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Vinod Khosla's advice to founders


I was listening to Sam Altman interview Vinod Khosla earlier today and one of the topics of discussion was about being generous with equity as a founder while hiring the initial team for a startup.

Khosla's advice to founders was to keep less equity for themselves and hand out equal or slightly lesser amounts to the first few key hires even though they didn't come up with the idea themselves and probably weren't around for the initial weeks or months.

He argues for this by making the case that the kind of people you will get at different levels of equity is starkly different. One of the measures of a good person (while hiring) is what they have to walk away from in order to join you. If you have to convince someone to give up a seven figure salary with Google or Facebook and join you at your startup instead, then they won't be comparing joining you with their job at Google or Facebook. They will actually be comparing joining you with starting up on their own. At an equity level similar to your own, you might be able to get someone like that to join you. Otherwise, they might prefer to startup on their own. This, he says, is how he managed to hire Eric Schmidt to work for him early on at Sun.

This kind of a mindset is very hard to incorporate and follow through and most entrepreneurs don't do it. As a result, those that do do it are likely to have an edge when it comes to succeeding.

Play this out ten years into the future and the decision you are making is whether to have forty percent of a ten million dollar company or ten percent of a billion dollar company.

We suffer from similar mindsets when we are deciding how much time and prominence to give to certain habits and values. We tend to value the principles we come into adulthood with very highly (equivalent of the founder) while valuing what we pick up along the way at much lower levels (early hires).

As a result, we tend to stick to our "authentic" selves and refuse to deviate too far from that and evolve into a completely different person.

If we value good habits and principles that we come across later on just as highly as the ones we come into adulthood with, we might not remain "authentic" and become someone else. As long as that change is for the better, it is a very good transition to make.

After all, what is the point in being authentic and failing to evolve and get better as we experience and learn new things along the way?

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