50% of a $7.5 billion sale is going to 3 people? insane.
what about the employees?
what about the employees?
And the employees also work hard, and are working on reduced pay, and are doing it because it's fun and they believe in the mission. And they believe they're all "in this together," but learn otherwise only when the big day arrives.
Methinks you need to distinguish between startups like Theranos, Clinkle, or Juicero, where a well-connected and charismatic founder meets an investor who takes on all the risk and then they crash and burn spectacularly and nobody gets their money back, and a bootstrapped team of engineers that build a product millions of people want and then get handsomely rewarded 11 years later.
there is certainly a gulf in the present day equity split between even the least helpful founder and the most instrumental employee.
as a community, we anchor each other by saying things like what you’re saying. if more people felt the way i do, as a community, we would not accept the status quo.
it sounds as though your stance is founded upon a just-world hypothesis.
And without that sacrifice on the part of employees, many companies would never have made it out of a vast pool of mediocre nondescript companies.
This is not the case for every employee or every company, but I think you need to balance your world view a little bit.
Unless they are being forced to do that without proper compensation in which case they should leave they aren’t and shouldn’t be awarded with extra just because they are workaholics if nothing else is that because it forces other people to invest more than they want or can.
For quite some time in the start of my working career I was staying till 9-10pm at work working on extra projects, perfecting something having fun etc. until at some point my then manager took me a side and told me to stop it not because of what it did to my life and not even because of the potential liability the company had but because of my other team members.
He basically said look you are 25 you can do what ever the hell you want but “Joe” is 42 and “Mark” is 45 don’t put them in a position to have to compete with you when there is nothing on the line.
Since then and since getting much more experience I’ve really taken that to heart and I actually detest people who spend considerable amount of time on top what is expected and appropriate at work and I work actively to prevent anyone on my team or who I engage with doing so.
If you like to code 24/7 do your 9/5 job and then work on some FOSS project on the side, take a 2nd job or volunteer at some charity and build them a new donor engagement platform. Don’t force me to feel bad or uncomfortable for leaving at 5.
Less dilution is better for employees too (especially the early ones).
Presumably the employees were paid salaries.
E.g., one person I know, an Employee #1, was shocked to discover that investors only held ~15% of the startup he was at, which he joined just a couple of weeks after incorporation, and the founders held nearly 80%. His equity was IIRC 1%, which he thought was great, and was assuming that the founders had maybe 10% each, with a big option pool and a much-larger investor ownership. Ok, so his numbers didn't change just from learning everyone else's, but he wouldn't have agreed to 1% if he'd known.
It's not the founders' fault. They acted in their own self-interest, and did not volunteer information that would have negatively impacted their position.
But the employee still had a right to be upset, same as any of us would be if we discovered that a teammate for the last several years had been pulling in twice your salary, when you were told "sorry, this is as high as we can go."
This is a super capitalist thing to say. Anyone can understand _why_ the founder acted in their own self interest here, but to say it's not their fault is to just remove all agency from them.
Maybe it's in my best interest to have someone murdered so I can take over their business. Would you say it's not my fault if I did so?
So in one particular cycle people try to gather as much Pie for them as they can.
There fore ultimately one has to be selfish, even if not out of nature, but out of sheer compulsion. These days you have to do these things just not to get walked over.
If you're starving, or need shelter or some other basic to survival, then yes you need to be selfish. After that being selfish is a choice
My point is that startup equity is shit in all but the extremely rare unicorn cases for everyone except the founders and VC's.
I always laugh when I see startups offering microscopic equity while founders horde orders of magnitude more stock acting like what they have done is worth hundreds of times more what your early employees do.
As if anyone can just choose to be working for a company with the right terms, in a position to make a multi-billion dollar sale, and also somehow not get screwed out of what they thought their terms guaranteed.
If you want up be paid $x a fortnight right from the get go then you get a job.
I don't see how the success of people who chose to do A means people that did B got screwed, just because they both worked on the same project. The decisions they made and context of their choosing to work on it were still different things each with their own pros and cons
Unless there was some more to it. Like share /options shenanigans that might not be legally fraud but fraud in spirit. No one seems to be saying that happened here though.
False dichotomy. People join startups (esp. early ones) thinking they have a shot at a significant chunk. But even for the very first employees, the equity numbers are ridiculously small. I don't understand why they sign up for it.
All my friends in startups work damn hard and poured huge chunks of their lives into it, and it has not been fun watching them be offered meager positions post-acquisition, while their founder/CEOs get multi-million paydays.
> on the backs of their employees
Also employee owned cooperatives are cool, and I wish there were more of them.
Based on what?
You don't think it's fair -- fine, but what would be fair?
The fact is that the multi-billion payday would not be possible, had they not convinced so many talented people to work for equity-peanuts. Kudos to them!
Bay Area overflows with job opportunities.
If those talented people would rather get a risk-free work at Google/Facebook/Microsoft for $250k, why didn't they?
Majority of software startups require just as much work, pay even less in base salary and their equity is worth $0 in the end, because the founders didn't create a valuable company.
You say employees got screwed because they worked hard and didn't make tens of millions.
I say they got supremely lucky.
A 0.1% of 7.5 billion is $7.5 million, which is more than you can hope to make from cushy G/F/M jobs and certainly more than you can hope to make from an average Bay Area startup.
They'll need to be frugal to remain members of the 3 comma club.
In fact, they have 745 employees. That averages out to 4.6 million per employee. Now, there's probably a good bit of VC money in there diluting that, but i'd bet not by more than 50%. I think the employee equity pool did just fine here.
GitHub had 2 funding events.
https://www.crunchbase.com/funding_round/github-series-b--49...
$250M at pre-money valuation of $1.8B i.e. 13%.
https://www.crunchbase.com/funding_round/github-series-a--83...
$100M at valuation of $650 i.e. 15%
So ~28% to VC, 50% to founders, which leaves 22%
How much of that was actually allocated, I don't know.
Having been part of a billion dollar acquisition myself, I can attest that for the vast majority of people (myself included), it was equivalent to a nice bonus. Perhaps more people need to realize that and internalize that before they forego the higher compensation, and easier workload of an established company?
The only thing that will realistically get founders to share more equity is for the market to demand it. Personally I would not sign up for another startup journey unless I felt there was substantially more upside on the table. Otherwise, you’re better off joining BigCo or go further and start your own thing and get founder equity.
FWIW, I wouldn’t begrudge the Github founders... they’ve done an amazing job over a very long time. They rolled the dice and made it happen. Hats off to them!
Gates had 45% of Microsoft after its IPO after a similar length of time (a decade) that GitHub has existed. His position rapidly diluted after that with increased share-based compensation and Microsoft's size ballooning. Allen + Gates + Ballmer probably had 65% of Microsoft after the IPO.
Larry Ellison still holds 27% of Oracle after 40 years.
I don't think the GitHub distribution outcome is particularly historically unusual. One could argue obviously that from a strictly subjective moral basis that it's still not enough distribution.
The only thing historically unusual, is that the venture capitalists got such a small share of the outcome, courtesy of GitHub not drowning themselves in funding across a decade. In most cases these days, the VCs would be taking up a far larger portion of the founder's 50% position.
I'd guess the employees are getting 20%-25% of the $7.5 billion. That's maybe $2.25m to $2.75m average per employee, assuming a 600-700 employee range.