most people would agree reward should be commensurate with risk taken. But imagine a simple case of two contributors. Person A's contribution in absolute terms is far more significant than Person B's. But Person B's contribution as a percentage of Person B's available resources (so to speak) is much more significant than Person A's percentage of Person A's available resources. I think most people would still think that it's fair to base rewards on absolute contribution. But I think the author's point is that's not the only option available and not what she would propose. I have no issues there.

More generally, the point about startups - and the limited liability company vehicle itself - working to the advantage of those who already have resources is true, but there's more to it. Why it's true: If there were no limited liability company form and you had to contract for your liability to be limited at the amount of your investment, you would have to give up concessions to creditors. With a corporate form statutorily available, you needn't give up such concessions. Who is best positioned to take advantage of this? People who already have resources. So people who already have resources effectively receive a wealth transfer courtesy of the law. This is the equity version of the saying about debt - that interest is society's way of thanking the rich for being rich. That said, I view this is as tolerable because the system enables the least well-off to take risks they otherwise never would be able to afford. That benefits everyone, especially them. The real problem (if there is one, and in my view there definitely is, but I appreciate not everyone here agrees) is vastly unequal distribution in the first place, but I view that as a separable issue (one fwiw I would want to address by redistribution of wealth, not in how we divide up corporate equity).

These management types drive me insane. If a founder tries to talk to me about merit and risk when trying to recruit me into their bubbly hype-machine, they can be sure I won't be calling back.

I've seen plenty of startups that were going great until they crashed suddenly and catastrophically. Moreover, company founders are often quite secretive with employees when it comes to company finances - So in reality, to an employee, the company often just looks like a black box.

Employees have to take a risk not only based on the business model, but also on the integrity of the founders because of the information asymmetry.

Plus, if it doesn't work out, the founders will typically have better job prospects than the employees because they can put 'CEO' or 'CTO' on their resume.

There's 100% of a company to go around. Here are the options.

1. Founder takes 100%, no one else gets anything.

2. Everyone that joins gets an equal share, which approaches a minuscule amount as more people join.

3. Some people get more than others. Some get none.

Which of the above is the author advocating for? There's no actual follow up on what the author would do with regards to equity. She only speaks about salary.

> That means paying juniors very well, paying late stage employees well and fairly. It means treating people as humans.

I wholeheartedly agree with this statement, but it has nothing to do with the original quote the article was written about.

Ummm... startup employees working three jobs?!

Well... that's one way to run a startup I guess. However, the startups I've been around have actually paid pretty well.

Perhaps I'm an outlier? Perhaps I can't empathise with such a situation, because I have been fortunate enough not to be in such a situation.

I was however once offered 1% of a startup that I wrote the first lines of code for. The startup is still going - well it seems... however I am not there. I chose to leave, and we should recognise that we always have such a choice. We always have a choice to leave.

It's funny though - you never really think about how much 'you deserve', until you're offered a percentage. I have sometimes wondered whether you're better off not being offered anything - in which case, the amount you 'deserve' never comes into play.

I do however empathise with how much some people get paid (or those that don't get paid at all) - the people that are just getting by. I believe that we have pools of talent that aren't being utilised, and I do see that as a waste.

The world most definitely isn't fair, and there definitely is a very real imbalance, and unfairness in the system. If some people were just given the space to breathe, to work on their passions, I think think we as a society could actually prosper even more. Not only that, but I also believe that we as society, could help those who have little to offer to still get by - to help them off the streets, and to provide the basic necessities of life that we all should have. I'd rather not walk past a homeless person on the street, or have someone that feels the need to steal to get by, only to have us spend resources locking them up in a prison cell.

And this article seems to touch on some of this - but in different words. It has a certain feeling to it that goes beyond startups, and to the fairness of the world.

I'm starting to ramble however - perhaps I should start writing a blog of my own.

Well, no matter the amount of good will, there's only 100% of company to go around. Someone is going to have little or nothing, and it's clear that someone should not be VC, a founder or employee #1.

This article could hardly be more wrong or ignorant. It presents the exact opposite of what the radical majority of business founders actually face. eg:

> Any time you hear, "taking the most risk" replace it with "have the most privilege and resources." Works well.

In two decades of building Internet companies, I've taken side jobs, made endless trade-offs with regards to my life, willingly suffered immensely to pursue what I want to do with my life (no, your opinion doesn't matter on my suffering to pursue what I want and whether that's the wrong way to go about life because you say so), and I did so while having very few resources in most instances. My first efforts were usually started at a cost of a few hundred or thousands of dollars.

What it means to take the most risk: I will work as long and hard as necessary without a paycheck - if necessary - to give my business the best shot I can at succeeding. The business is mine, I do not treat it as a job (no, your opinion does not matter on that either), I started it, it belongs to me first and foremost. Employees overwhelmingly do not behave that way, they properly (emphasis) leave if you do not pay them.

Most business founders are of this mold. It's incredibly hard to get a business off the ground, it takes countless painful trade-offs to do so. It frequently requires years of time during which your paycheck can be between non-existent or being very slight. The article is either intentionally pushing propaganda, or ignorant of what most business creators go through.

Having a family is a choice, and it is OK that it costs money - it is worth something to have a family.

Privilege to run a startup - that should also be a choice. Convince somebody to give you money, everybody can try that.

What if I really struggled to get off the ground, lived on minimum income for years, with the threat of divorce hanging over my head because my wife can't take the economic situation any longer. How privileged am I really?

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This article is bound to get critiqued for its morality-based reasoning. While I agree with that, it'll be hard to get anyone to agree, especially founders who by definition believe in (one definition of) meritocracy.

But there is, I believe, also a business case for it, especially if the employees' equity comes, at least partially, from the VC's share: Diverse ownership may result in better decision-making, it makes you less dependant on one or a few large stakeholders, and can make unfriendly takeovers harder. It's obviously a great motivational tool and inspires loyalty. Most startups fail, so it's not completely unlikely that you'll end up working for one of your employees' startup next year, and people tend to have good memories.

In as far as such a model could reduce income inequality across societies, you're also helping to alleviate all the problems associated with that. Inequality has been shown to correlate with crime, political instability, and a few other things that founders would try to avoid even if only interested in their own well-being. (This isn't a perfect fit for tec startups in the US where salaries are already quite high, but as mentioned in the article, there are countries where unpaid internships are a mainstay for startups).

The post she linked to as something she had written before essentially equivocates "that CEO who had several men who had raped female employees kept on staff because they were good coders" with someone that has hired people they know, have good personal relationships with and have a similar background to.

It might sound weird and foreign to these SJW types, but when you're a fresh grad or someone with a couple of years experience and you go start a startup, you're unlikely to care about your diversity quota. You hire people that you already knew. Fellow university students, people from former jobs, that sort of thing.

>Any time you hear, "taking the most risk" replace it with "have the most privilege and resources."

This is absurd and adolescent.

I know people who are extremely privileged, and don't make any sacrifices or take any risks, just so they can avoid discomfort, and I know people with very few resources, who sacrifice and suffer in order to start companies. Being an entrepreneur is a risky venture, and hard on one's health and wealth, and many lose it all in the process.

Shame on the author for making such a ridiculous blanket characterization about entrepreneurs that discounts their sacrifice, in the name of brain-dead socialist ideology.