Do Startups Pay Well?
The Answer Is Yes.
If the company was liquidated in bankruptcy, the employees would see the gold, with the remaining amount going to creditors.
The equity in a liquidated startup belongs to the creditors. If you are thinking that the equity belongs to the founder, it does, but in liquidation, it is distributed proportionately to the creditors.
Do Startups Pay Well – Equity Of The Investors
The equity in a startup is actually the equity of the investors, with the exception that the founders own 100% of the equity in a startup.
Founders can make the employees get rid of the equity they have, but this is not right. If the equity is not distributed, there will be losers, including the founder.
Let us look at it from the point of view of an employee. If you joined a startup as a part-time employee, you would get a certain amount of equity-based on hours worked.
The amount is usually expressed in a certain percentage but can be in any way between 0% and 100%.
Do Startups Pay Well, When you join a startup, this amount would stay with you, until you find a proper job or find another startup to work for. For example, you join a startup with 50% equity.
This means that you are not entitled to any share of the profits of the company, but you are entitled to 50% of the equity.
At the end of the year, 50% of the profits would be divided equally between the employees.
If the profits go up a lot, it is usual that employees are entitled to more equity, but the equity distribution is proportionate to the employees.
Do Startups Pay Well, It's only natural that employees need to be paid according to the value of their contribution, i.e. the hours they put in.
For the workers, equity is very important to their well-being, as they can sell their equity to another employee to secure their financial security.
An employee who works hard is entitled to a share of the company's profit, which is just and equitable.
When you work at a startup for too long, you would probably want some equity compensation, which is what is called a stake.
Stakes are nothing but the share of the company that you get based on the hours you work. As you work more hours, your stake grows, and the compensation you get would be based on the hours you work per week.
By joining a startup with 50% equity stake, you would have a large portion of the company's profits in your hands. So you can decide how the rest of the company is to be divided between the employees.
The workers can decide whether they want to take advantage of equity, of course on their own, but there are ways of sharing the financial benefits and responsibilities.
For example, they could agree among themselves how much they would work per week and how much would be left over for their overall compensation.
Another possibility is to use a project management method that assigns a certain percentage of the overall project allocation to the employees.
This way, everyone would get their fair share based on their role in the overall project.
And, if the management team determines that a project should be split up among several employees, they can do so and the employees can agree amongst themselves.
This method has many advantages as it is very easy to implement and it can actually cut down on costs.
What Is A Stake?
Stakes are nothing but the actual amount of shares you have in the company. When you work for a company on a full-time basis, you become a part of the company.
In this way, you get to know the company's CEO and you know what his management style is. Stakes are very important because this is how the company is showing its appreciation to you.
For example, if you are working as a technician and the company needs more funds for a new purchase, then the company will ask you to work more hours.
You will get paid more based on the percentage of the need. If the need is 80%, then you would get paid 100% of your work while the rest of the employees will get paid 80% of their work.
If the need is 20% then the company will ask you to work 20% of the hours and the other employees will get 20% of the remaining hours. So, basically, you will get paid a certain amount of money for the work you do.
How are Stakes Calculated?
To calculate stakes, you need to know the number of shares you have and the price of the shares. First, you multiply the shares by the number of shares that you have, then add it together and divide it by the total number of shares.
If the total number of shares is 10,000, then you would multiply 10,000 by 0.20 and add the two numbers together.
Do Startups Pay Well, How Is The Company Making Money?
Companies are allowed to use the earnings from the business to pay dividends to the shareholders. Companies will also use the earnings to buy back shares of the company.
The stocks of the company will be used to pay dividends to the people who own the stocks or to pay themselves.
This will also help the management of the company make the company stronger. And sometimes the stocks will be put to other uses such as pay bonuses or give to employees. So Do Startups Pay Well. Yes.
Now Let's Look At How The Angel Investors Can Approach The Deal
The angel may ask the questions such as
“What is the present market price of the stock?” and “How can I get a good price for my money?”
They normally need to understand the basics of investing in the stock market and they need to ask these questions so that they know what the current market situation is and how they can maximize their return with their money.
They will know that the current market situation is what they will be investing their money in.
The angel investor should also ask questions such as
“What is the future market situation?” and “How can I find a great stock for my money?” and “What is the price that I can sell my stock and make a profit?”
They should know the exact time that they will be selling the stock and they should also be aware of the price that they can buy the stock at.
So the angel investor should be able to tell the startup that they will only invest in a startup company if the company can show them some positive market situation when they will be investing in the company.
This allows the angel investors to have a good value for their money in the deal.
There is now an option to be angel investors in a very safe environment and with no skills or knowledge simply by being a member of the VC Crowd.
Members receive shares every month in their portfolio and it will grow month by month. The club does all the research and due diligence for the members.