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Comment by jamestimmins | Hacker News Reader

Perhaps I'm alone in this, but when a tech company is solely owned by a small group of execs, that's a huge red flag as a potential employee. In my mind, it says they truly only care about themselves in a very tangible way.

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As a person who works in tech and uses it, when I see a tech company is vc funded that’s a huge red flag as a person who would have an interaction with that company because more often than not their business model will involve whoring out my personal data before closing down after a few years either because no one wanted to keep throwing money at them or because someone threw a lot of money at them, bought the company and closed the service down.

In my mind it says the founders truly only care about getting their pay day in a very tangible way.

I’m no fan of any X-as-a-Service company, but I trust a bootstrapped and privately owned one a fucking lot more than I trust one built on VC dollars.

You're probably not alone, but I'd rather have a company owned by its founder than a mystery group of very rich people whose main goal with the business is getting more money out of it. If my boss works for himself rather than his funding overlords (who are multiplying the money they invested 100x by doing fuck-all) I'd vastly prefer that.

(disclaimer: I work for a successful privately owned company)

Their employees get a share of the profits (like many regular businesses). They are also quite firm in their goal to stay private, so why would equity be relevant to an employee any way?

What share of profits though? The most recent article I can find (https://mailchimp.com/culture/investing-in-people-through-pr...) boasts of contributing "up to 19%" of annual salary to employees' 401k. While obviously not a bad deal, it's a far cry from options/RSUs and other standard annual bonuses offered at other tech companies.

The other tech companies are vastly outside the norm and have severely affected the entire industry with inflation. And if people cared and wanted to work at those other companies, then they would. Don't assume to know what's best for everyone else.

> What share of profits though?

The share that goes into your yearly salary, bonuses, raises, and benefits (like the 401k match you disregard).

They owe you nothing else, and each employee is free to ask for more or leave for greener pastures if they are unhappy.

Shares are often a much more tax efficient way of rewarding employees and having an actual share has numerous advantage's in term of morale retention and so on.

Also shares keep on producing income after you have left a company.

“Also shares keep on producing income after you have left a company.”

If I was making $120k per year working at MailChimp the last thing I would want is 30% or more of my net worth tied up in private shares. What employee wants that much exposure? It’s a private tech company with no plans for liquidity potentially ever.

Private company shares can pay dividends though.

It is severely limiting. You can’t sell private shares on the open market to buy a condo, pay off college debt, invest in your own company, quit and travel the world, etc. It could be decades before you receive the full share value. If hypothetical employee is working full time it’s probably because they don’t have enough assets 2M+ to live off passive income and need to work. Let’s say they are frugal and save $40k per year. If you have comp like a public co and receive $40k+ per year in shares does it really make sense to have 50%+ of your net worth in a single private tech company? It would probably work out great but 10 years is a long time to wait. I’m pretty sure there is issues with tax too but I don’t know the math.

Shares are worthless unless you can convert them to something. If the company is not public or doesn't have a secondary market, you're just getting paper money that you can never spend. Morale will definitely tank once people figure that out.

>While obviously not a bad deal, it's a far cry from options/RSUs and other standard annual bonuses offered at other tech companies.

Nobody is forcing people to work there.

Don't just tell us that you are suspicious. It would be more interesting to describe the experiences you've had that have led you to cultivate this suspicion.

There's a camp of people (which I consider myself a part of) that see small group or solo ownership as potentially a very good thing (provided the right people are at the helm).

It enables a company to do what's best for the company/employees/customers in the long-term vs. only needing to be focused on the short term or some unreasonable expectation of an overpriced exit.

Please consider not painting all such companies with the same brush.

I think it's better that the founders have a sizable equity but at the same time it's probably a lot harder to grow a company without other investors. But I don't think it would matter in its actual day-to-day business. Dishing out profits as bonuses instead of equity is just a personal preference to them.

Maybe they won't get as dedicated personnel but at the same time if they have kept the company owned by themselves to this point I guess it's a valid choice in continuing doing so.

Is it greedy or not, well to me it shows that the founders are shrewd for sure but.. Are they doing this for the benefit of the company or just to maximize their own profits? Hard to tell. I feel giving up equity isn't such a big deal and it would make me more satisfied having my best employees part of the company. Paying only bonuses sounds a bit cheapskate.

Really cash bonuses sounds a cheapstake? There are many many companies who will gladly give you a percent of there business provided you are vested for 4 years and they are successful and there is a window opportunity to cash out.

Stock options are the cheapskate way to go. Lotto tickets for the newbies.

Many rapidly growing companies that already generate profits? Even if the price of the stock would stay the same it would still make sense to get the extra profits as stock as you would pay much less taxes. Granted you'd have to have a way to sell them when you want out.

And vesting isn't always a bad option, don't you agree? In the case of many successful start-ups like Facebook and Google you'd have earned and probably still will earn a lot more from the stock than from any bonuses they could have given you.

The chances of finding the next google and getting in the ground floor is about 0.

Vesting is bad for everyone. The company buying yours gets to keep you around but you are the least motivated employee. You get to waste a few years as they figure out how to replace you. That's the best case.

Usually you leave and are given the option to buy the shares within 30 days at some price without a way to cash out.

Will these shares go up? perhaps but not really. What happens is new investors money will reduce your percentage. Your shares will be put in a non-protected group while the founders/investors take preferred shares with 10x the voting power.

If they gave you cash you buy google shares you sell when you want and you have the choice to put the money anywhere.

Fair enough. There's no clear-cut answer which is better. You're painting vesting in more darker light than I assume it's but you made your point across. =)

If the founders and investors want to screw you over I'm sure they can and will do so, nothing much you can do with that. If they're concerned with their employee happiness I doubt they'd do it just for pure greed. However as you said the lottery-ticket will probably keep the best employees around much longer than they'd otherwise so it's probably not all bad? Not everything can be valued by its monetary value only.

And also I'd argue that the hottest start-ups aren't for sale in stock markets or at least they are already highly priced when they enter them. It's a lottery-ticket for sure but as with all companies you can never be 100% sure how they're going to end up.

No, they care about the company. Because if they cared about themselves, they would have sold the company and retired happily ever after.

The cool thing about solely owned companies is that they can think long term, as in > 1 year. CEO's of an externally funded company don't have that luxury.

You're not getting married to them. You can leave if what you said is true. And can read former employee exit reviews

You can also leave people you are married to.

Then what was the vow for?

Yeah, and you can also get an AR-15 and try to shoot your way in getting a raise.

The idea was some things are easier than other (changing jobs is likely easier than divorce)

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