The old fashioned way shareholders would receive liquidity was through distributed earnings aka profit sharing; this is still a viable option. Employees receive a salary and shoulder little risk relative to shareholders/investors so I'm not sure I agree they "deserve" to be rewarded in the same way.

So you’ve given me compensation (equity stake) that I can’t sell, ever, effectively making it worthless. Borderline fraud. If I want cash flow, give me liquidity and I’ll go buy a public dividend fund.

My time is worth more risk wise then some investors bottomless pit of fund dollars (cough SoftBank cough).

I agree with you, though. I think employees want stock options without understanding their drawbacks and limitations. Receiving stock options sounds sexy and is motivated by social factors that may not be as beneficial now as they were several decades ago. But employees need to take personal responsibility for the offers they accept and if they feel under valued, they can leave at any time. I would personally opt for the cash flow route as well.

I think that stock options (and the eventual shares realized through option exercise) are a legitimate method for a cash constrained startup to offer deferred comp to early employees (as well as meaningful ongoing ownership in the business if done properly), but that additional government regulation is required to tip the power balance away from the employer/option grantor. I don’t disagree with social factors, but I think even today employees want upside exposure you can only obtain with options (or other equity instruments). Hustle has a cost.

If you want to issue options, no right of first refusal. You have to allow the transfer of your shares on a secondary market for accredited investors. You have to provide a cap table to all shareholders, as well as dilution and preferred share info. You have to hand over a 409A valuation annually to all shareholders.

You don’t have to go to the public markets, but you also don’t get to treat common shareholders (usually employees granted ISOs) as second class citizens. If private markets are the new public markets, we still regulate the private markets, just a bit less so.

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Employees are shareholders, too.

If they do not own shares, no, they are not a shareholder. Companies want employees to feel like shareholders as it should increase productivity.

Upon vesting, any employee can exercise one share and become a stockholder. It's a great way to see the books, too.

But your tone in treating employees and shareholders was very antagonistic. The vibe in startups has always been "we're in this together." Not, "I'm the boss/investor and you're the cog."

Not trying to be antagonistic, but precise. You say "upon vesting" which makes the assumption all employees are granted options. This is not the case. I don't see anything wrong with simply being a payed employee, receiving a fair salary for the work performed. If someone wants to be guaranteed a shareholder position, they absolutely can! By starting a company of their own. That is the beauty of our economic system. Not everyone is entitled to ownership at their place of work, nor should they be.

Most full time employees at VC backed companies will receive stock comp as part of their compensation.

you make a good point.

I think the 'vibe' is part of the problem. It's somewhat dishonest.

Why do all companies need to be 'family?' Can't we just respect each other as we get the job done and go home to our actual families? The 'company culture' is a ruse to get employees to have loyalty where the company does not reciprocate.

reminds me a bit of the blog post: <https://www.yegor256.com/2015/10/06/how-to-be-good-office-sl...

Im a complete newb to this. Can someone not sell their shares freely, regardless of public staus, if they do their own marketing?

Many companies have right of first refusal on any private share transfers. You need to offer the shares back to the company at whatever sales price you agreed to with a third party. Most times, the company can just sit on the offer and never actually respond. There are no timeliness clauses or guarantees when evaluating the offer.

Notoriously, this happens with companies like Uber. If you were friends with Travis, you could sell. If not, you'll go pound sand.

Investors also want to see the books and numbers. Not everyone can sell on hype alone. Even leaked numbers from Uber were taken with huge grains of salt.

Over the counter arrangements and warrants are on dubious legal standings with regards to transfer-controlled private "stock units". Actual shares are a different story, but everyone gives out "stock units" and not shares. It might seem pedantic, but there's a gulf of difference while the company is still private.

Shares can be bought and sold privately. They don't need to be publicly listed to cash out.

In theory, sure, but almost every startup I’ve seen makes board approval a requirement of the transfer.

Why do they "deserve" to? I fail to see how they're owed anything (that wasn't in their contract); it's business, and venture capitalists aren't innocent when it comes to harming businesses due to greed.

Because they built the business? Just because something’s in a contract doesn’t mean it’s not exploitative.