Greg Lohman warns tech startup founders on an a16z panel about equity dilution as companies ramp up hiring prior to an IPO.
Assertion Not checkable as stated
Lohman: Early startup negotiations create five-fold equity disparities between identical roles
“And we come in and start working with companies, you might see two employees who basically do the same thing, and I have five times as many options as that other person. I mean, there are huge disparities, and that's just how they negotiated coming in and when…”
Insight
Lohman: Stock options strictly outperform RSUs for high-growth pre-IPO startups
“There's really no scenario where RSUs are better than options in that model. And so from a pure upside, from a pure opportunity perspective, from a flexibility perspective, from a tax perspective, from an administrative perspective, there are lots of advantage…”
Insight
Lohman: Startups must establish job leveling frameworks early or face failure
“And if you don't get that framework set up initially, you're dead.”
Insight
Lohman: Big tech RSUs function as value preservation, not high-upside returns
“We think of RSUs at a place like Google is, is value preservation, right? They're in a value preservation mode growth, but not huge returns, and you're giving an employee a share of stock, it's got value, that employee can look at that share and say, at the en…”
What-if
Lohman: Incremental executive equity refreshes pass boards easier than delayed pool grants
“This would have been a lot easier if they'd been on top of this, if they'd been granting equity along the way, The numbers that they were proposing in the absolute were not ridiculous. If they had gotten there in stages, it would have been a lot easier.”
Insight
Lohman: Startup compensation strategies shift rapidly in the 12 months pre-IPO
“A lot of the things we talked about with RSUs versus options, the foreign and a price your dilution, all those things are going to change most rapidly, in most cases, right as you go public, right in that stage. And You know, you hire somebody 12 months out, s…”