> How is a legitimate startup supposed to recruit the best people under these conditions?
Easy. Disclose the preference of the terms you got from investors to your early employees.
This problem is self created. If you don't tell them the terms of your deal, they rightfully assume the terms will screw them, since otherwise why wouldn't you be transparent? Good workers rationally and rightfully go to FAANG instead of a startup if it doesn't feel like the startup is being fair.
Honestly, startups should be more transparent, because they can't compete on money. If they can't even offer trust and upside, they are offering literally nothing over an established public company.
So many people flock to startups because they didn't want to go work for a large soulless corporation (often taking a pay cut in lieu of equity) -- only to discover that startups can also be soulless corporations that focus on greed more than anything else.
Edited to add:
It would be nice if there was an equity dashboard inside each and every startup that basically said, "If the company is sold today at $100M, you get $X." Not only would it serve as motivation, but it would also show every effect every VCO demand on the corporation to your equity.
Ideally it would be a graph over time so you can see if your equity stake is going down or up in value, and you can make an informed decision about leaving. Also many of the VCO shenanigans might stop if people know ahead of time what it means.
Exactly. I once asked a founder if his books were open to viewing by employees and whether I could see the cap table. He looked at me like I had a horn growing out of my forehead, and later I learned he privately complained to the recruiter about how unreasonable and unacceptable requests like that were. There’s this big “youre the tech help and you don’t need to care about banky things like liquidation preference and future dilution” attitude still. Much safer to just go with an established company whose shares can be sold as soon as you get them.
Also:
> How is a legitimate startup supposed to recruit the best people under these conditions?
I’d argue most startups don’t need “the best people”. They need a few hard workers who can wear multiple hats and have a promising skills trajectory. The “social network for dogs” doesn’t need to hire Ken Thompson.
Easy. Disclose the preference of the terms you got from investors to your early employees.
This problem is self created. If you don't tell them the terms of your deal, they rightfully assume the terms will screw them, since otherwise why wouldn't you be transparent? Good workers rationally and rightfully go to FAANG instead of a startup if it doesn't feel like the startup is being fair.
Honestly, startups should be more transparent, because they can't compete on money. If they can't even offer trust and upside, they are offering literally nothing over an established public company.