In the last 2 weeks I have had to catch up on several shareholder’s agreements that startup founders have sent my way to review.
It is very disappointing to see that most of the Indian founders keep 10% or less towards Employee Stock Option Plans.
There’s no better way to say this. This is silly, very backward in its thinking and has no justification.
I dont buy the argument that employees dont value stock options. They dont understand them and hence they tend to ignore them.
As an investor and startup founder it is your duty to make sure employees understand the value of stock options.
All successful startups will agree that the startups with the best people usually wins. Not always the best product or best technology but the one with the best people.
The best people dont come cheap. They have multiple options – Working at a large company, working for themselves or striking it on their own to build their own startup.
If you want to encourage the best people to consider startups, you not only have to pay well, but also give them enough incentives and “upside” to ensure their success.
I am also very disappointed that investors are not asking this of startup founders. The long term viability of the ecosystem depends on the best folks making good money so they can become entrepreneurs or investors again.
The wealth needs to go around. 2-3 folks in any company making a lot of money while the rest slave away for paltry sums is a recipe for a host of B and C players being early startup employees. None of us want that.
I dont think this is very sustainable.
If you are a startup founder, one of the most important things you need to do is to ensure your employees make a lot of money as well if there is a big upside.
I want to be a big force of this change for the good.
Starting today (as part of Microsoft Ventures and my own personal investments) I pledge I will ensure that every startup (starting in India) has at least 15 if not 20% of the shares kept aside for early employees. I also want to make sure that the shares do get granted to employees. Finally I also will make sure that our portfolio will share the wealth with the employees as well. I understand that means we might have to take a haircut on valuations or even reduce our ownership. So be it.
If any of our co-investors do not agree to our model for equitable employee contribution, we will not do the deal.
Be the change.