Two founders A and B start a company with 50/50 ownership. Two years later they raise $1M at $5M post from investor C who now owns 25%, and they create an ESOP (employee stock option pool) with another 20%, so (fully-diluted) the ownership levels are A=B=27.5%, C=25%, ESOP=20%. Two years later there’s an offer to sell the company for $20M. In just four years? Wow! Each founder can get $6M before taxes (because the ESOP isn’t fully allocated yet). But both the founders and investors see this as a signal of even bigger things to come, so they turn it down and forge ahead. Instead, they leverage this valuation validation to raise $5M at $20M pre from investor D, and C takes their pro-rata, and they and top off the ESOP at pro-rata as well, so now it’s A=B=15%, C=25%, ESOP=20%, D=25%. For the founders to get $6M pre-tax, they would now need an offer of $40M. No matter, we raised money to grow, and we’re growing, so let’s grow! Two years later things are still going well, so they raise $15M on $75M pre from investor E. TechCrunch is going to write about this for sure! C & D don’t take their pro-rata (better for founders!), so now it’s A=B=11%, C=21%, ESOP=17%, D=21%, E=20%. At this point the founders have gone through a lot -- six of the most intense and stressful years of their life, even if also fulfilling, so maybe they’d want more like $10M pre-tax in any sale, to feel good about the outcome. At their ownership level, that’s a $90M sale, but they just raised at $75, so the new investors wouldn’t get enough return at that paltry level, so that’s never going to happen. You can see the pattern. There’s no obvious off-ramp here. Either the company ends up as a unicorn, or… what? The founders (and employees) would have gotten the same money had they had sold long ago? Note that this is a very good-case scenario. The company grew at a healthy clip for 6 years. Every financing round was a normal valuation and a normal amount raised -- 20%-25% each time. Nothing unfair, no one “exploited” anyone. What do you do with that information? You could say: Never raise money. But I’m happy I did at WP Engine, and I’m happy we didn’t sell early in our company’s life when we had a good offer. (The numbers were, in fact, even better than the above scenario!) It’s not just “how much money did the founders get.” Life is the journey, it’s the people, it’s building things, it’s caring about something, it’s teams caring about the same thing, it’s happy customers, it’s people’s careers, it’s wealth for many instead of just the founder. Indeed, what I find most common in bootstrapped companies is founders with 100% of the equity, and upon sale, employees get nothing. Remember that the next time you’re tempted to point the finger at the VC’s as the greedy ones. Even so, is it weird or bad that investors have most of the equity, and thus get most of the money if the company is successful, despite spending 1/100th of the time working on the company than any one of its employees, to say nothing of founders? For that, you have to decide whether "risk capital" is logical or illogical. And, of course, whether you want to make that trade. It’s perfectly sensible to say: “I never want to get on that carnival ride. My ownership is my life.” It’s also perfectly sensible to say: “I want to build something large, impactful, meaningful, substantial, creating a legacy.” I’ve done both, and I’m happy to have done both. You can pick one, without wasting hours “hating” on people or systems that picked the other.

We may be the first generation to not die.