There are companies setup like this. It's fairly common for companies founded by people who have already made their money (as finance people, executives, previous entrepreneurs or early startup employees) to be self-funded. The problem is that if you require everyone to work for stock, you're cutting yourself off from a big portion of the talent pool, basically everyone who requires an income to live.
Investors get a share of the company in exchange for providing salaries for the people who can't live without them. If you don't need those salaries, you don't need the investors. But it seems like it's better to have the option to take that investment and pay people than it is to require that everyone work for no pay to get the startup off the ground.
I have met a lot of talents in this situation. That is why I wish I could retain them better. It is important to give the team member a peace of mind, right? Otherwise, they need to worry about money all the time, and it probably is not good for the productivity.
I will definitely stay in the game for sure. :) I know it is important to motivate people. But, to the people who work so hard for your vision, I think founders need to take care of those hard-working employees. I feel frustrated because I wish I could offer what they deserve.
I think, start-ups need strong team with good talents. We are fighting with big companies and well paid jobs. If we just wanna take people who are willing to take high risk to join the start-ups, we are gonna miss out a lot of great talents.
Start-ups are fun, and we can attract great talent. But, we all need to pay rent and survive. I am just hoping that we could find a balance, pay the talents a fair salary, and enjoy the fun start-up ride together.
Josh :)
I'm sure that raises a host of complications vis-a-vis the cap table etc., but it nonetheless seems an intriguing possibility.
yes, that is definitely an issue. In many cases,I think some people need to worry about their rent, monthly expense, or mortgage (personal burn-rate) to worry about. If you are in your early twenty, your personal burn-rate would be much lower than in your late thirty.
Shares/options are great for motivating the team. They are bonus. But, we all need to at least cover our personal bur-rate to live.
I feel, as a founder, at least I should not let my devoting team members worry about that.
Then why doesn't everyone and their mom become a VC?
Hint: Because it's nowhere near as easy as you think it is.
It is plausible that the barrier to entry is high, but the job is easy.
what i see, people don't even know that it's hard so you have to enlighten them. i see people think there are some other barriers, like connections, friends of parents, university, money, etc
The real issue, I think, is that your job forces you to motivate people to take risks on your behalf and it feels like you're over-promising. A lot of success in business relies on motivating people (employees, clients, users) to help you succeed by promising what you'll be able to deliver if everything goes right... selling a vision, in other words. But your workers buy into that vision: they're willing to take mediocre (or even abysmal) compensation in return for the opportunity to be part of something great.
You shouldn't feel bad about paying them poorly. If they wanted high-paying jobs, they'd take them. You should feel bad if you downgrade or abuse their loyalty, if you intentionally break your implicit promises to them (if you bust your ass and do the right thing and still fail, that's not an intentional breach). But you seem considerate enough that I don't see you doing that.
As for investors and the low salaries they expect employees to take, that's a gnarly issue. It's a completely fucked system when the people who are risking more (their careers and opportunity cost) and putting more on the line (their time and work) are second-class citizens compared to the investors, who are just putting up money (that might not even be theirs, in the case of institutional agents). The real investors in any company are the founders and early employees who are doing the actual work. The money given by financial investors ought to be respected (it's a loan, not a gift) and they should certainly have enough say to ensure this, but it shouldn't give them the clout it does.
It's one of those decrepit old systems whereby favor has more value than labor. It's not worth taking personally, and your employees don't resent you for being on the losing end of it.
Also, as for what keeps that system in place, I think there's a bit of unacknowledged resentment of entrepreneurs by VCs. The VCs have the well-paid, cushy, powerful and easy jobs and are pretty much guaranteed by their path-of-low-resistance career track to be rich... but their jobs are a bit boring from a day-to-day perspective... lots of meetings and reviewing prospectuses (prospectii?) and shit like that. The entrepreneurs, as they see it, deserve less respect because they have the fun jobs.