Here’s Why You Should Grant Equity To Startups Employees

Here’s another problem. Employees generally in a lot of emerging markets don’t believe in equity probably rightfully so it’s not usually worth anything and so they want cash they don’t really care about equity because they don’t care about equity the founders don’t want to give them equity. What? Why should I give you equity? You don’t care about it you know you just want the dollars. But the reality is that most ecosystems that are really vibrant happened because there are lots of small winners.

When I worked at PAYPAL about 14 years ago thirteen fourteen years ago I was employee number  250. Lot of people you know in my bio suggests that I was one of the founders of Paypal or I was earlier at Paypal. Well I was at PayPal three years after the company was started. Almost four years just a few months before the IPO and I didn’t expect that I was going to make a lot of money from my stock options. I made maybe about a million dollars, after taxes probably about half that I paid off some debts. Bought a car for my mom bought a car for some friend of mine and I had some money left over.  I was really kind of scared about the real estate market in California was kind of a little crazy at that time so I was like well where am I gonna put some money I followed in the footsteps of Reid Hoffman and Peter Thiel and so I started making small investments maybe about $25,000 average in about 10 to 13 companies over  the next four years.

I got really lucky three of those 13 investments ended up being a hundred million plus exits, SlideShare . Slideshare like here’s what I actually used to put these whole  slides on today and as a result of that you know I was a little bit you know helpful in getting those companies and so it’s really been great in seeing that .You know I won’t go into the whole PayPal story but there’s been at least seven or eight unicorns that came out of PayPal. hundreds of companies that have been started and many other investors.

But it was great to see Yemeksepeti as an example of correcting maybe after the fact that there weren’t equity I believe the founder actually distributed a substantial amount of capital to other employees in the company and its that type of behavior that’s what’s going to create more companies more angel investors for people with expertise to be angel investors.

So sometimes even if founder even if employees don’t value equity and don’t want equity and even  though founders don’t want to give them equity, there is an important component to building an equity culture and spreading equity widely among the company employees not just among the founders or management team because you are creating the next generation of investors and the next generation of startups. And that’s a critical thing for companies to get up and  for countries to get off the ground is to have that equity culture built in.

31 December 2015