None of this is very good justification for founders being the only employee that have the option to sell part of their stake.
> If you were an employee and had $200k total value in your options, and you could sell 10%, you're getting $20k.
It obviously depends on your financial situation, but having the option vs not will certainly matter to some employees. Not to mention that the stake could well be worth $0 in the future.
I don't think it needs any justification, really. The investor decides, whom to sell to and how much. If the founder doesn't want to organize a sale for employees, then he doesn't do that. He would probably have to pitch it and include it in to an already complicated funding round.
I totally understand why a typical founder doesn't want to do that. If for you as an employee it is a deal breaker, then you can complain about it, change company or whatever. It is not like the founder owes anything to the employees (unless he has promised that). Everyone in the equation are adults and have to decide themselves, if the position they are in makes sense for them with the terms they have.
> I don't think it needs any justification, really
From a founder's perspective sure, you can do what's best for you.
That's not what this article is about. This article is highlighting that there's a tendency in SV for founders to cash out early, and secretly. And along with that, there's a tendency to paint a narrative that the founders haven't sold a share. It's hard to see that as anything other than deceptive.
It's one thing to join a startup that you know may not succeed in the long run. It's another to join a startup that has a founder whose been secretly cashing out along the way.
Justification does seem necessary in that second scenario, at least from a morality perspective.
Lying to the employees is scammy and wrong. However regarding that we would need more information what has exactly happened. Not telling or not highlighting something is not the same as lying.
Personally I'm not in the SV scene but from Europe, and I don't know much cases of these early cashouts.
I mean I think it depends, why is it needed, the founder is not working for his employees, it's the other way around and he has the most risk involved, founders don't make a lot of money in cash anyway and this is not pre COVID, investment rounds r smaller, so u r basically saying that a founder should only think about making company and his team rich and if he fails he can die poor while his employees can always jump ship with the cash incentives they got
> If you were an employee and had $200k total value in your options, and you could sell 10%, you're getting $20k.
It obviously depends on your financial situation, but having the option vs not will certainly matter to some employees. Not to mention that the stake could well be worth $0 in the future.