"Today’s Tech Founders Don’t Just Own the Company. They’re Also Getting Huge Pay Packages." How are these stock awards different to owning the company?
If anything, those stock awards sound less attractive as they should be options at a very high valuation?
In effect, isn't this the same as later VCs reallocating the cap table in favour of the founders (and against earlier investor and employees)?
Getting (a) stock worth $800mm and (b) investing some lesser fraction many years ago that winds up being worth $800mm are very, very different different.
> those stock awards sound less attractive as they should be options at a very high valuation?
They are. (Well, sort of. Robinhood grants RSUs that vest depending on the stock price, with only 20% of the pre-IPO grants vesting at the current price and 0% of the post-IPO grants vesting until the stock price at least triples within the next 8 years [1].)
Getting (a) $800mm in cash versus (b) an option theoretically worth $800mm but which must be held to expiration are very, very different.
[1] https://www.sec.gov/Archives/edgar/data/0001783879/000162828... page 226, Narrative Description of Executive Compensation Arrangements
It’s not pay, it’s a stock grant or options grant. They are also selecting for amazingly successful companies AND likely companies that didn’t have to raise a ton of money (this dilute founder equity).
It shouldn’t be surprising the founders end up with a big % of equity and massive payouts.
If the companies had failed and the 20% equity was worth $0 and the founder wasn’t getting paid, not sure WSJ would do an article called “Tech founders are left with almost nothing to show for years of work”
This seems similar to a headline that says “Winners of lottery jackpot walk away with huge payouts”. I mean yeah, you only focused on the biggest winners.
They're talking about companies that are, or are about to become, public - so a stock grant is closer to being cash.
Doesn't the title say 'pay package'? Stock awards are part of your pay package. Where did you read 'salary'?
If a CEO owns 60% from the beginning, that's already built into the cap table no matter how big the company gets. If they get RSUs as incentives later on, the company is still footing the bill for giving them an $500 million in stock - an asset the company owned that could have otherwise been converted to cash.
The article doesn't do a great job explaining why giving bonuses later is so much more expensive for the company and its shareholders
An option to buy something at a certain price isn't the same as just getting the something. As mentioned in the article, ceo compensation consists usually of stock + options (et al.) tied to performance targets.
> In effect, isn't this the same as later VCs reallocating the cap table in favour of the founders (and against earlier investor and employees)?
Sort of, that's the point of the article. Apparently, new founders take on too much early financing.
You're already expecting way too much intelligence from a journalist.
They want to peddle headlines of people doing well playing the speculative economics game
Their article is simply to make it look attractive to keep playing, because of course their owners control a lot of the speculative economy
But please keep going everyone; all the tech stocks I have been buying since Apple at 6-10/share in the late 90s aren’t going to prop themselves up
Why work when you’ll do it for me!