Those of us who lived through the tech bubble can attest to the power of equity ownership as a recruiting and, if things remain positive, retention tool. I enjoyed the benefits of stock programs at Netscape and Electronic Arts and believe it’s effective when properly used. Here’s a helpful article from Tech Crunch by Redfin CEO Glenn Kelman on current equity practices in the tech community and why they need to change.
Key take-aways: (a) economic pinch means more companies getting acquired earlier in their life cycle (b) investors are demanding, and getting, preferred liquidation positioning and (c) founders are taking huge positions for themselves, leaving little for remaining employees. Kelman advocates that founders and investors should be focused on building companies for the long term and being more generous for the employees because it will benefit everyone more in the long term. It’ll be interesting to see how this evolves as the market heats up.
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