
Some Thoughts on Founder Liquidity - wasd
http://avc.com/2014/12/some-thoughts-on-founder-liquidity/
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toasted
Not to be overly emotive, but honestly, fuck Sam Altman on this one.

If a person founds or cofounds a company worth >5million, they should become a
millionaire and have lifetime financial security. The VC already in all
likelihood already has lifetime financial security.

VC's bank on an 80-95% failure rate, so they are basically sacrificing
lifetime financial security for 9/10 of their founders in order to increase
the likelihood that 1/10 will be a bit more miserable and therefore work
harder to increase the chance of a big exit.

fuck them, take financial security.

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toasted
Just out of interest, is there a company which provides covert early exits for
founders? For example I meet with a founder, they sign a contract saying
secretly that they will give me a share of their equity in 2 year's time or
whenever a major liquidity event occurs, and in return I pay them an amount
based on current valuation?

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tptacek
Founder stock agreement boilerplates restrict founders from encumbering or
pledging their shares without the approval of the board.

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pc86
This has always been a curiosity of mine as someone far removed from SV and
outside of any major metropolitan area.

If you found or cofound a startup, at what point do you get any money from
that? When do you draw a salary? When do disbursements to equity partners
become a common (or at least not unheard of) occurrence?

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tptacek
In bootstrapped startups, it's not unusual for distributions to start
happening immediately. One of the good features of bootstrapping is that it
forces you to rig the business sustainably from day one.

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prostoalex
Sometimes you need those to kick in immediately, as the founders have maxed
out (or spent significantly on) their credit cards, and you want the startup
to have a clean bill of health, not this major liability revolving at 20% APR.

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kasey_junk
Founder liquidity seems like such a minor issue in comparison to employee
liquidity that I fail to see why it is taking up any brain cycles at all.

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tptacek
It's the agency problem. Illiquid founders are motivated to act against the
interests of shareholders. I saw this happen bigtime at a company I once
worked for.

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angersock
Mind elaborating on that?

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tptacek
Illiquid founders push for early exits.

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boucher
Illiquid founders are, generally speaking, majority shareholders. Hard to
argue they are not looking out for shareholder interests.

~~~
tptacek
That doesn't change the fact that pushes for early exits can screw over both
the investors --- who put real money into the company based on a promise that
the founders would work for their interests --- and employees, who will
receive a pittance compared to founders in most early exits.

