Item — HN Reader

Is there a story behind the cruel-sounding "Cap table cleanup" heading? It says:

  > You've got early employees, investors, or a co-founder
  > who wants to leave or cash out. You want to swap them
  > for a friendly new face who can add value and help you
  > grow the business.

It feels like they're insinuating that there's usually a painful process in enabling people to cash-out and leave? Is this because of the whole "golden handcuff" thing and the risk of everyone just wanting to leave immediately? To me that's always seemed like a larger problem in how we arrange early equity. Incentives are malformed.

5 comments

It's a positive thing, just written weirdly.

E.g., an early employee takes a moderate salary plus X% equity.

Normally that person is stuck waiting until a liquidity event (like an acquisition, IPO, or late-round funding where some private shares can be sold).

But if the startup has shifted from hypergrowth mode to realizing that it's going to be profitable and stable, then that liquidity event won't ever happen.

So Tiny is basically saying, hey, if you've incentivized your people with equity, but you're no longer on the VC exit path, you can set up a deal with us where those people may choose to sell us their little slices of equity, which gives us some ownership and gives them the financial windfall they were originally hoping for.

It just means you need a liquidity event. Many investors don't want to cash out early stage employees, many PE will only want to buy the whole thing. If the business can't take out a loan or similar, and those staying can't afford it, you need a new investor who's up for this type of restructuring.

pg and others commonly cite founder divorce as reason startups fail. If Tiny et al can workaround for this (liquidity + recruiting network), they can unlock value that would otherwise get destroyed by shutting down a nascent startup prematurely due to human conflicts.

Just a heads up that you don't need to add a new &Lt; for each line of text in the text area, everything after the first &Lt; will be quoted untill you double 'enter'. Cheers

Not really. HN doesn't support any quoting syntax/formatting. There's a common convention in use of putting a ">" (not "<" or the more relevant ">") at the start of a quoted paragraph. The "problem" with the above comment is they indented the quote, which formatted it as code, which wraps strangely, so they wrapped it manually.

Oh very silly of me. Thanks for the correction.

The wording really creeps me out, it's kinda condescending like, we'll just work our way in and tell you how to run your business.