
One Percent Stake - bootload
http://stephaniehurlburt.com/blog/2017/1/30/one-percent-stake
======
tominous
The cool thing about being a founder is that you get to choose what to do with
the equity in your company. So if Stephanie Hurlburt wants to offer a greater
share to late employees for reasons of fairness or justice then more power to
her. As a side benefit she may attract more talented, loyal employees.

On the other hand there are probably more effective forms of philanthropy than
giving your employees more money and equity than the market-clearing amount.

In the end I think the talk about what people "deserve" is a red herring, on
both sides. The way I'd look at it is that a business creates value, spends
some of it to grow and keep the wheels turning, and the rest is surplus which
the owners get to keep, spend or give away as they see fit.

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raleighm
There are valid points here. Most people would agree reward should be
commensurate with risk taken. But imagine a simple case of two contributors.
Person A's contribution in absolute terms is far more significant than Person
B's. But Person B's contribution as a percentage of Person B's available
resources (so to speak) is much more significant than Person A's percentage of
Person A's available resources. I think most people would still think that
it's fair to base rewards on absolute contribution. But I think the author's
point is that's not the only option available and not what she would propose.
I have no issues there.

More generally, the point about startups - and the limited liability company
vehicle itself - working to the advantage of those who already have resources
is true, but there's more to it. Why it's true: If there were no limited
liability company form and you had to contract for your liability to be
limited at the amount of your investment, you would have to give up
concessions to creditors. With a corporate form statutorily available, you
needn't give up such concessions. Who is best positioned to take advantage of
this? People who already have resources. So people who already have resources
effectively receive a wealth transfer courtesy of the law. This is the equity
version of the saying about debt - that interest is society's way of thanking
the rich for being rich. That said, I view this is as tolerable because the
system enables the least well-off to take risks they otherwise never would be
able to afford. That benefits everyone, especially them. The real problem (if
there is one, and in my view there definitely is, but I appreciate not
everyone here agrees) is vastly unequal distribution in the first place, but I
view that as a separable issue (one fwiw I would want to address by
redistribution of wealth, not in how we divide up corporate equity).

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jondubois
These management types drive me insane. If a founder tries to talk to me about
merit and risk when trying to recruit me into their bubbly hype-machine, they
can be sure I won't be calling back.

I've seen plenty of startups that were going great until they crashed suddenly
and catastrophically. Moreover, company founders are often quite secretive
with employees when it comes to company finances - So in reality, to an
employee, the company often just looks like a black box.

Employees have to take a risk not only based on the business model, but also
on the integrity of the founders because of the information asymmetry.

Plus, if it doesn't work out, the founders will typically have better job
prospects than the employees because they can put 'CEO' or 'CTO' on their
resume.

~~~
wheelerwj
> Employees have to take a risk not only based on the business model, but also
> on the integrity of the founders because of the information asymmetry.

We'll yeah, but thats the same fkr evdry job everywhere, especially in every
other small business.

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jsmeaton
There's 100% of a company to go around. Here are the options.

1\. Founder takes 100%, no one else gets anything.

2\. Everyone that joins gets an equal share, which approaches a minuscule
amount as more people join.

3\. Some people get more than others. Some get none.

Which of the above is the author advocating for? There's no actual follow up
on what the author would do with regards to equity. She only speaks about
salary.

> That means paying juniors very well, paying late stage employees well and
> fairly. It means treating people as humans.

I wholeheartedly agree with this statement, but it has nothing to do with the
original quote the article was written about.

~~~
superquest
> Which of the above is the author advocating for?

Exactly.

The points were valid up until this point, but the question begged by the
title "one percent stake" is never answered.

~~~
robjan
Perhaps the article was created to provoke conversation about an issue, rather
than to solutionise it.

~~~
jsmeaton
I think the main point trying to be conveyed is that "risk" entitles reward is
false, and that others should share in the reward. I agree in part, and that's
what a decent and fair salary is for. The author puts forward similar ideas
about her own company.

But she's attacking a straw man. The quote specifically only discusses equity,
not salary. Removing the bits about equity would lead to a better more
coherent article in my opinion.

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LouisSayers
Ummm... startup employees working three jobs?!

Well... that's one way to run a startup I guess. However, the startups I've
been around have actually paid pretty well.

Perhaps I'm an outlier? Perhaps I can't empathise with such a situation,
because I have been fortunate enough not to be in such a situation.

I was however once offered 1% of a startup that I wrote the first lines of
code for. The startup is still going - well it seems... however I am not
there. I chose to leave, and we should recognise that we always have such a
choice. We always have a choice to leave.

It's funny though - you never really think about how much 'you deserve', until
you're offered a percentage. I have sometimes wondered whether you're better
off not being offered anything - in which case, the amount you 'deserve' never
comes into play.

I do however empathise with how much some people get paid (or those that don't
get paid at all) - the people that are just getting by. I believe that we have
pools of talent that aren't being utilised, and I do see that as a waste.

The world most definitely isn't fair, and there definitely is a very real
imbalance, and unfairness in the system. If some people were just given the
space to breathe, to work on their passions, I think think we as a society
could actually prosper even more. Not only that, but I also believe that we as
society, could help those who have little to offer to still get by - to help
them off the streets, and to provide the basic necessities of life that we all
should have. I'd rather not walk past a homeless person on the street, or have
someone that feels the need to steal to get by, only to have us spend
resources locking them up in a prison cell.

And this article seems to touch on some of this - but in different words. It
has a certain feeling to it that goes beyond startups, and to the fairness of
the world.

I'm starting to ramble however - perhaps I should start writing a blog of my
own.

~~~
bootload
_" I was however once offered 1% of a startup that I wrote the first lines of
code for. The startup is still going - well it seems... however I am not
there. I chose to leave, and we should recognise that we always have such a
choice. We always have a choice to leave."_

1%, that's rough for a first hire coder.

------
varjag
Well, no matter the amount of good will, there's only 100% of company to go
around. Someone is going to have little or nothing, and it's clear that
someone should not be VC, a founder or employee #1.

~~~
milesrout
>there's only 100% of company to go around.

Tell that to all the people that are told they're getting 5 out of 100 shares
and then are told six months later than the owners are going to create 100 new
shares for some 'investor' and invest the money into the company (i.e. pocket
it).

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adventured
This article could hardly be more wrong or ignorant. It presents the exact
opposite of what the radical majority of business founders actually face. eg:

> Any time you hear, "taking the most risk" replace it with "have the most
> privilege and resources." Works well.

In two decades of building Internet companies, I've taken side jobs, made
endless trade-offs with regards to my life, _willingly_ suffered immensely to
pursue what _I want to do_ with my life (no, your opinion doesn't matter on my
suffering to pursue what I want and whether that's the wrong way to go about
life because you say so), and I did so while having very few resources in most
instances. My first efforts were usually started at a cost of a few hundred or
thousands of dollars.

What it means to take the most risk: I will work as long and hard as necessary
without a paycheck - if necessary - to give my business the best shot I can at
succeeding. The business is mine, I do not treat it as a job (no, your opinion
does not matter on that either), I started it, it belongs to me first and
foremost. Employees overwhelmingly do not behave that way, they properly
(emphasis) leave if you do not pay them.

Most business founders are of this mold. It's incredibly hard to get a
business off the ground, it takes countless painful trade-offs to do so. It
frequently requires years of time during which your paycheck can be between
non-existent or being very slight. The article is either intentionally pushing
propaganda, or ignorant of what most business creators go through.

~~~
matt4077
That's all good and well. But there's no denying that startup founders, on
average, come from families wealthier than average.

The causation is probably impossible to ever fully understand, but it appears
plausible that part of the "risk-taking" involves the risks simply being
smaller: maybe they simply gave you money, or you inherited it. Or they have
contacts to fall back on to quickly get you a job. Or you're less likely to
fail because you could afford the education that only dad's law practice can
buy (in the US). Whatever it is, you're less likely to end up homeless.

Even if they were just better parents and taught you the merits risk-taking,
the ultimate cause of your success is still something no person has control
over – who you were born to. That's the antithesis of a meritocracy.

------
facepalm
Having a family is a choice, and it is OK that it costs money - it is worth
something to have a family.

Privilege to run a startup - that should also be a choice. Convince somebody
to give you money, everybody can try that.

What if I really struggled to get off the ground, lived on minimum income for
years, with the threat of divorce hanging over my head because my wife can't
take the economic situation any longer. How privileged am I really?

------
forgottenacc57
.

~~~
bootload
_" This stupid meme seems to be materialising in which just cause I'm a white
male that success gets thrown at me and it's all easy and nothing wAs hard and
I never had to sacrifice - I'm not going to tell you how hard it really is
except to say I've lost EVERYTHING multiple times including my
wife/relationship and it's taken me 25 years of trying so PLEASE stop telling
me how easy I have it cause I'm a white male."_

It could be argued this is ^opportunity cost^.

What the article is making light of is, workers who don't to have the access
to the time, resources and opportunities to build a business, yet still have
to work to make ends meet. Never to get the chance(s) to start a tech-company.

~~~
forgottenacc57
.

~~~
crdoconnor
>No one is entitled to a slice of a tech company just cause they couldn't
start one.

What makes one "deserve" the lion's share of a tech company?

The company I work for is split between two cofounders. One came from a very
privileged background. The other didn't. Guess who got more?

As far as I can see the notion that one deserves wealth because one _has_
wealth is baked into our society and legal system. Owning a rental property
means receiving a stream of income from those who do not. Owning shares means
receiving a stream of income from work done by others.

Likewise, if you earn a salary you're the one paying that rent and the work
you do is generating those dividends.

Likewise, being rich (and being well connected to the wealthy) when you start
a company gives you the leverage to take a larger share.

If that's what you believe is deserved then fine, I guess.

I've yet to hear anybody actually state the words "being richer _entitles_ you
to a larger unearned income than those who are not" though.

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matt4077
This article is bound to get critiqued for its morality-based reasoning. While
I agree with that, it'll be hard to get anyone to agree, especially founders
who by definition believe in (one definition of) meritocracy.

But there is, I believe, also a business case for it, especially if the
employees' equity comes, at least partially, from the VC's share: Diverse
ownership may result in better decision-making, it makes you less dependant on
one or a few large stakeholders, and can make unfriendly takeovers harder.
It's obviously a great motivational tool and inspires loyalty. Most startups
fail, so it's not completely unlikely that you'll end up working for one of
your employees' startup next year, and people tend to have good memories.

In as far as such a model could reduce income inequality across societies,
you're also helping to alleviate all the problems associated with that.
Inequality has been shown to correlate with crime, political instability, and
a few other things that founders would try to avoid even if only interested in
their own well-being. (This isn't a perfect fit for tec startups in the US
where salaries are already quite high, but as mentioned in the article, there
are countries where unpaid internships are a mainstay for startups).

------
milesrout
The post she linked to as something she had written before essentially
equivocates "that CEO who had several men who had raped female employees kept
on staff because they were good coders" with someone that has hired people
they know, have good personal relationships with and have a similar background
to.

It might sound weird and foreign to these SJW types, but when you're a fresh
grad or someone with a couple of years experience and you go start a startup,
you're unlikely to care about your diversity quota. You hire people that you
already knew. Fellow university students, people from former jobs, that sort
of thing.

------
aminok
>Any time you hear, "taking the most risk" replace it with "have the most
privilege and resources."

This is absurd and adolescent.

I know people who are extremely privileged, and don't make any sacrifices or
take any risks, just so they can avoid discomfort, and I know people with very
few resources, who sacrifice and suffer in order to start companies. Being an
entrepreneur is a risky venture, and hard on one's health and wealth, and many
lose it all in the process.

Shame on the author for making such a ridiculous blanket characterization
about entrepreneurs that discounts their sacrifice, in the name of brain-dead
socialist ideology.

~~~
AbrahamParangi
> This is absurd and adolescent.

That's an awfully emotional (dare I say, adolescent) way of saying "I
disagree, here's why".

While I may not exactly agree with the author's position, I think it's fair to
recognize the uncomfortable truth that in most startups, rewards for success
are distributed according to a power law distribution.

Taking it a step further, I strongly suspect that it is the financial
innumeracy of many engineers, designers, and other hard-working early stage
employees that make the economics of many startup businesses possible.

~~~
aminok
I don't see what's emotional about it. I view the assertion that being a risk-
taker in the startup world is synonymous with being privileged as absurd and
adolescent. I also explained why I think the notion is offensive and worthy of
being condemned.

> I think it's fair to recognize the uncomfortable truth that in most
> startups, rewards for success are distributed according to a power law
> distribution.

Can you elaborate on this a bit? I'm not sure I understand what exactly you
mean by this.

~~~
bootload
_" I view the assertion that being a risk-taker in the startup world is
synonymous with being privileged as absurd and adolescent."_

Just being in the position to ^take risk^, is privilege itself.

~~~
aminok
It does not automatically mean one is more privileged than those who choose to
work for startups, which is what the article implies.

~~~
crawfordcomeaux
Would you agree it does often mean that?

More specifically, for what percentage of startups would you consider it fair
to say?

~~~
aminok
I have no idea, but a statistical correlation does not justify the blanket
characterization made by the article, where "risk-taker" is essentially held
as a synonym for "privileged".

~~~
crawfordcomeaux
What's the harm?

~~~
aminok
It diminishes the accomplishments of entrepreneurs, and the sacrifices they've
made. If they only have large equity stakes in the companies they founded
because they're "privileged" it casts them as undeserving of the wealth they
acquired.

~~~
crawfordcomeaux
Ok. And what's the harm in that?

~~~
aminok
Isn't it self-evident? It harms their standing and reputation, in being cast
as in possession of wealth they are not morally entitled to. It's defamation.

~~~
crawfordcomeaux
Privileged =/= undeserving

Can you show an example of damage done by this sort of "defamation"?

~~~
aminok
Privileged clearly implies undeserving.

