Kevin Systrom: The Equity Question | Summary and Q&A

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May 31, 2011
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Stanford eCorner
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Kevin Systrom: The Equity Question

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Summary

In this video, the speaker discusses the complexities of startup equity splits and the varying opinions on how they should be divided. They emphasize the importance of being fair, considering the stage of the company and the contributions of each individual. They also mention the significance of treating employees well and being generous when allocating equity. Additionally, the speaker explores the idea of managing uncertainty at different stages of a startup and how equity splits should reflect this. Finally, they touch on the dynamics between founders and early employees in terms of equity distribution.

Questions & Answers

Q: What is the speaker's perspective on startup equity splits?

The speaker admits to being baffled by the different approaches to equity splits in startups. They emphasize the need to be fair and considerate of the stage of the company and the efforts put in by individuals. They also highlight the importance of treating employees well and being generous in allocating equity.

Q: How does the speaker suggest managing uncertainty in startup equity splits?

The speaker believes that equity splits should reflect the level of uncertainty faced by individuals at different stages of a startup. They provide examples of various degrees of uncertainty, such as starting with no money or not knowing what the venture will become. They suggest that equity distribution should be based on the questions being answered and the level of uncertainty being managed.

Q: What factors contribute to the disparity in equity between founders and early employees?

The speaker mentions that founders often end up with significantly more equity than early employees, mainly due to taking venture capital funding and having to budget for hiring a larger number of employees. This results in a risk-reward relationship where joining a startup early can be lucrative, but there is an inherent disparity in equity distribution.

Q: How does the speaker feel about the relationship between founders and early employees in terms of equity distribution?

The speaker expresses some reservations about the relationship between founders and early employees when it comes to equity distribution. They believe that the increasing trend of startups raising less money initially benefits early employees, but they also question the dynamics and fairness of the situation.

Q: How does the speaker link the concept of equity splits to the ability to raise less money for startups?

The speaker suggests that the ability to raise less money to start a company means that early employees are getting better deals in terms of equity. This implies that joining a startup early on becomes a more attractive proposition in terms of potential financial gain.

Q: What is the overall message conveyed by the speaker regarding startup equity splits?

The speaker highlights the importance of fairness and being considerate of the stage of the company and the contributions made by individuals when dividing equity. They also emphasize the need to treat employees well and be generous when allocating equity. Additionally, the speaker raises concerns about the potential disparity in equity between founders and early employees and the dynamics of this relationship.

Q: How does the speaker feel about the traditional viewpoints on equity splits?

The speaker indicates that they are confused by the conflicting opinions on how equity should be divided in startups. They believe that the most important aspect is to be fair, taking into account the stage of the company and the efforts made by individuals.

Q: How does the speaker link equity splits to the achievement of success?

The speaker suggests that if individuals work hard and treat employees well, good things will happen. They emphasize that equity splits should reflect the contributions of individuals before and after a certain stage of the company's development.

Q: What role does venture capital funding play in equity splits?

The speaker mentions that taking venture capital funding often leads to a disparity in equity between founders and early employees. This is due to the need to allocate equity for hiring a larger number of employees and budgeting accordingly.

Q: How does the speaker view the relationship between risk and reward in terms of equity splits?

The speaker indicates that there is a risk-reward relationship when it comes to equity distribution. Joining a startup early on can potentially result in greater financial gain, but there is also a disparity in equity distribution between founders and early employees.

Takeaways

The speaker emphasizes the importance of fairness and consideration when dividing equity in startups. They encourage treating employees well and being generous in equity distribution. The speaker also raises concerns about the growing disparity between founders and early employees and questions the dynamics of this relationship. They mention that the ability to raise less money initially benefits early employees but also highlights the need for equity splits to reflect the level of uncertainty and questions being addressed at different stages of a startup's development.

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