Tuesday, May 27, 2008

Respecting the Wanderlust

Back in the office today after a weekend of five year college reunion. Lots of great stories from lots of great people, many of whom I hadn't seen or even thought about in years.

Much racing through the mind, much I want to share, but, in the interest of reining it in, I'll keep it to one thing for now...

It turns out that one of my friends was one of the first employees of the founders of what has been an impressively successful news aggregation and distribution dot com startup.*

She was involved with early business plans. She helped raise early money. She created early content. And, after about a year, when she wanted to go to law school, the startup told her she was leaving too early.

The shares she'd earned hadn't vested (and wouldn't for another three plus years), and she'd lose a big chunk of her investment in the company if she didn't stay.

It was a bummer to give up such an investment, but school was calling, and she decided not to make the rest of her life wait for time already spent to become cash value potentially someday redeemable.

I love her decision. It's a beautiful thing to see someone do something that proves that she's not playing for the money.

But I wonder about her former employers. I wonder if it was fair of them (or a good idea for them) to reclaim the equity my friend had earned.

Now, here's the moment in the post when I offer up a couple of disclaimers. First of all, reunion weekend was overwhelming and a blur of quick and sometimes intense conversations, and my discussion with the friend mentioned above was, while more substantial than most, not nearly comprehensive enough. I think what I've written is accurate, but there is a slight possibility that my imagination played more than its fair role in assembling the little story I just told. Also, I want to acknowledge once again that I'm an entrepreneurial rookie and one whose gut instincts and epiphanies are meant to be taken with spoonfuls of salt. Ok. Interjection over. Back to the thought...

I think it's possible that my friend's former employer did the wrong thing by tying her investment to a strict term of service. I understand the rationale behind the decision. I think it is important to try to keep employees focused and committed through good times and bad, and I think it's important to have safeguards against greener grass projects coming in and poaching great people. But it seems a little heavy handed.

LanguageCalls treated me totally differently, and, while I thought nothing of it at the time, now that I've heard a friend talk about her highly contrasting experience, I have a new reason to appreciate LC, and I want to throw my thoughts out there and hopefully hear other people's reactions and experiences.

LC's founders knew from the start that I wasn't going to be around forever. They respected that, respected me and my future, and they didn't consider my unwillingness to commit to long term employment something that should preclude me from earning a small stake in the company. They gave me the option to take as much of my salary in shares as I wanted, attached no strings, and they now treat me the same way they treat people that made small, friends and family type investments.

LC treated me unsuspiciously, and I think that might be the way to go. I could be wrong, however, clouded by what might have been a unique or unusual situation I experienced. I'm curious to hear what people think.

Am I crazy to see vesting clauses as balls and chains? They preserve equity, but might they cut potentially helpful people out of the loop? They prevent fairweather commitment, but wouldn't they keep quietly unhappy people on staff? They're safe, but isn't it possible that they'll prevent the best young people from getting involved and invested and thus potentially in for the long haul?

Anyway, nothing pressing. I'm not about to make a hire or anything. Just thought I'd dangle a few questions and see what others might have to say. Let me know.

*Note: Which, I guess, should probably remain nameless. As much as I love radical transparency, I don't want to get anyone else in trouble. Not that I think this could actually get anyone in trouble, but you never know. Better to be safe.


wiley said...

I would be inclined to say that as long as the terms of employment were clear at the time contracts were signed I don't see any problem with offering vesting shares vs. hard stock. If you don't like the terms, don't sign the contract - either negotiate for a better one, find another opportunity, or make one.

Also, LC's strategy of hard stock was probably a well calculated play to get you to take less cash. Shares that take 3-4 years to vest aren't that much of a bargaining chip when you're trying to keep expenses low.

Jake de Grazia said...

I agree that as long as everyone's ok with the arrangement, vesting shares are fine. My concern is that smart, experience-seeking young people maybe shouldn't be ok with that kind of arrangement. And if they're not ok with the arrangement, then they have no way to invest in the project, which, I think, is bad for everyone.

As for why LC gave me the deal they gave me, they definitely did it because they wanted me to take less cash. But what startup doesn't (or shouldn't) want to keep costs as low as possible?

Hmmm. I wonder if I've just stepped out of my league here.

I've claimed that invested employees are a good thing, and I've claimed that startups should spread equity to save cash.

Both seem kinda intuitively right, but I fear that a certain old CEO of ours, Wiley, might be reaching for his glasses and getting ready to give them a good long shake.