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I've been out of startups for a few years now, but it always struck me that there is plenty of room in the cap table for employees, if founders and VCs realize they have to cut back.

If founders and VCs gave a third to half of their companies to employees, instead of crushingly small option pools, this math would almost certainly shift. And the returns wouldn't be much worse for founders or VCs.

The reason they don’t is because they already gave 50% to the investors. And it isn’t uncommon for companies with $30M or $1B exits for the founders to get nothing. I heard about a company recently where the company sold for $40M and the founders only owned 4% after years of raises. I doubt the founders got anything. Most of the time these companies are having trouble scaling sales.

That’s why I included investors. One could imagine a regime change where, given the market for talent, both founders and investors realize the need to carve out more for hiring equity, and value companies accordingly, especially in the BS early rounds where it’s not based upon any real financial metrics.

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