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Comment by memish | Hacker News Reader

He's not implying that employees don't create value.

Startups share equity with employees. The earlier you are there, the more you get, in part because of the inherent risk.

This is why founders get the most equity and the most upside if it succeeds. They took on the most risk and it wouldn't otherwise exist.

If the company ends up being valued at 100B dollars, guess what, the founder and maybe some early employees are billionaires or hundred millionaires.

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> This is why founders get the most equity and the most upside if it succeeds. They took on the most risk and it wouldn't otherwise exist.

Is this always true though? I've worked with a grand total of one company where, if the company went bust, it would mean the end of the founders' life savings. Every other startup/company I've seen, the founder was already very well off. Yes, they put a big chunk of capital and/or time into the start-up. Yes, they were highly motivated to make it succeed. But if it failed, they would... be sad, fall back to family money for a while, and then later do another start-up (or go back to their previous career in Investment Banking). I think this idea that the founder must be singularly taking a huge amount of "risk" is a romantic, stereotypical take, not always true.

Start-up employees, however are shouldering risk. They are by and large not already wealthy so if the start-up fails, there goes their livelihood until they line up another job. I think we should stop thinking that "risk" is exactly the same as "how much of the company's raw dollar equity did you contribute".

I agree with you 100% and am not afraid of vocalizing similar things to a hyper capitalist audience.

However, I don’t see the way out unless the social safety net is strengthened (not gonna happen) or we just ban rich people from starting companies (lol, lmao even)

Edit: maybe there shouldn’t be a way out. Maybe the solution is just to educate and make transparent that rich founders have better odds and less to lose and bust conceptions around successful at business == higher quality individual.

I’ve been toying with an idea where blockchain actually is interesting: imagine all currency is on the ledger - all of it. And every coin had an (rather short) expiry!

You need to create value continously or fall back to UBI.

Just something to play around with. :)

So... the role (controlled) inflation plays in an economy?

Good point. I guess this need to be expanded with limits on other types assets as well.

Basically we’ll end up in a totalitarian society governed by an AI.

That train of thought escalated quickly.

> there goes their livelihood until they line up another job.

This risk exists with any employment arrangement. So arguably the risk is merely the greater likelihood of the startup failing vs big corp laying you off.

For employees, there is employment risk, reduced compensation, potential increased difficulty of finding next job. For founders there is the first two but generally finding next job is easier (because you get lots of managing/etc experience potentially faster than you would normally).

When they talk about risk they mean capital risk, not personal risk.

So someone with 10 million dollars who puts up 1 million has put more capital at risk than someone who puts up 100,000 even if that is everything they own.

And paying out on personal risk doesn't make sense. Imagine doing a seed round and the share of equity each investor gets is not related to how much they invest but what % of their networth they invest.

Also in every startup I've worked for(3) the founders were not rich before starting the company.

The straw man here is the family money you've assumed. I've done 6 startups as founder or early employee. I assure you I had no "family money" to fall back on. It's only my most recent company that had an exit that really put a cushion under me, and that's after more than 20yrs of startups.

People who assume there's family money to fall back on are generally themselves in a privileged position. They are projecting that onto everyone else and it's an excuse to not build anything and discouraging anyone to do anything.

Maybe there is an imbalance of risk taken or value added among founders and early employees. I think that's debatable, but assume it's true. It's never reasonably accounted for in the equity distribution.

It would be one thing for a founder to have 3x the equity of an early hire, but it is commonly more like 60x or 300x. Instead of a dozen people being able to cash out and support their families for the rest of their lives, one or maybe two people get to have many multiples of that and the rest barely make progress towards retirement.

I agree 100%. Also, I don't see a substantial difference in risk between a founder and an early employee at all. Founders typically have little invested in the startup other than their own time but they compensate for that by paying themselves a salary with investor money.

It sounds like you're saying that early employees and founders have a similar level of rush, but vastly different levels of reward.

Why would anyone ever be an early employee when they can be a founder instead?

Access to capital

All things equal I don't think they should. The reality is probably a combination of early employees not being as skilled as the founders and behaving irrationally/ not understanding the value of their equity.

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