I see YC and YC community in general bringing more transparency and fairness to the way startups are built and run. They need to set the tone and tenor about what is right and acceptable. I am looking forward to see constructive debate around this topic in the comments (or not, if I am totally off the mark here).
True, but typically using throwaways has some weird connotations. Glad you're changing its meaning!
It makes a lot of sense from a game-theoretic perspective, but I don't know what the tax implications would be. Like, I know that a very minor equity position will often give little-to-no negotiation power when the distribution of the company's riches gets decided. I'd much rather ride along on the founder's coattails. As it stands, I have to ask what sort of equity position the founders get and make sure it's the same, and run into complex issues when leaving the company, etc. Much easier for me to understand is "when the founder gets a million dollars, you get a thousand" or the like.
Given that I don't want to screw over my employees, I'd rather have legal structures set up so that I can't. Furthermore, I'd prefer this system to be extraordinarily obvious, so that it's clear to everyone that I've committed myself to a course of action. Like, how you win a game of chicken is by removing the steering wheel from your car, waving it out the window, and yelling that you can't turn away. You'd don't keep the ability to swerve just because you might think you'll need it.
BUT, I think the criticism here is absolutely justified. It should not have been done as a common stock dividend using new investor money. If a founder wants money now, they should give up a proportionate right to money later.
Do you think he would have thrown the red flag had it been significantly less than 21M?
Seems that it wasn't that they were taking money off the table it was how it was structured.