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Comment by m0zg | Hacker News Reader

> A 0.1% equity stake in a startup that ends up hitting is life changing.

For the vast majority of startups, "hitting" is $100-200M acquihire. 0.1% of that is only 200K. If you can get in on something like Beyond Meat, sure, but that's the kind of a company which won't be a part of something like this.

Speaking from the other end of this spectrum, BTW, my risk tolerance is higher now than it's ever been. I don't have to work at all, and my mortgage is paid off. But it's much more difficult now to convince me that some harebrained startup scheme will work. :-)

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Before Series B, I don't think people really know what's going to hit. And even then it's iffy. Beyond Meat was not a foregone conclusion when I got shares. And the way I got shares was actually through a pool that produced one acquihire, two zombies and this one IPO. We all shared an interest in each other (although different structure than this company).

So, to go back in time, if instead of having half the company or whatever, I could have 47% and trade that 3% away for 0.1% stakes in 30 other companies (also knowing I had 30 people with an equity interest in my success), I would do that in a heart beat as long as those companies had been filtered at all.

Much of our research has been with founders at YC & 500 (cohorts who represent the Beyond Meats of the world). The majority we spoke to, including the breakout unicorns, stated they would have have participated in equity pooling with their batchmates during the batch. We also learned the darlings of their batch were often not the breakout successes, and later upstaged by others in the batch.

I actually had exactly this idea with my YC knock-off, HMC INQ.

The first cohort (5 cos in 2017) I offered them to all pool some of their equity. But first I polled how much each would be willing to give. The results were 0%, 0%, 2%, 5%, and 20%.

So, I abandoned it. Ironically the one that offered 20% is doing the best so far.

Amazing. I heard similar stories from other 2x founders.

Maybe, just may be a realistic assessment of the chances of success is an under appreciated entrepreneurial trait.

Maybe this trait can co-exist independently with the ability to forge ahead DESPITE knowing how low the odds are, because you want to see something happen.

Maybe it is that silicon valley groks this as "an irrational belief" when in fact, it is the compulsion to forge ahead despite knowing the odds.

> "hitting" is $100-200M acquihire. 0.1% of that is only 200K.

Note that there are liquidation preferences so it's usually not as simple as that. If 100M had been invested at 1x liquidation preference, investors hold 33% and the startup is sold for 150M, then they'd only get 50M from their shares so they'll likely execute their right to get their investment back (at the expense of their shares, let's assume the deal includes this). So the 100M gets distributed among the investors and the 50M gets distributed among the remaining shareholders who hold the other 66%. For a 0.1% shareholder from that group this would mean a 75k payout instead of 150k that your calculation would give.

Yes, I'm aware of this little nuance - I've been through startup equity meat grinder myself. It's too complicated to quickly explain to a layperson though, and deliberately so. Many people are working for startups not knowing that they'll get bupkis if those startups succeed. I'd venture to say easily the majority. Many founders on HN try to pretend they won't negotiate their often abusive equity offer terms with their best employees (a lie - they will) because that requires "board approval". Most of them are also not huge fans of prospective employees hiring a lawyer to review the equity offer, to at least understand how the employee is being screwed.

You will be surprised at the spectrum of companies that are interested in doing pooling, as were we.

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