"I'm not sure that of the potential downsides to Dan's strategy, a significant impact to the success of the company would be among them."
Really?!
Employ that strategy and then interview a series of great co-founder candidates. If they bring more to the table than you, imagine their response when you say, "You're bringing more to to the table than I am, but given that I will be CEO and the idea is mine, I think I should be getting slightly more equity than you."
The "you should have this in your DNA and thus shouldn't be motivated by equity" argument has nothing to do with Zappos. Staying or leaving is almost always based on a lot of things (equity, comp, passion, team, opportunity, risk etc). Everyone weighs those differently, but very few people ignore the equity/opportunity part of it entirely.
If you subscribe to that argument, why exactly are you reaching for more than half of the equity pie? Or reaching for ANY of it? And why offer stock options at all? Telling people to "do it for the love of the game" is a pretty self-serving thing to say.
I, too, think you're taking it down the slippery slope.
I think the person who should be CEO should (ideally) be the a) the person who brings the most to the table (in terms of that business) and b) the person who can inspire the team (and embody the vision). Often, these are the same people and then the decision is easy. Sometimes, you'll have a very technical company (Tech needed) with a consumer facing product (Inspiration needed). Then it gets harder. But I would never sit down with anyone and say "you bring more to the table but i deserve more." The bringing more to the table indicates the kind of position you should be in the company.
I'm also not saying that the non-CEO person is going to get zero - far from it. But if someone is going to get miffed over something that small that early, I think that's a pretty serious red flag for us not being able to work together.
Part of the difficulty here is that I think we have very different pictures of what we expect a CEO to be. Early on, it's not like you're going to have 15 different c level execs. If you have a tech business, guess what, you have a tech CEO (and probably no CTO). If you have a marketing business, you probably need a marketing CEO.
I've been both several times - and I definitely understand both positions now. If I joined a company, and wasn't CEO, i would absolutely understand why they were getting more than me (and I would hope they would understand the reverse).
Tony, I think you're arguing with a strawman. Per the original article, if the CTO is bringing more to the table than you, then you get +5 for being CEO, and they get +5 for idea, and/or +15 for patent, and/or +50 for being so awesome they could get funded without you.
I see people disagree with IronYuppie (I do too - I don't think the CEO job is harder than the CTO job) but I'm not sure why it's getting downvoted.
By your formula, someone with a equal or barely-lesser contribution could have a greater equity share (CEO, idea). That's my gripe, boiled down. Don't think it's a straw man.
Ideally, it's close-- i.e. there is no ugly duckling. And where it's too close to call (i.e. you don't have a credible argument for why one person will have a greater contribution), I think erring on the side of almost-parity is the way to go, because stuff changes too fast and anticipating contribution is HARD. Today's shit-hot idea may be DOA in a month. Today's CEO may shift to VP Bizdev next year. Fundraising connections may come up dry when they are tapped. If any/all of that happens, then you have one guy saying, "Wait, he gets 65% of the company because of all of these contributions that really aren't working out. How non-awesome is that? And my good college buddy just asked me to jump into this NEW idea with 50% ownership... Hrm.".
Those are non-trivial risks for nearly-trivial (risk adjusted) dollar figures, IMO.
Really?!
Employ that strategy and then interview a series of great co-founder candidates. If they bring more to the table than you, imagine their response when you say, "You're bringing more to to the table than I am, but given that I will be CEO and the idea is mine, I think I should be getting slightly more equity than you."
The "you should have this in your DNA and thus shouldn't be motivated by equity" argument has nothing to do with Zappos. Staying or leaving is almost always based on a lot of things (equity, comp, passion, team, opportunity, risk etc). Everyone weighs those differently, but very few people ignore the equity/opportunity part of it entirely.
If you subscribe to that argument, why exactly are you reaching for more than half of the equity pie? Or reaching for ANY of it? And why offer stock options at all? Telling people to "do it for the love of the game" is a pretty self-serving thing to say.