If you were an employee, you were not a founder. A founding-employee would be someone who explicitly "invested" time/money into a company without compensation. If you are also an employee earning a wage you better have a written agreement stating what amount was "investment" and what amount was compensated wage.
Startups typically offer employees, particularly early employees, substantial equity compensation. If the employer is offering this compensation in bad faith, or otherwise preferring one equity holder over another without an explicit contract - then they are at the very least a crappy business partner. A founding engineer with a 2% stake could be missing out on 5-10 million of this transaction.
As an aside, most founders are paid during the entire project. It’s not hard to raise a preseed round to get yourself paid for 6-24 months to work on an idea. If a founder chose to bootstrap - that’s all fine, but let’s not pretend that the employees aren’t taking massive career risks vs “standard” employers.
> If the employer is offering this compensation in bad faith, or otherwise preferring one equity holder over another without an explicit contract - then they are at the very least a crappy business partner.
I don’t know about you, but every company I’ve ever worked at is a shitty business partner if that’s the metric. The standard has always been I get what we agreed to if I was lucky, and otherwise I got full “I’ve altered the deal, pray I don’t alter further” and dared you to defend your rights.
I actually have called their bluff a few times and gotten some money out of it, but it was always a year long event or more to resolution and involved risking even more money on lawyers.
Just one slight problem: people need to eat, and food costs money.
Your startup won't succeed when its founder starves to death. It's why the founder will usually get a bunch of cash during investment rounds [0]: they can't focus on the company if they are constantly worried about cash in their personal life. Unless the founder is already independently wealthy, it is a guarantee that they'll be employed by the company and being paid a living wage. Heck, in some countries this is even legally required!
According to your logic, no successful startup will ever have a founder, as any form of pay instantly degrades them to regular employee, and any kind risk taken and below-market salary is completely irrelevant. Never mind the fact that they are taking home a minimum-wage salary while working 100 hours a week - they are earning a wage so they can't possibly be a founder.
So if this logic already breaks down for the founder, why couldn't it also break down for early employees whose compensation is mostly in stock options? How is their situation any different from the founder's?
Startups often pay a shitty salary in exchange for a decent chunk of stock options, with the implicit promise that you'll make bank if you work hard and make the company successful.
Getting screwed out of your payout by such a totally-not-an-acquisition is wage theft. It's like promising a sales-related bonus at the beginning of the year, and then in December changing the metric to "AI-related sales to the CEO's golf buddies".
Startup options are worthless. The only value most people will ever extract from a startup is the experience they had working there, and the salary that was put in their bank account.
I understand that a lot of inexperienced people (like in this thread) think they're going to get rich though.
No, it is not "wage theft" to not get rich when the company exits (by whatever means).
Nobody expects to get rich off working for a startup. The risks are massive, and very few exit with billion-dollar deals. This is taken into account by the people who work there and accept those stock options: 99.xx% chance of being worth essentially zero, but a tiny yet nonzero chance of being able to retire early when it does a billion-dollar exit. It's a lottery ticket, not a promise - every startup employee understands that.
Groq is now changing the deal after the fact by making those stock options worthless 100% of the time. It's like you participate in a lottery, and then the organizer decides to just not do a draw and keep all the proceeds for themselves. Sorry, but that's theft.
Don't intend to pay out in the unlikely event that you hit it big? Then don't offer stock options to your employees and pay market-rate salaries - plus of course a decent premium for the fact that (unlike an established company) your startup can go bust at any time and doesn't offer stable employment. You can't have it both ways.
Startup options are usually worthless, yes, because very few startups end up getting to a position where the options are worth something.
> No, it is not "wage theft" to not get rich when the company exits
I don't think anyone in this thread thinks they're gonna get rich by working for a startup. There's a hope that they will, that's why they are working, but there's no expectation. Maybe there's an expectation of getting a nice tidy sum after an exit (in the 5 or 6 figures) but not in the 7 or 8 figures, at least not if they're just employees and not founders.
What's being discussed is a startup exiting for billions of dollars and the employees with equity seeing zero of it.
Working for a startup usually means lower wages and longer hours, for the chance at striking it rich if the company succeeds. If employees don't see anything when the company succeeds, there's literally no upside to working for a startup.
I recall having to sit through many trainings on how to value employee equity. My experience is that most startup employers try to BS what it means to convince people to value their equity at a significantly higher price than they otherwise should.
If the employer is explicitly making the employee options worthless, then they should be obligated to disclose this. Otherwise it’s trivial to engineer a corporate entity which pays the employees while “licensing” the technology from an IP holding firm. Later they can simply sell the IP holding firm without owing employees a dollar.
The implicit promise is only partially true. Very rarely you can find a proven talent that will actually forego significant salary. Often time when that happens the person is close to founders and will have a significant role in shaping the startup and will get quasi-acquired too.
This promise may have been more true before 2010s where public companies were not paying as much in liquid cash and private companies were not valued so aggressively. Fact is most employees take the startup offer because they don't actually have a liquid offer that's super competitive at that moment, or they are just kind of bored and taking a break of the corporate job that does not give them too many responsibilities, i.e. they are compensated via the title, not just the promise of making bank.
That just means you’re pulling from the lower end of the talent pool. There is nothing wrong with this, but usually talent is correlated with outcome. Most hot startups which are going places are near impossible to get into even for folks with good offers.
Your last sentence is not mutually exclusive with my statement. Both could be simultaneously true. The sheer number of big company employees compared to hot startup makes it hard for everyone good to get into the startup, especially considering they usually have more specific needs. That said it could also be the case that the hot startup cannot easily get good employees from big company.
My point was more that the high end ones they do get are usually in the front piece of the airplane in the acquisition split. Also, the really hot startups are actually paying quite a bit of cash upfront so the original premise of employee sacrifice isn’t as true.
If you were an employee, you were not a founder. A founding-employee would be someone who explicitly "invested" uncompensated time/money into a company without compensation and also worked as an employee. If you are also an employee earning a wage you better have a written agreement stating what amount was "investment" and what amount was compensated wage.
