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The "No BS" version of how startups are really built, taught by actual startup Founders who have lived through all of it. Hosts Wil Schroter and Ryan Rutan talk candidly about the intense struggles Founders face both personally and professionally as they try to turn their idea into something that will change the world.
Welcome back to another episode
of the Startup Therapy podcast.
This is Ryan Rutan, joined
as always by my friend,
the founder and CEO of
Startups.com, Will Schroeder.
Will, we watch founders
fight like hell over giving
an investor 15%, and then
turn around and hand a
co-founder 50 cen- or 50%
like it's a free breadstick,
or like it's 50 cents, right?
The truth is, man, investor
dilution is usually the
cleanest equity we give
away because at least we
know what we got for it.
Yep.
Why, in your opinion, are
founders so disciplined with
investor equity and so wildly
emotional with everybody else?
It blows my mind.
It blows my mind that given
how expensive these other
decisions are, how, like, just
frivolously, like, people- Yeah
give, give away their
stock to a co-founder-
Yeah … which, which, you
know, is always m- my, my gripe.
I'm not anti-co-founder, but
dude, you paid a lot for it.
Or employees, early
employees, you know, who
may or may not contribute.
Or advisors, who I think if you
did the math, are gonna wind
up being the highest priced
advice you could possibly find-
much less would pay for.
Yep.
Right?
Founders, w- when we say,
like you said, "Hey, you're
gonna give up 15% of the
company." "Oh, maybe it
could be 12," or whatever.
I'm like- Right … "You're
gonna get actual money, man."
There's an inbound wire that
justifies that decision,
right?
Yeah.
So- That one's okay
…
so how are you okay with giving
some guy you met on- Yeah
Craigslist 50% of the company
because- Yeah … he could
build a mobile app, right?
Right.
How are you
okay with that part?
Yeah.
Equity is not a thank
you note, right?
Yeah, yeah.
It's, it's the most expensive
currency a startup has, but we
don't treat it that way, right?
I, I'm gonna, I'm gonna echo
back to something you said,
I think on the podcast,
but it's been, like, six
or seven years ago now.
And, and you said that,
"Yes, today it feels, it
feels valueless," right?
Yeah.
The company's at, at a state
where, like, it doesn't
feel like it's worth much.
But remind yourselves that
represents 100% of the
future value of your company.
Yep.
Let me say that again- … in
case anybody choked and
spit their coffee out.
It represents 100% of the
future value of your company.
And so when you are handing
it out like, I don't know,
Halloween candy, might
wanna reconsider that.
When I look back at all
the startups that I've done
and kinda how I've, you
know, distributed equity
in the past, and I, I'm not
terribly upset about it, of
all the decisions I made.
In other words, like I, when I
looked at, at… Like, I never
looked back and say, "Oh my
God, that person got too much,"
or, "I got ripped off," or,
you know, something like that.
Yeah.
Nothing like that.
What I'm upset about is how
poorly I valued the equity.
This is me saying I think,
you know, people more or
less earned, you know, what
they earned, but I think
my, my internal compass,
where I, I wish- Yeah
that I had been more
disciplined about how I
thought about that equity.
You know, kinda, you know,
what we talk about now, which
is, oh, damn, it, it's, it's
worth real money now, right?
And I think what happens in
the early, early days- is
we're on the opposite side.
We can't believe anybody
will do anything for these
magic beans that we have
called equity, right?
We're like, "Wait,
you'll do- Yeah.
Seriously?
Yeah.
Like, you, you'll take- Yeah
… you'll take this Monopoly money?
Seriously?
Right.
Yeah.
Yeah, it'd be like, yeah,
it's, it's like walking into
a car dealer and being like,
"I just printed this out."
They're like, "No problem.
No problem.
Just go ahead.
Take anything you want off
the lot and just leave us a
stack of your fresh-printed
bills right there."
What throws us off is because
we feel like we got it for free,
'cause we just came up with this
idea nine seconds ago, that we
can just give it away for what
we perceive to be real value,
that it must be free currency.
Yeah.
And that's why in the early
days, which is why we're
doing this episode, which is
why in the early days when y-
that first year, that first
18 months, when startups
founders don't realize how
vulnerable they are, that we
start giving this away, again,
because we're so blown away.
I'm gonna go back to the
co-founder one for a second.
Sure.
The most common instance,
and we will dig into
this, but the most common
instance is I got this idea.
If anybody will agree that it's
also a good idea, vis-a-vis
validate me, and- Yeah … join
me on this insane journey so I'm
not alone- Yeah … I'll kind
of agree to just about anything.
Yeah, yeah.
Yep.
T- terms?
Yep.
terms.
We don't need a term sheet.
Here's half the company.
And I always remember, 'cause
we always saw this live at
the startup weekend events.
You know, where in one weekend
everybody came together.
Any hackathon or
anything else like that.
And it would always
be the same thing.
The weekend goes, it goes
from a Friday to Sunday,
and then on Monday everyone
would be like, "Okay.
Well, we kind of just divided
up the company, like, in
thirds on Saturday morning,
'cause that's when we decided
we were gonna work together.
Yeah.
And now it's Monday, and like,
that guy's kind of an idiot.
I don't think I want to give
him a third of this company.
Just 'cause he showed
up at this event.
He's not even from
here.
He just flew back
to somewhere else.
Like,
what are we gonna do
now?
Yeah, yeah, yeah.
I always remember that,
'cause Ryan, you remember, we
used to meet with all these
folks on a regular basis.
Oh, yeah.
We were really involved
in, in those events.
And I remember the hangover
on Monday morning, where the,
usually the person who had the
idea was like, "Man, I just
gave that guy that just happened
to be in the room, like, a
third of my company." Yeah.
Because he was the only person
that, that could write code
on Saturday morning, right?
Which is like- Yeah
you know, when they
started to work in earnest.
And I was like, "You know
can undo that, right?
Like, you can go start
another company, whatever."
And but I always remember
the look on the founder's
face, where they're like, "I
think I made a huge mistake."
Yeah.
'
Cause you did.
Yeah.
You, you gave a third or half
your company to essentially a
stranger for what they might
do someday, and probably won't.
That is bananas.
Yeah.
Why are you freaking out-
It is … about that?
Yeah.
Right, I know.
That's the thing.
It's, it's, yeah, like we,
we treat investor equity like
it's some kind of fine china.
Yeah.
And co-founder equity
is like bar peanuts.
Just everybody stick your
hand in and get what you want.
Uh, don't worry about it.
Yeah.
It, it- Half the
company isn't a gesture.
It's a life sentence on your
cap table, for God's sake.
A life sentence.
Like, you are doing so much
to the company- It's crazy
… by making that decision.
Yeah.
With objectively very
little information.
And unlike investor
equity, which comes with
a receipt, nothing, right?
Yeah.
Investors pay in cash.
Everybody else pays in maybe.
In maybes and promises, right?
Yeah.
And to be fair, I want
folks to hear this.
Most of the people you're about
to give equity to, or have given
equity to, will not perform.
They will not perform, right?
And it's not because-
It's math.
Right.
It's, uh… And, and, but
here's why they won't perform.
Number one, because startups
are transient and hard, right?
Like most- Yeah … people, once
the, the fog and pixie dust off,
I wanna go join a startup wears
off, and like- Yeah … oh,
it doesn't pay anything, and I
have to, you know, consume all-
Which takes about two weeks,
by the
way.
Yeah, yeah, yeah.
It's, once people sober
up basically, they realize
it's a terrible idea.
Right?
Which is fair, okay?
Another reason is the startup
changes so fast that what-
So fast … you thought you
were gonna do, or what they-
Yeah … thought they were
gonna do, or whatever the
conditions were when you made
this pact Just don't apply in
three, six, 12 months, right?
Right.
So nobody's fault,
but the playing field
changed completely.
The game changed completely.
The other thing that you
run into is that for a
lot of people, what they
think their value will be
and what it actually is,
is dramatically different.
Yeah, yeah.
It would be like me saying that
I wanna play for the Columbus
Blue Jackets in the NHL, right?
Like, I'm a pretty good
hockey player, right?
Um, I can skate pretty well.
Yeah.
I can… You know, you've
played hockey with me, Amari.
I'm okay, right?
Yeah, yeah.
You left some bruises on me.
Yeah.
But if I took that same
impression of myself and
took it to that next level, I
wouldn't make it off the bench
before getting leveled, right?
Like, and, and that would be
the shortest hockey career ever.
Yeah.
And I use this to
say my s- You're
not getting into the stadium
without a ticket, let's put it
that way.
Yeah, yeah, exactly.
So m- my self-assessment of
what I think my performance is
going to be- Yeah … doesn't
mean jack shit, and that's
what I'm getting paid on.
Because I'm gonna tell
you, I'm gonna go out
there and nail goals.
I'm probably gonna have
a hat trick- Yeah … you
know, every single time.
Yep.
Yep.
And I can say whatever I
wanna say, but I also have to
show up and do those things,
and most people just in
life can't do those things.
They, they can't, you know,
execute onto the best of their
ability, which is why- Yep
… there's a delta in performance.
Yeah, I mean, how often
do we see this, Will?
Founder gives 50% to, let's
say, a technical co-founder,
'cause I think that's one of
the, one of the, the biggest
ways we see- Yep … people
part with equity, because they
need someone to build it, right?
Yep.
And they, they can't
do it themselves.
They don't have
the money to do it.
Six months later, the
product's barely shipped
or not shipped at all.
The relationship
is really strained.
The founder's now
negotiating with someone
who owns half the company-
Yeah
…
and maybe isn't even
full-time emotional.
It, it, like, and they're not
even there emotionally anymore.
Mm-hmm.
Maybe they are, they're
there, maybe they're not.
But it puts you in such a
weird position as a founder.
Yeah.
Right?
The wrong co-founder doesn't
just cost you equity.
I think that's something
really important here.
Yes, it costs you the
equity, but it also
costs you optionality.
Big time.
It costs you speed.
It costs you sanity,
and it can just, it can
absolutely wreck things.
Yep.
And so I think we have to be
careful here that this doesn't
stop with the equity, right?
The term sheet isn't the end of
your suffering, unfortunately.
Right.
Well, and, and I think,
you know, with the, the
co-founder, to your point,
you can get other investors.
Getting another- Yeah
… co-founder, not unheard of.
It does happen.
Yeah.
Co-founder cycle.
But it's pretty painful,
and it's pretty expensive.
Yeah.
But most importantly, there
is a guarantee of nothing, and
this is just with humans, right?
At least with the- Yeah,
yeah … investor, there's a
guarantee of cash, you know?
Say what you will- Right
… about the equity- So-
that you're gonna give up.
You are going to get
market value cash.
Yeah.
With all of these other
resources, the co-founders, the
employees, the advisors, you
know, humans in general, you're
gambling every single time.
It'd be the- Exactly
… equivalent of this if the
investor came in and said,
"Hey, here's the deal.
I'm gonna give you a million
dollars for 20% of the company,
okay?" And you're like, "Okay."
Yep.
"
Sure.
But I may not give it to
you." Yeah. "But you are gonna
give me 20% of the company.
And over the next- Yeah … two
to five years, every day you'll
come to me and say, 'Hey, will
you give me the money?'" And
every day I'll think about it.
I want to, right?
I'll say that I want to.
Yeah.
Yeah.
But I probably won't.
But you're gonna give me
the million dollars anyway.
How many people would be
like, "That's a great idea.
Where do I sign up for that?"
That does sound perfect.
And yet they do it every single
day- Yeah … with people.
Right.
Every single day.
Yeah.
And yet they'll haggle with
an investor over a couple
of points- Yeah … who will
actually wire the money.
Yeah.
Right?
And then they'll turn around
and give half the company,
so in, in, based on your
math, that would be $2.5
million worth of equity-
Yeah
…
to someone who
might do something.
Who might do something.
Right?
Right?
And probably won't.
But l- let me stick
with that, though.
Let's say it's, it's
the equivalent of $2.5
million worth of equity.
Now- Yeah … of course I wanna
lay the foundation, everything
we're about to talk about, in
the fact that right now you
don't actually have that money.
However, if you did, if you
had $2.5 million, would you
give it to that person- Yeah
in addition to what you're
gonna pay them for whatever
intangible value that you think
that they're gonna provide?
The answer's almost
always no, right?
Always no.
Yep.
If I had $2.5 million, I would
never give you that money.
Well, guess what?
Yep.
That's called an employee.
Uh-huh.
Yep.
Like, that's what employers
are for, where you just pay
them to do their jobs, and
they do their jobs, right?
Yep.
Giving some, like,
disproportionate massive
amount of, of money to somebody
for what they might do,
especially in the early years,
we have no freaking idea-
Yeah
…
is a dangerous gambit.
It is.
But nobody sees it that way,
right?
That's, that's what I'm saying.
What, what they're looking at,
what they're looking at at the
beginning is, like, well, it's
worth nothing, and I'm asking
so much of them, all right?
And so, so what
do we have to do?
What would be fair, right?
Oh my God, this is the word that
enters the conversation that
absolutely blows everything up.
Co-founder grants should be
priced like an investment,
like you just said, right?
Yeah.
Not a wedding vow, right?
Yep,
yep.
Till death do we part,
and if we do, you get 50%.
Yeah.
Um, because how many times
have we seen this, man?
And they're rarely
memorialized.
Yeah, right.
Yeah.
Fairness at the start,
right, it, it feels like
the right thing to do.
Right.
But how often have we
watched fairness at the
start- Absolutely rot into
resentment at scale once
they start moving, right?
It just, it happens so
often because as you said,
right, the businesses move
fast, and not everybody
moves at the same pace.
Not everyone is gonna keep up.
Not everybody's gonna
stay there, right?
Just because you're in early
doesn't mean you were in equal.
Right.
Yeah.
And, and I think that's
where this goes wrong.
We got equal shares for what
end up being really, really
imbalanced inputs and, and
outcomes, and it, it achieves
a, a real huge problem a couple
months or a couple years down
the line when all of a sudden
the one who is putting in most
of the time and has exactly the
same amount of equity and is
creating most of the outcomes
and has exactly the same amount
of equity starts to kind of
go, "Hmm, why is it like this?
Oh, yeah, that was
fair two years ago,
three years ago." Yep.
And, and now it no longer is.
I gotta tell you, I was on
the other side of this where
I was the unfair co-founder.
Let me give you an example.
This is actually, uh,
last company I did before
startups.com very long time
ago, like 15 years ago.
I'd started a company called
unsubscribe.com, and I had
the idea for the company.
Um, I had some people in town
in Santa Monica that I w- I
wanted to start it with, and
I'd kind of like a, a game
plan for how it would go.
And so I recruited two
other co-founders, right?
And at the time, I don't
remember exactly what the equity
split was, but, you know, l-
let's say it was like I had,
like, 50% or 40% and they, the
other two had, like, 30%, right?
So- Okay … I had the majority,
but it was my company, my idea.
However, and this is, this
is where it turns, I had
no intention of running it,
which is why I recruited
the other two, right?
Uh-huh.
One was a CEO candidate, the
other was a CTO candidate.
That company ended up raising
money, like, overnight.
Like, overnight, right?
Like, from, like, super brand
name investors like Charles
River Ventures, et cetera.
Uh-huh.
The other two co-founders came
to me- And they were like,
"Hey, Will, like, we totally
recognize that, like, you
brought us together, it was your
idea," and blah, blah, blah.
Uh-huh.
"
But we're gonna be all
in on this." What is
it that you do here
exactly?
Yeah, exactly.
That's exactly.
What do you do here exactly?
And I remember having
this very long, very
uncomfortable conversation-
Oh, yeah
…
with these other two
co-founders, right?
It wasn't that they
were wrong, okay?
It wasn't that they
were wrong, it's that
I didn't like it, okay?
I want to point out, like,
we assume that there's a
rationality that goes forward,
and there is not, right?
Like, I was like,
"Fuck you guys.
This was my idea.
I literally brought… You
guys are the reason, like,
that you're here, or I'm the
reason that you guys are here.
How… And we just raised money.
Like, how am I the
one getting fired?"
Because
of you.
Right?
Yeah, yeah, exactly.
Yeah.
Now, now in retrospect,
they weren't wrong.
But also you have to fight
with for what's yours or
people will gladly take it.
But I guess what I'm trying to
say is, this is a case where
we equally s- uh, split things
up, not perfectly equally,
but close enough, right?
And as soon as they realized
that I was on the wrong
end of the cap table, if
you will, they came to me.
And to be fair, they were
very professional about it,
and they were very cogent.
And, and eventually
I relented, right?
However, however, this is
one of those cases where I
recognized for the first time
that I was the problem, right?
Like, I was- Yeah … the
thing kinda like holding
it back, so to speak.
And to be fair, I wasn't
planning on working
there, so like, I only
had so much leverage.
I'm like, "Oh, you guys wanna
work on this full-time and
make money?" What do you mean,
guys?
This is going exactly to plan.
Yeah, exactly.
It is the case, even if you're
well-intentioned, even if you're
the goddamn founder, that you
could be the- Yeah … wrong
person in that equation.
Yes.
Right?
And not easy to unwind.
That's something really
interesting, 'cause, like, when
we get into the are co-founders
worth it piece, it'd be fun
to go back and actually look
at, like, original idea versus
founder who actually really
was the one that carried it,
and see how often it is that,
like, it's the original founder.
'Cause we often think of the
co-founders kinda like second,
and sometimes things do start,
like, they, they start so early.
Yeah.
And I think you and I
would both agree on this.
Yeah.
That at that early idea
stage- The idea's really
not worth that much, right?
Right.
It is the execution.
It's all the other stuff that,
that actually makes it valuable.
And to see really, like,
how often kind of the, the
second and the non-idea
person is the one who actually
creates a lot of the value.
Yeah.
But let's do something
here, because I don't wanna
leave this up in the air for
founders who are just sitting
out there like, "I would
give up 50% of my company
for the right co-founder,"
because we hear this a lot.
Yeah.
I got a couple things that
I, I, I generally wanna
say to them when, when I
hear these kind of things.
Yeah.
And I'd be curious what
then you'd add to the list.
It's start with vesting.
Always vest.
Add some cliffs.
Mm-hmm.
Tie additional equity to
actual value creation.
Define what happens if they
stop contributing, and put some
breakup terms in writing before
there's anything to fight about.
Because once the fighting
starts, there's gonna
be no fairness left.
There's gonna be no- Yep … no
coming to terms at that point.
What, what would you
add to that list?
Here's what I would say.
The best thing about that
conversation is it forces
expectations to the table.
Oh, yeah.
And for both sides.
And I think if you wanna set
up that conversation properly,
I think the conversation
has to be bidirectional.
It has to be-
Oh, yeah.
Gotta be … I need to know what
your expectations are, right?
Yep.
If things were to go wrong,
if I were to be the shitty
co-founder, like, you know,
let's say I'm talking to my
two partners at Unsubscribe.
If I'm the shitty
partner, I need to know
what your expectations
would be of me, right?
And if you're the shitty
partner, uh, vice versa.
One of my first partners in my
first business said this to me
when we were doing the deal.
I was, like, 22 at the time, so
I didn't know a lot about stuff.
And I said, "Man, these feel
like, like, feels like a really
onerous conversation." We
were merging our two agencies.
Yeah.
And he said, "Look, we always
start by writing the divorce
papers first, 'cause if we can't
agree- Yeah … on how it'll
end, we don't know how it's
gonna start." Like, for some
reason, that always stuck in my
head, and it was a very friendly
conversation, but just like
a term sheet- Yeah … about
super onerous shit, right?
Like, what happens if- Yeah
… you're convicted, right?
Like, crazy stuff.
And, um, anyway, I really
thought in those, those early
conversations that whenever
you say, "I need to address
your concerns or your desires
or your needs," it didn't
feel like, "Let me draft up
your execution papers," right?
Yeah.
It, it drafted up, "Let's
figure out so you know ironclad
what's fair to you- Yeah
ahead of time." You
know, again, what your
expectations are, et cetera.
Yeah.
And I, I found that
worked very well.
Because I think when other
people see it from, "Oh
wait, I might get screwed?
You're not just worried
about you getting screwed?"
Yeah.
"
Yeah, all of a sudden I'm,
I'm real interested in kind
of what this looks like."
Yeah, no, I think it
is super important.
I mean, I think that, that is
actually what fairness looks
like at that early stage.
Yeah, right, right.
Not 50% of the company.
Fairness is, "Let's have a
conversation around this.
Let's, let's talk about
exactly what happens in,
in the unlikely event of
a water landing," right?
Right.
That's a great
way to put it.
So those things do
need to be addressed.
Early employees,
same issue, right?
I was… That's
where I was going.
On average, startups
are gonna give up 15
to 20% of the company.
In an option pool.
Now, now typically option
pools are a little bit
smaller when they come from
investors, between 5 to 15%.
I went up- Yeah … to 20
just because a lot of times
you've got a lot of early
employees that are granted,
like pre-option pool, et cetera.
So the option pool- Yeah
… isn't always exclusively,
you know, just what was set
aside on serious seed funding
or something like that.
But let's, let's use just
a, a simple number of 15%.
That's a huge bit of the
company, and it's super hard to
ever get back or unwind because
it's tied into so many people,
which is where the problem is.
Yeah.
Yep.
Lots of, lots of little fights.
Yeah, exactly.
If someone's gonna take 15% of
your company as an investor,
you have a term sheet which
has all the terms that,
that they're gonna invest,
like at all the rules and
regulations, so to speak.
You've got, that'll transfer
to an operating agreement,
which will then memorialize
all of those terms.
You kind of know
what you're getting.
Yeah.
Here's the cash and here
are the terms, right?
Yep.
And it's, so long as you
understand those, the
deal has, doesn't have a
lot of questions to it.
Employees don't work that way.
Employees show up, and it's
just like a co-founder, "Here's
what I'm gonna do. I'm gonna
do blah, blah, blah." Right?
And statistically they will not.
Right?
Just Yeah … the
nature of people.
Otherwise, every company
would just keep the people
that they had forever and
there would, there would
never be a termination
or a turnover, right?
Doesn't work that way.
Uh, life works a
little bit differently.
But here's the challenge.
There's management
of people, right?
But there's a big difference
between, "Hey, you're not
doing a good job," and,
"Hey, you're fired." Okay?
Here's- Yeah … and
here's why I say that.
"Hey, you're not doing a good
job," can keep you around
long enough to make it through
your vest period, right?
"Hey, you're fired," sometimes
even has an acceleration to it.
Yeah.
But a vast majority of people
can earn the same amount
of equity Whether they do
a good job or a bad job, so
long as they don't get fired.
I was seeing the scene from,
uh, is it Office Space?
Where he's sitting in there
with the two, the two hatchet
men, and he's like, "What
that'll do, Bob, is you'll,
you'll end up doing just
enough to not get fired."
Yeah.
Right?
And, and that's, it's
kind of it, right?
Exactly.
It's, because look, if,
if equity's making up
for, for below-market
cash comp, great, right?
Yeah.
And sometimes, and
that's a real trade.
Yeah.
Yeah.
I would argue it, it can be
a really bad trade still.
But at least it's a trade.
For both sides.
Yeah, yeah, yeah.
But I was talking,
yeah, that's exactly it.
I was talking to a founder
two weeks ago and they had
layered equity on top of
really strong market comp.
Right.
Without any kind of
performance accountability.
Right.
Which just ends up being silent
overpayment and, and they were
at this point now complaining,
it's like, "Yeah, the team
just isn't motivated and I
did all this stuff for them."
It's like, when did you do it?
At the very beginning.
And what do they have
to do to maintain it?
And it just went dead silent.
Not get fired.
It's like- Right
…
well, they, they got it.
Not get, and- Right?
Like, no.
It's, in, in some of
these cases, there
wasn't even vesting.
So they were just handed
pieces of the company.
Oh,
shit.
Yeah, and, and- And
they have them now
…
and look, man, I'm gonna make
a few arguments having been
in this game for a long time.
And, and Ryan, you've
watched a lot of pr- people
come through our company-
Oh, yeah … over the last
15 years, so you, you've
seen it firsthand as well.
For sure.
But it's not exclusive to
folks that have worked for us.
First things first is we give
out equity as an incentive
for the future, right?
And, and everybody's like,
"Okay, I'll take it." Now,
what you said a moment ago,
some people are using it to
actually, like, be a part
of their cash comp, right?
I would argue at which
point you can't pay someone.
Let's say somebody makes
$200,000 a year, and you
can only pay them 100,000
and they're gonna take the
other 100,000 in equity.
Totally fair trade.
Yep.
That's money you didn't have-
Yep … that you would've
otherwise paid them, okay?
Paid
somebody.
Totally fair.
Yep.
Right.
Yeah, yeah.
In that case, I would argue
that they've earned every bit
of it because that was what- Yep
… they were gonna earn anyway.
You just couldn't
pay them, right?
Yeah,
exactly.
Straight up.
Uh, I get that one.
There's a different version
which you just said, which
is we're kind of gonna pay
you what you're gonna get
paid anyway, and you're gonna
get a whole bunch of stock.
And-
Whether you perform or not,
which is where I wanna take this
What's missing in this deal, and
this goes back to the premise,
you know, of this episode,
which is why don't founders
look at the other places they're
giving equity as stringently
as they do with investors?
If I say to you, "Hey, you get
paid $150,000 for whatever job
it is, and you're gonna get a-
an extra $200,000, let's say, in
equity." First question is why?
Like, like- Yeah … what
exactly, how are they
gonna perform differently
than they would've
otherwise performed, right?
In other words, if they go to
another company and they don't
have equity, are they just
gonna not show up for work?
Like, what, what- Yeah … is
it about that, that equity?
I have not seen, in my
years, a dramatic difference,
a dramatic difference.
I've seen a difference, not
a, a dramatic difference
the way people think it is,
between someone who makes a
good m- you know, market rate
salary, like they're well-paid
and someone who has equity.
Now- Yeah … a
few caveats there.
Very few companies ever
get to a point where
equity is valuable, right?
I mean, like, it's,
it's statistically tiny.
Bit of a lottery ticket.
Yeah.
Yeah.
Which is, which is why I said
a moment ago that at what
point you're paying people a
full salary and then paying
people on top is very different
than if you're actually
subsidizing their comp,
you know, with your equity.
At that point, it's not
a lottery ticket anymore.
Yeah, man.
If your employee's
getting paid market rate
and gets equity too, that
equity needs to go get a job.
Yeah.
Like, come on.
You know, something that's
really funny about everything
we talk about here is
that none of it is new.
Everything you're dealing
with right now has been
done a thousand times before
you, which means the answer
already exists, you may just
not know it, but that's okay.
That's kind of what
we're here to do.
We talk about this stuff on
the show, but we actually
solve these problems all
day long at groups.startups.com.
So if any of this sounds
familiar, stop guessing
about what to do.
Let us just give you the answers
to the test and be done with it.
So, yeah, here's
what I'm saying.
From the employee's standpoint,
I think for a lot of employees,
they look at it as, "Oh, I'm
working for a startup company.
I, you know, I deserve a piece
of the thing." Every single
person that's ever worked for
us has been g- has been given
an, an equity grant, right?
It's vested over time,
but, uh, you know, they've
been given an equity grant.
Because I do believe, I…
You know, when, when and if
that payday comes, I want
everybody to take, to get a
piece of it, and that's great.
Yes.
However, however, there's
also a side of it which is,
wait a minute, if we were
to sell today, the people
that work really hard and
the people that just didn't
get fired get paid equally.
Everybody gets a Super
Bowl ring, right?
There is a great, uh… I
told you about this guy.
Uh, there was a great
entrepreneur that I was
meeting with maybe, like,
a year and a half ago.
Uh, we're at a, a restaurant,
and, uh, he's pitching me
on this, uh, on his idea.
And he's, like, notably
athletic, right?
Uh-huh.
You can just tell, like,
when some people are like…
There's athletes who, like, go
to the gym a little bit, and
then there's a professional
athlete sitting- Yeah … next
to people who don't, who just
go to the gym a little bit.
Yeah.
And this guy was the
professional athlete, right?
He was like, like- Uh-huh
… 6'4", like 4% body fat, right?
Like- … not just
a dude, right?
A dude, right?
Right.
Anyway, as he's sitting there
talking, I see this giant
thing flashing on his, on his
ring, or on his, his finger,
which is a ring, right?
Uh-huh.
And I'm like, "I, I gotta pause
for a second. Is that what
I think it is-" What is it?
"… on your ring?"
Yeah.
"
Or on your finger?" And
he's like, "Oh, yeah,
it's a Super Bowl ring."
And I was like, "And you
failed to mention that -" Yeah.
"… in this conversation?" He's
like, "Yeah, I won this
with the Broncos." And I was
like, "Dude, that would've
been the first thing I said
in every conversation-"
Yeah "… I've ever had."
Yeah, "Will, why do you wear
that ring in the middle of
your forehead? Isn't that
supposed to go on your finger?"
Yeah.
But here's what he said, which
I thought was interesting.
He's like, "I never stepped o-
on the field one time," right?
Like, "I, I-" Yeah "… was
like second, third string.
E- everybody gets a ring." He's
like, "You know, whether you
play or not." And I use that.
He's a great guy, by the way.
And I use that as a
metaphor- For this, right?
Like, if we were to sell today,
every person that's ever worked
for us that has equity, whether
they performed well or not,
is going to get paid the same.
Paid the same meaning like,
you know, that their equity's
gonna convert the same way.
And I'm like, "Well, shit."
What happened to fair?
Didn't we s- wasn't fair where
we started with all of this?
Right, right.
Yeah.
And so my, my point with
employees is you're paying
employees equity not because
they're, they're gonna
perform so well, because
they're not gonna get fired.
And I use the latter- Yeah
… to say I know the incentive is
that they'll work harder, and
that might apply, but the cost
is gonna be exactly the same
whether they work harder or not.
You know, same with salary,
but certainly with equity.
Here's what I've seen over time.
It does work with some people.
It does work with some people.
Ironically, those are the same
people who would've worked
and compounded value for
the company whether you give
them equity or not, right?
That,
that, that's
my
point.
The, the value add players
are always gonna be
value add players, right?
A- a- and unfortunately,
I think we too often treat
early employee equity as a
signing bonus when it really
needs to be treated like
a value exchange, right?
Because if it's just, if
it's just a signing bonus
and it's granted at the
beginning, even if there's
vesting involved, right?
Like, vesting isn't value
creation, it is just
time passing, right?
That happens whether we
do a damn thing or not.
Showing up is not the same as
compounding the company, right?
Right.
In, in my opinion, equity should
do, should reward three things.
Three things and
three things only.
Risk, sacrifice, and impact.
Ideally, all three.
Yeah.
But it has to have some
semblance of at least one
of those things for it to
really be a fair exchange.
On that note, let's
move to advisors.
So we're just, got like
the third leg of the
stool, if you will.
Uh-huh.
Advisors crack me up as
a category that, that
gets, uh, equity, not
because they get so much.
I mean, honestly, uh,
advisors, like, don't, don't
ever really compose that
big of the cap table, right?
You know, as far as the-
Right … slice of the pie.
No, but it is, but it's
another great illustration of
how easily founders will part
with it and really not think
through, "What am I actually
getting in return for this?
Would I pay the same thing
for it if it was a cash
payment?" And the answer
is almost always no.
Let me lay this out, 'cause
I, I think we just have
great data to run this, okay?
So currently, uh, this is,
this is coming from, uh,
Carta, I believe, you know,
who does cap table management.
Advisors are currently getting
between .10 to .25% of the
company for their advisory work.
So for, for those of you that,
that are following at home,
that means a 10th of, of 1%.
That is per advisor, not,
not as a- Uh, correct, correct.
Per advisors.
Yep.
Right?
And so, you know, l- let's
say you've got, you know,
three to five advisors, you
know, that could easily cost
you a full point of equity.
Which- Yep
here's where this
gets dangerous.
Numerically, that's
a very small amount.
That's less than 99%-
Yeah … of the rest
of the company, right?
Yeah, yeah.
However, however, where it
gets hilarious is when you
start to do the math of
what it actually buys you.
Here are the categories
that investors usually
get recruited under, okay?
Most popular, category
A, sage-like wisdom.
They have, they have some
sort of sage-like wisdom on
either an industry- Oh … or
a- Yeah … particular, um,
skill set, you know, marketing,
things like that It tends to
be the biggest one, right?
Like, I need somebody… It
used to be back in the day,
like, like the oldy-timey
boards that you put together,
advisory boards- Yeah
were like a doctor, an
accountant, and a priest, right?
I'm kidding, but like- Uh-huh
… it was always like the same-
Cover the basics … like, g-
gaggle of G.I. Joe characters
that you, that you'd- Yeah
… go out and recruit, right?
'Cause you needed
those, those skills.
People often found attorneys
'cause they need legal in the
early days, things like that.
Anyway, regardless of who it
is, the problem is the same.
You're trying to tap that wealth
of knowledge, and you don't,
you don't know what it's worth.
Second thing that I see is,
"I wanna tap a network."
Introductions to customers-
Yeah … introductions to
investors, intro… And by the
way, those can be valuable.
Yeah, yeah.
They can be.
There is an
opportunity for value.
But it doesn't mean-
Yeah … there's value.
Now, so what's interesting about
advisors, unlike employees,
and why we get to them last,
is because they're probably the
most unaccountable part of the
entire cap table distribution.
I know so few advisors that
have actually done the things
that startups thought they
would do, myself included.
Yeah.
I've been asked a billion
times, I know you have, to
be advisors for startups.
I always tell them
the same thing.
I said, "Look, I can be
valuable, but I won't be
valuable." And they go, "Well,
what does that mean?" Yeah.
Right?
I was like, "In your mind, how
you think I'm going to help
you isn't how I- Yeah … plan
on helping you," right?
We were like, "Oh, we- we'll
open up his Rolodex and m-
introduce you to, to all
his investors." No, I won't.
No.
Nope.
That doesn't sound like
a lot of fun for me.
Or, "Will's gonna get involved
in our team and he's gonna
help us daily, you know, to,
to make some decisions." Nope.
Nope.
I got shit to do, man.
That's called employee.
Yeah, yeah, yeah.
Yep.
It's not that I don't
wanna be helpful.
We literally advise startups
for a living, right?
Which is why- Yes … I
don't wanna do more of it.
But it's, it's, I think
the expectations of what
advisors can or will do
pale in comparison to
what they actually do.
Yeah, man.
Like, we, we see people make
mistakes with this all the time.
Mm-hmm.
And, and I think it starts- Yeah
… with, with founders confusing
reputation with contribution.
Right.
A famous advisor who does
nothing is just really
expensive wallpaper, right?
Or the most expensive LinkedIn
endorsement you'll ever get.
Advice is only valuable if
it does a couple things.
One, changes decisions-
Yep
opens doors, or
reduces mistakes.
And I think that where we end
up in this trap is that as, as
founders early stage, we find
people who do those things.
We talk to somebody once
and they give us some
valuable advice- Yep … and
it changes one of our
decisions for the better.
And then we go- Amazing
… "Great, we should make
them an advisor," right?
Most of the time, that's the
one piece of valuable advice
they had, and now we've
just permanently attached
them to our cap table and
paid them what could end
up being tens or hundreds
of thousands of dollars, or
millions of dollars, depending
on how big the company is.
You have a, you know, a, a
big, big exit, that 1% all
of a sudden becomes worth
a lot of money, right?
This isn't take a penny,
need, need a penny, take
one, have a penny, leave
one- … kind of thing, right?
It's, I think advisor equity
is, is one of those places
where tiny percentages
hide giant waste, right?
We see this in lots of
places in a startup.
Yep.
Um, but this is one of
those where it's just,
it's so glaring to me.
It's interesting because from
the advisor's standpoint, I
think they're well-meaning.
I definitely don't wanna paint
advisors, right, as some, like,
shysters or something like that.
That's not it.
It's not the advisor's fault.
It's the founder's fault.
The, the founder loses this
in a few ways and, and again,
y- you learn as you go.
The first place you lose is you
don't clearly define what you
expect the return to be, right?
Yeah.
Ryan, I'm gonna give
you .25% of the company.
Here's bullet points of
exactly what you need to
deliver in order to earn that.
Uh-huh.
If you don't nail all of these,
you won't get your equity.
I guarantee the number of
advisors that agree to that
is geometrically lower.
Think about why for a second.
Here, here's, here's an example.
Take this from the same
standpoint if you were
hiring somebody, okay?
Yeah.
And the person sitting across
from you, the interview
candidate, and you're
like, "I need you to show
up for work every day."
They're like, "No." "I need
you to come to meetings."
"No." "I need you to work for
the company eight hours a day."
"Nope, not gonna do that." And
you're like, "You're hired."
That's essentially, like,
the mismatch of expectations.
And so- Yeah … now, I
will also say, similar
to employees, advisors
want to be those things.
They want to be this
fountain- Yeah, of
course … of knowledge.
They want to be
this helping hand.
They wanna be, you know,
make a good connection
that works out for you.
They want to do all
of those things.
It doesn't mean that
they can or will, right?
Right.
Like, I've got a pretty
big Rolodex of investors.
I theoretically could introduce
you to them, but now, when
it comes time to actually
do it, here's how the math
changes very quickly, right?
I look at all of my,
my, uh, contacts.
On the one end I've got Roelof
Botha, who's the managing
partner of Sequoia, right?
I've known Roelof for 20-
Yeah … something years, right?
He'll take my call once.
Uh-huh.
Like, he's pretty busy.
Actually, I don't think he's
the managing partner anymore.
Yeah.
Anyway, uh, and on the other
end it's, like, just some rich
dude that I know that, you know,
I, I could introduce you to.
I want to make these
introductions, but I'm not going
to if it's gonna burn social
capital that I can't get back.
Right.
Yep.
If I introduce you to, to
Sequoia and that goes horribly,
there's a fairly good chance
that I've, you know, soured
my relationship with Sequoia,
and I don't get it back.
Yep.
No skin off your back.
Over 0.25% of what is
still monopoly money.
Right.
Right.
This is… All I'm trying to
say is that technically I could
make all of these introductions.
It doesn't mean
that I can or will.
So your perception of
what my value is doesn't
necessarily align with
what my ongoing value is.
Which brings me to point
two, ongoing value.
Yeah.
I have a million things that
I can tell you about your
business that are gonna be
like magic tricks to you.
I can tell you about-
Yep … like how to update
your, your pitch deck.
I can tell you about what to say
in a pitch meeting, et cetera.
But once you don't need
those specific markers,
those specific, uh, moments
in the journey- Yeah
I might be useless to you.
We have late-stage people
that come to us, right?
And they're like, "Hey,
yeah, I've, I've solved
all the early-stage stuff.
I've got some late-stage
problems where I'm trying to
let, like, uh, refocus the
cap table, or, or I'm trying
to figure out what expansion
rounds look like." And I'm
like, "I can offer some advice.
I can't offer- Yeah … the
best advice." Right.
Because when you get to that
stage, different skill set,
different, a different world.
I'm certainly fluent in
it, like I understand it-
Yep
…
but there are people
that are better at that.
Conversely, those people aren't
good at the early-stage stuff
like you and I are, right?
Correct.
So, like-
Yeah
…
my point is, you hitting us
up for early-stage value and
expecting us to be perennially
u- useful is probably unlikely.
And of course everybody
wants to be, right?
And I guess, again, like, like
you said, the, the advisors
would hope that they can be.
Yep.
Uh, but I think in, in
reality it's just the, it's
time diluting value, right?
There's gonna be a curve at
which they're, they're no
longer as valuable to you as
they were in the beginning,
and yet you've now tied them
to yourself permanently,
which is the problem.
Do you remember who,
who Jim Grote is?
I do.
Um- Wow.
Yeah.
Yeah, all right, uh,
hear me out, right?
Jim Grote's the founder
of Donato's Pizza,
for, for folks- Yeah
who don't know.
He's also a, a local
legend in Columbus, Ohio,
where- Yeah, yeah … Brian
and I went to school.
Damn it, now I want
Donato's Pizza.
Yeah, I
know.
I
know.
I know.
Do you know how far I am
from a Donato's Pizza?
I can get a Papa John's here.
Not quite the same thing.
Yep.
I met Jim, uh, 20-some odd
years ago, and w- we were
at, at some event together,
and I got talking to him.
He's like super nice guy.
And I remember thinking,
someone at the time was asking
me for an intro to Jim, uh,
usually like, like within the
year, and they wanted to, to,
to tap into his knowledge.
Uh-huh.
And I remember something that
he and I talked about, and he
said something to the effect
of like, "Well, I've done a
lot of this, but I haven't
done a lot of this lately."
And it always stuck in my head.
I thought it was-
Yeah, yeah, yeah
…
his level of self-awareness
was extraordinary, okay?
That's incredible.
Yeah.
E- exactly.
Most people don't realize their
knowledge has a shelf life.
Correct.
Right?
Yeah.
And you know who
doesn't realize this?
Fucking advisors, right?
Yeah, the advisors.
No, that's what I mean.
That's what I mean.
Yeah, I, I think that, in
fact I think that's more often
spotted by founders than it
is the advisors themselves.
Yeah.
I think once you've, you've
achieved guru level, once
you've- Yeah … if somebody's
told you that you're a
sage, you're forever a sage.
Yep.
It's, it's tough.
I try to be mindful of
that because, like when I'm
dispensing advice, and you
and I do this for a living.
Yes.
I always try to like play my
own filter and bias to be able
to say, "Is what I'm about
to tell this person current?"
Like, and, and how can I
validate that it's current?
Yeah.
Right?
And so I always try
to be mindful of that.
And I think that for a lot
of people when they seek out
advice, what happens is they
get an audience with guru.
You know, whoever the
guru happens to be
in, in their space.
Yes.
Right?
And that guru knows a
ton about that space for
their moment in time.
They drop some, some
incredible nuggets, right?
And you're like- Right
"Oh my God, if I could have
access- Yeah … to this oracle
of knowledge all the time."
Imagine what else is
in their head, right?
Mostly ore, unfortunately.
Yeah.
You, you, you saw the gold.
And it turns out for most
people, they're just not
like a bottomless fountain
of freaking wisdom, right?
Right.
They know a couple things
that you don't know right now.
Yeah.
And then once you know
them- And guess what?
They tend to lead
with those, too.
Yeah, exactly.
They, they, they lead
with their best shots.
Yeah.
When I was starting my
agency, like m- like 19 years
old, I met this guy, right?
This guy named Don.
He, he's a great guy.
And he was a consultant,
and he was a marketing
consultant.
Okay.
And he was the first
person that I had met that
understood what marketing was.
I had no goddamn clue, right?
Right.
Even though I was starting
essentially a marketing agency.
He had gray hair, and
he presented well, and I
just thought- Yeah … he
was freaking Yoda, right?
Uh-huh.
Now, I owe him a huge, huge
debt, and he knows it, and
he, he reminds me every
single time I see him.
Because he- … he's the one
that introduced me to the agency
that, that ended up, uh, we
ended up merging with, right?
But at the time, uh, and
he, he and I have been
friends for a very long time.
At the time, he would say to
me, he'd be like, "You know,
this is the way things work,
and this is how you charge,"
and everything else like that.
And I remember, Ryan,
working for him for
pennies on the dollar.
I think my effective- Uh-huh
… billable rate for how much
he pimped me out was, like,
nine cents an hour, okay?
Because I thought he was this
fountain of knowledge, and I,
I was willing to- Yeah … you
know, give up and to learn
and everything else like that.
In, in retrospect,
probably a good idea, but
I wouldn't recommend it.
Yeah.
Many years later,
20 years later.
Don and I get together for
lunch, and, uh, and I'm like,
"Don, did you know at the time
that I was working for, like,
nine cents an hour?" He's
like, "Oh, hell yeah, I did."
Yeah.
He's like, "I was so upset when
you ended up doing that deal
and all, your rate went up."
You know, he's, I was like-
Yeah, that's hysterical … "So
you're just gonna keep taking
advantage of me?" He's like,
"Yep." He was saying it
like, you know, in jest, but
I always thought about that
moment where I'm like, damn,
dude, the only reason I was
willing to do that is 'cause
he knew something that I didn't
know at a time, you know, I
wasn't, I wasn't capable of
getting more of that knowledge.
And I was will- Right
… willing to pay a massive
premium in retrospect to get it.
And I was like, these
founders are easily misled.
And look, it is tough,
'cause you are making a
bit of a bet there, right?
And sometimes the
bet does pay off.
Right.
Right?
So i- in that case, that
investment that you made in
Don, it was an investment
that he made back into you.
It did.
In tro.
Yeah.
It all worked out quite well.
But it's not like
that went to plan.
It wasn't like there was-
Right … a plan there.
You're just looking at it-
Right … and going, "You seem
to know a lot more than I do,
so I am going to, uh, pin myself
to you, and, and we're gonna
see what happens." It's a long
shot bet, and I would say for
every time it works out as
you've just described, there are
20, 30, 40, 50, 60 that don't.
Think of the cost, okay?
So, so let- let's
put this out there.
Yeah, that's fair.
So if you've got, if you're
giving up a quarter point, let's
say, to an advisor, which is a
little bit on the higher end,
but let's use that, but you're
also doing it at a $10 million
valuation, which is usually,
you know, a good deal for a
pre-seed, uh, raise these days.
But you're paying
that person $25,000.
Now again, you're paying
them in equity future value,
which will probably turn
out to be nothing, so it's
not exactly $25,000, okay?
This has nothing to do with
whether that $25,000 is the
same as the investor money.
It's the fact that you're
haggling more over the investor
money than, than you are
over, over this, this 25K.
Yep.
And so think of how many
times you wind up pinging
that person in the time
that you work with them.
In your mind, you're talking
to them all the time, and
then they're always up
in your world, et cetera.
We have advisors
at Startups.com.
I won't name names-
Yeah … 'cause they're
all great people, right?
But big brand names that you've
probably never heard of 'cause
we failed to mention it, right?
Yeah.
Who I think maybe- I have given
three requests to ever, right?
Uh-huh.
In the 15 years that we've
been around, like ever.
And I think on average, I
probably paid for each email
or phone call at least $10,000.
Yeah.
Right?
It ends up being a
pretty expensive email.
It is.
It is.
And I can't even remember
what the requests were.
If we look back, you know,
we own a platform, uh, called
Clarity, which of course is,
is, uh, an expert exchange.
This is ironic- Yeah … that
we're talking about
this because, like, we
actually know exactly what
advisors get paid- Yes
for actual real
world startup advice.
Yeah, yeah, yeah.
Because we write those
checks to the advisors
every time the startups ask.
Ryan, you've done
hundreds and hundreds and
hundreds of these calls.
Yes.
How many times have
you gotten paid $5,000
for a call?
For a call, exactly zero times.
Yeah, exactly zero times.
Exactly zero times.
Now, I have had tell, people
tell me the, the call was
worth $100,000 or that it saved
them two years to their life.
Yeah.
Awesome.
Which I would equate to several
hundred thousand dollars.
So value is there, right?
But nobody ever offered
to actually pay me the
full value of the call.
Yeah.
No.
Nobody was like, "You know
what? So we're gonna send you
half of that $100,000 you saved
us. We really appreciate it."
Right.
Never happened.
And on average, these advisors
who are getting paid by the
minute from startups to, to
give their advice- Yeah … and
they're great advisors.
I mean, I, I highly recommend
going on there and, and
finding some great people.
But are getting paid hundreds
of dollars for the advice.
Now, to be fair- Yes … it's
not because they're trying
to get rich off of Clarity.
We always said that Clarity
is iPhone money, right?
Like, it's, it… For, for
the advisors- Yeah … it's,
it's not all the money that
you, you'll make to make a
living, but it's enough to
buy a free iPhone, right?
But most advisors, yourself
included, are doing it 'cause
they wanna be helpful, but they
wanna, like, have s- like a
metric of their time, right?
Like- Yeah … hey, if you're
gonna take up 20 minutes
on a call with me, like, it
should have some friction
for you too, 'cause it
definitely has friction for me.
It saves you from the
Googleable advice- Yeah
uh, syndrome.
Yep.
Or at least you're getting
paid to Google for people.
Yeah.
Um, yeah, yeah.
Yeah, I, I did, I got, I got
called out once, uh, I don't
remember if it was on X or
on LinkedIn, but somebody was
like, "Hey, asshole, how can
you charge $400 an hour to…
What, what makes you think
you can charge $400 an hour to
talk to people on the phone?"
And I said, "Well- I pasted
back the two comments around,
"You saved two years of my
life," or 100, you know,
"Helped us make $200,000."
Yeah.
And said, "So, so there's part
of it." I was like, "The other
part is I started at 100, and
I got too many calls, and I
went to 200, and I got too many
calls, and I put to 300 and
I got a little less calls."
Yeah.
"And I put to 400, I got
exactly the number of calls
I wanted, which wasn't
too many, but people-
Yep … showed up really,
really well prepared." Yep.
"So here's the booking
link." He never called me.
Yeah, it comes back to here's,
here's the value of my time,
and here's the explicit cost.
But my point is- Yeah
even at $400 an hour,
no one would've gotten
to $25,000, right?
Right.
And, and that's
just one example.
That'd be a lot of hours.
It would take a lot of hours
to consume 25K, and that's
a lot of hours you're not
gonna get out an advisor.
You just aren't.
So here's what I would say.
I love the fact that
founders are really well
conditioned to price their
equity and hold onto it.
I hate the fact that they only
apply that rubric to investors.
Sometimes.
Right?
Which is the only person- To
the one place where
there's actually a clear
value exchange, right?
I know.
Now, you can argue whether it's
an equitable value exchange or
not, but at least it's clear.
You know exactly what
you're getting.
You will get it, right?
Like, like you will-
Yeah … get the money, right?
Yeah, yeah.
It'll be conditional
and everything else like
that, so it's- If you
don't, you won't give
up the equity, right?
Right.
Yeah.
Versus all these other
buckets where like, ah,
what could go wrong, right?
And like, you're just like,
like saying, it goes back to
what I said a moment ago, which
is you're literally saying
to, quote, "an investor", "I
am gonna give you the equity.
You might give me money.
Let's shake on it."
Yep.
Like, what?
So-
Yeah
…
all I wanna say is like, we have
to use equity to pay for stuff.
If there's nothing wrong
with doing a co-founder
deal or obviously giving
employees equity or, or
giving advisors equity,
that's not the argument here.
No.
The argument is
how you treat it.
The argument is how you-
Yeah … focus on that value
and how you pay for it.
If you're looking at that value
as amorphous, and you're just
willing to give up half the
company or a quarter point to
somebody and not be sure that
you're extracting that same kind
of value as you would from an
investor, you're leaving way
too much equity on the table.
There's never- Yeah … gonna
be a point ever in the history
of you building your company
where you're like, "Man, I wish
I gave away more equity," right?
"I wish I gave Brian
more equity- Yeah … for
those calls," right?
That'll never happen.
Yep.
What will happen is you're
gonna look at every one of those
transactions, and you'll say to
yourself, "Man, I really wish
at that moment I had treated
every single share that I ever
gave away exactly like a dollar
that I was taking back for
it and extracted that value,
because that's the only thing
I have left to show for it.
And in the end, that's
all that matters."
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