I'm more in the "thought provoking and agree" camp. I'm not sure that of the potential downsides to Dan's strategy, a significant impact to the success of the company would be among them.
The idea _does_ get too much value here - I'd definitely put that at zero. But in my startup experiences, the CEO _does_ have to deal with a lot more annoying shit, and put her name on the line far more than anyone else, and should get the credit for doing so.
Further, I'm more in the Zappo's camp here - if a minority shareholder wants to bolt, I could not be happier. Leaving a company is always a hard decision, and if they're not cut out, AND they've come to that conclusion on their own, then FANTASTIC. I don't think that having 50% equity makes ANYONE more likely to stick around - you either have it in your DNA or you don't.
You're arguing that the CEO should get more because he has to deal with more annoying shit?
It's just as easy to argue that the tech co-founder should get more because he'll almost certainly end up working longer hours - and be the one who has to fix shit at 3am when the servers go down.
The fact is, both co-founders have their own reasons to feel entitled to a larger piece of the pie. But the truth is, it's all subjective - and nigh impossible to really weigh whose contribution is more important to the overall success of the company. Especially on day 1.
So at the end of the day, what really matters is the perception of fairness. If you give both founders an equal share, while both may feel that they are entitled to more of the piece, it's hard to argue that it's not a fair arrangement. Nickel and diming one of your co-founders will only create resentment down the road. And for what?
Annoying is the wrong word - had HN had the feature to edit/update I would :)
I do think the person who takes the title of CEO is risking more, and than deserves credit. They have their name in the public, and reputation on the line more than anyone else in the company (and, ideally should be up at 3 am as well, either fixing servers, or cold-emailing PR firms, or working on investment decks, blah blah blah). Greater risk deserves greater upside - while it's just a rule of thumb, I think Dan's post is a good starting point for the conversation on how to recognize that.
I hate that phrase 'reputation on the line'. Most companies don't have a CEO who have a reputation. And companies fail. So what, it's life. Stop worrying about a thing that's not actually valuable.
"I'm not sure that of the potential downsides to Dan's strategy, a significant impact to the success of the company would be among them."
Really?!
Employ that strategy and then interview a series of great co-founder candidates. If they bring more to the table than you, imagine their response when you say, "You're bringing more to to the table than I am, but given that I will be CEO and the idea is mine, I think I should be getting slightly more equity than you."
The "you should have this in your DNA and thus shouldn't be motivated by equity" argument has nothing to do with Zappos. Staying or leaving is almost always based on a lot of things (equity, comp, passion, team, opportunity, risk etc). Everyone weighs those differently, but very few people ignore the equity/opportunity part of it entirely.
If you subscribe to that argument, why exactly are you reaching for more than half of the equity pie? Or reaching for ANY of it? And why offer stock options at all? Telling people to "do it for the love of the game" is a pretty self-serving thing to say.
I, too, think you're taking it down the slippery slope.
I think the person who should be CEO should (ideally) be the a) the person who brings the most to the table (in terms of that business) and b) the person who can inspire the team (and embody the vision). Often, these are the same people and then the decision is easy. Sometimes, you'll have a very technical company (Tech needed) with a consumer facing product (Inspiration needed). Then it gets harder. But I would never sit down with anyone and say "you bring more to the table but i deserve more." The bringing more to the table indicates the kind of position you should be in the company.
I'm also not saying that the non-CEO person is going to get zero - far from it. But if someone is going to get miffed over something that small that early, I think that's a pretty serious red flag for us not being able to work together.
Part of the difficulty here is that I think we have very different pictures of what we expect a CEO to be. Early on, it's not like you're going to have 15 different c level execs. If you have a tech business, guess what, you have a tech CEO (and probably no CTO). If you have a marketing business, you probably need a marketing CEO.
I've been both several times - and I definitely understand both positions now. If I joined a company, and wasn't CEO, i would absolutely understand why they were getting more than me (and I would hope they would understand the reverse).
Tony, I think you're arguing with a strawman. Per the original article, if the CTO is bringing more to the table than you, then you get +5 for being CEO, and they get +5 for idea, and/or +15 for patent, and/or +50 for being so awesome they could get funded without you.
I see people disagree with IronYuppie (I do too - I don't think the CEO job is harder than the CTO job) but I'm not sure why it's getting downvoted.
By your formula, someone with a equal or barely-lesser contribution could have a greater equity share (CEO, idea). That's my gripe, boiled down. Don't think it's a straw man.
Ideally, it's close-- i.e. there is no ugly duckling. And where it's too close to call (i.e. you don't have a credible argument for why one person will have a greater contribution), I think erring on the side of almost-parity is the way to go, because stuff changes too fast and anticipating contribution is HARD. Today's shit-hot idea may be DOA in a month. Today's CEO may shift to VP Bizdev next year. Fundraising connections may come up dry when they are tapped. If any/all of that happens, then you have one guy saying, "Wait, he gets 65% of the company because of all of these contributions that really aren't working out. How non-awesome is that? And my good college buddy just asked me to jump into this NEW idea with 50% ownership... Hrm.".
Those are non-trivial risks for nearly-trivial (risk adjusted) dollar figures, IMO.
The idea _does_ get too much value here - I'd definitely put that at zero. But in my startup experiences, the CEO _does_ have to deal with a lot more annoying shit, and put her name on the line far more than anyone else, and should get the credit for doing so.
Further, I'm more in the Zappo's camp here - if a minority shareholder wants to bolt, I could not be happier. Leaving a company is always a hard decision, and if they're not cut out, AND they've come to that conclusion on their own, then FANTASTIC. I don't think that having 50% equity makes ANYONE more likely to stick around - you either have it in your DNA or you don't.