Anyone who doesn’t own stock options or get their main salary from your company is de-facto misaligned with your company’s vision.
- cash promotes employees claiming from the current company’s value, rather than incentivizing them to invest their time in increasing the future company’s value.
- cash bonus incentivizes performance, but still no interest in the future of the company
- equity incentivizes thinking of the future
It’s very hard to distribute equity fairly:
- Giving equal shares is wrong, since not everyone has equal impact.
- Giving different amounts upfront, is unfair, since noone has proven their impact yet.
- Early employees get more equity since they take more risk, but later employees might have more crucial contributions to the company’s success.
Solution to this problem: Keep equity details secret.
Side note: One of the clearest patterns observed from investing in startups is that a company does better the less it pays the CEO. No more than $150.000 at an early stage venture backed startup (the book is from 2014).
- Zero to One, Peter Thiel
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