I have a radical idea that I’d like to see put into practice. Hopefully do it myself at some point.
We tell a story about risk and innovation that justifies founders and early employees getting massively more value (equity) than later employees.
And the amount of equity given out falls off a cliff as the company grows. So you have some people with ownership that is 10x, 100x or even 1000x larger than others. That leads to radically different outcomes.
What if we rethought equity rewards to substantially flatten those ratios? And maybe 20:1 or something was the max ratio.
Then employees truly are owners.
Certainly lots of issues with this half baked idea. But my overall point is that I think the typical equity pyramid is deeply unfair. It could be more equitable.
One story I enjoyed discovering that is similar to what you're suggesting is the early equity grants at Wizards of the Coast (publisher of Magic: the Gathering). The founder was liberal with giving out equity to people who were helping build the company, not just the pure cash investors. I too think the value early employees add in building a company far outweigh the equity grants that have become "standard" while the founders retain the vast majority of equity.
> I think it was my old friend from Walla Walla, Franc Sawatzki, who donated a drafting table that we valued at something like $100. Given that the sale to Hasbro yielded over $1,400 per share, that $100 “investment” yielded something like $280,000 a decade later. Not bad!
I started my career at the peak of dot com, and remember one of my co-workers leaving. He’d been early at Wizards of the Coast. Someone else said he was “calling in rich”.
We tell a story about risk and innovation that justifies founders and early employees getting massively more value (equity) than later employees.
And the amount of equity given out falls off a cliff as the company grows. So you have some people with ownership that is 10x, 100x or even 1000x larger than others. That leads to radically different outcomes.
What if we rethought equity rewards to substantially flatten those ratios? And maybe 20:1 or something was the max ratio.
Then employees truly are owners.
Certainly lots of issues with this half baked idea. But my overall point is that I think the typical equity pyramid is deeply unfair. It could be more equitable.