Founders will almost always have common stock too, so they're in the same boat - it's only investors who will have preferred stock. If you don't spend 10 minutes to understand liquidation preferences before accepting a startup offer, that's kind of your problem.
1. If the company is bootstrapped the founders can have preferred stocks with whatever clauses they want on it
2. Most (all?) companies will not show you their cap tables so it basically boils down to “trust me bro”
The logical conclusion to #2 is valuing the equity compensation at zero, and foregoing it and asking for extra cash.
I’ve yet to work at a startup where liquidation preferences and investor participation is freely given or ever even mentioned. I only know about because I participated in TechStars. So, I guess we can blame employees for not hiring a lawyer to review their sign-on agreement (which, again, doesn’t have that info) or we can hold founders accountable for not sharing all relevant data needed to evaluate an offer. As a prospective candidate It’s one of those things you need to know about to even know to ask about.
I think founders are doing themselves a serious disservice. I loved working at startups but it’s just not worth it in most cases. The trade-off was always take lower salary for a chance at making big money and repeatedly investors and founders perform a rug pull.
Blaming employees for a change in the gentleman’s agreement is certainly one way to look at it. But, it sure feels exploitive, especially for younger folks that haven’t yet been burned by it. If founders keep doing it… well good luck finding anyone willing to work at their startup.
Seriously - the whole point of giving your early employees equity is so that you can attract talent without blowing your budget.
It seems like most founders love pretending that there are armies of top-tier engineers rushing to work at their startup in exchange for pay that's well below market and stock that still won't be worth very much even if the company has a wildly successful IPO.
I really wonder why this happens - is it just greed from the founders? The VCs? Do early employees value stock like shit regardless of how transparent the company is?
Kinda? The underlying issue is someone you think you can trust not telling you the full details so they can fuck you later.
The underlying issue is trusting someone you should not trust, someone on the other side of the negotiating table who has interests opposite to yours.
Yeah but I'm a programmer and don't innately understand that social power dynamics stuff. They're friendly and nice people and offer me drinks and snacks when I meet up with them. What do you mean they don't have my best interests at heart?