Are founders really 1000x more valuable than their employees?

Given that many entrepreneurs just keep failing and then trying again and again and again it doesn't make much sense to me at all. There is no risk. Maybe it will be embarrassing if Malhalo fails, but I'm sure that won't stop you trying again.

Personally I think there's no good reason, founders aren't actually worth much more than the employees, it's just the way capitalism works. To the victor goes the spoils. Hence the occasional Marx being thrown into the mix to try and keep the worst excesses in check (overall I think capitalism's been a greater good for humanity). I think we're due a Marx soon if the earnings divide keeps growing as it is.

Don't try and rationalize it, it's just natural greed. But it has benefits too, all those jobs that wouldn't have existed.

At least in America, there is so little stigma associated with a failed startup that I don't see the reputation aspect of your argument. Short of flat-out malfeasance, a failed entrepreneur is far more fundable than someone who has never started a company.

The real answer is way more simple: the founders hold most of the cards, and the engineers don't.

Edit: and if the engineers don't like this, they are free to try to start their own startups.

And I'm sure the founder of Friendster has no trouble finding a job. Starting a company and failing has enourmous cachet in the States. And Friendster did quite well, relatively speaking, compared to most failed startups.

In regards to money, that depends on the process. Did the startup function using the founders cash for a period of time that required a significant financial investment? If so, then there's significant risk on the part of the founder. If the startup functioned for a limited period of time on the founder's cash before receiving an investment that paid the founder as well as employees, then clearly there is little risk. Granted, the former scenario is the more likely.

Imho, for most, the financial risk and opportunity cost is why they deserve those shares, if you're going to do calculations.

But, even more fundamentally, the founders deserve the shares because if they didn't start the business the business wouldn't exist. Without the founders, the discussion is moot.

I agree that the difference is that the founders risk something. What they risked was just money and time. And risking time can be risking more than you'd think because there's an opportunity cost to not creating a career.

It boils down to risk-amortized market for money and time; capital and human-capital.

This is just the market. There is no fairness guarantee mechanism. If I have a billion dollars to put at a very, very slight risk, it is still worth much more than your willingness to risk your time, your "reputation", your health and your $100K.

Seriously though, I agree that founders are taking the risk, but actually I think that is irrelevant as well.

The bottom line is that the founder started the damn company; the company would not exist without the founder. If you go and negotiate a contract with a company, you get what's in the contract. In a profitable business we can argue all day about who's creating the value, but it's subjective and irrelevant; the only thing that matters is that the founder went and started a company and offered you a job and you took it. If you weren't able to negotiate a deal for what you're "worth" then man up and start your own damn company, otherwise you're just whining.

"This isn't about who is more valuable, this about who took the risk."

Risk? I joined less than a year after incorporation. I feel like I'm shouldering substantial risk by taking 50% of my overall compensation as options in a venture which I have no direct control over—I'm not on the board, I'm not a director. The options are worthless until 4-5 years down the road, and even then, I have no control or say into when we sell, to whom, and for how much.

Myself and the other employee are probably going to leave, because we feel that more like 2-3% minimum is appropriate for our position, and we doubt that the founders will see it that way.

Personally, I'm of the opinion that no job worth doing is worth less than any other job, but I recognise there's “some” ways to go before that thought becomes in any way mainstream again…

But I think your second point (Founder get more money because they have more ownership) is tautological. The article is really asking, should the founders get such a great proportion of ownership?

I think that equity % is just like normal income. You get what the market will let you get.

Founders get a lot because the right combination of qualities, risk taking, and luck are rare. Being an employee of any kind makes you more common than a founder, and thus the market will always pay less.

You can see great examples of this by looking at basically any celebrity. Do Oprah and Brad Pitt really deserve billions of dollars for their contributions? Most people would say that morally their contribution to society is minor (or even negative), but the market doesn't seem to agree, and they are rewarded with money far exceeding the income of many business leaders. They get this money because they chose to do something people are willing to spend money on.

Why do thugs that play football, whose moral contributions are, again, minor or often negative, make millions of dollars each year? Because millions of average people pay $30/wk to watch them run into each other, $100/yr in team merchandise, etc. If you don't like that, convince people to stop spending money on football.

"I returned, and saw under the sun, that the race is not to the swift, nor the battle to the strong, neither yet bread to the wise, nor yet riches to men of understanding, nor yet favour to men of skill; but time and chance happeneth to them all."

Yet people support it and sleep at night. The world is not fair, people are unfair, and it's a damn good cause to try to make it fairer.

Sure I expect there's a serious correlation between putting effort in, but a huge part of how valuable your efforts are to your life is decided by where you were born, who your family are, who fucks you over and how you are parented.

I'm sure there are Muslim women in Saudi, or prostitutes in Liberia, or Chinese farm workers who'd (aside from cultural bias) work twice as hard and have just as many good ideas as Mark Zuckerberg or Bill Gates given the education and upbringing they have, but they simply don't have the opportunity.

Many socialists I talk to have it wrong in that they don't recognise that yes, effort is a factor in your life's success, but many of the capitalists I talk to fail to acknowledge that effort is simply one of many factors that influence it.

But that said, you're absolutely delusional if you think that everyone in this country who wants to become a lawyer or a doctor or a better-paid whatever is capable of doing it. There are a million different reasons why most people will never become lawyers or doctors...or computer programmers. The reasons are all quite real, even if you've never had the misfortune of experiencing them: some people are born into grinding poverty. Others are never educated while young. Many people just aren't intellectually gifted. It isn't their fault, and nearly everyone I've met is doing the best they can with whatever they've got.

Right now, there are thousands of people accumulating debt in third-tier law schools trying to do what you suggested to your mother -- but most will never get anywhere, no matter how hard they work. There are culinary schools full of aspiring chefs, vocational schools full of people trying to learn their way into a trade, and literally millions of other people who have been told that their lost factory job can be replaced with something better, if only they spend enough time in community college.

Just because you had the disproportionate good luck to be born into a situation where you can become whatever you desire, does not mean that everyone else in our society has been granted equivalent opportunity by the big genetic lottery.

Said another way: empathy is a useful skill, but you don't have much of it when you're 12.

It's nice to have a simplistic 12 year old's attitude in thinking you can just do stuff if you want, but life is full of so many factors. Right wingers especially seem to have this child-like mindset.

IBM, KPMG, PwC, etc. are all service businesses that are massive and successful. There's a thousand other firms with middling market caps you've never heard of that also make billions.

Because it's super hard not to become that involved -- you're working so closely with the founders who are that involved. It's pretty hard to 9-5 it when nobody else is.

If you think you're worth 10-20% of a company, stop applying for jobs and go start your company.

It is absolutely a seller's market for talent right now. If you aren't getting what you think you're worth, you have nobody to blame but yourself. Your current company may not give it to you --- for the role you fill, they may believe you're replaceable for less cost --- but that doesn't mean you can't get it on the market somewhere. But you have to make the effort. People absolutely cannot in the real world whine that things "aren't fair" and expect improvement.

Which is generally funded by VC money. In the formula of money -> jobs -> more money, the founder doesn't necessarily play such a meaningful role. If he hadn't taken VC money to create the company that contains the jobs, someone else would have.

In other cases, the best definition of the founder is if you joined when there was no company.