You forget that the employees are also taking a risk. A Fortune 500 is stable, and steady work can be found in many city hubs.
Startups are sometimes spread quite afar, Mojang was in Stockholm, and are not always likely to survive. While Notch was "rolling in the dough" there was no guarantee that it would continue indefinitely.
That risk is why employees, especially early employees, feel like they should get some equity. It's a trade-off: they are accepting a percentage chance that they are joining a company that could fail, but there's also a chance it could be wildly successful. The difference between equity and wage represents an assessment of risk and riskiness. And, of course, offering lower wages and higher equity shares creates positive incentives for employees to go above-and-beyond and ensure that the company is not just a mild success, but a multi-billion-dollar-buyout success. This is opposed to the perverse incentive that wage-only compensation creates, where a buyout potentially means losing your job. After all, if you weren't valuable enough to deserve equity, you may not be the talent the new company was seeking to acqui-hire.
In this case, it is almost certainly the case that any Mojang employee would have better off foregoing all wages in exchange for a small amount of ownership.
With hindsight biases, I suspect every Mojang employee would say they'd be willing to give up some wages for some equity. But before the acquisition, it was nowhere near clear that the company was worth $2.5 billion, so I wonder how many employees might still be willing to take that offer.
So, like I said, trade-offs. I think the tone at the end of your post represents how a lot of founders might look at it, and I realize it's hypothetical. But stepping back from the situation, there are complicated incentives involved in wage and equity compensation, and balancing those as a founder or an employee can be difficult.
Employees are always taking risk; no company lasts forever, and even seemingly stable companies frequently get rid of people for reasons unrelated to performance.
If early employees feel like they should get equity, then they should ask for it on hire. That Mojang apparently found plenty of employees on a cash-only basis suggests that equity was unnecessary here.
There is a separate feeling, which is that in retrospect they feel like they deserve a share of the big money because there was big success. That's a reasonable feeling. But I think it's very different than having worked for a successful company, getting paid regularly, getting bought by a major tech company, and then saying, "Gosh, that was too risky!"
>> You forget that the employees are also taking a risk.
I don't know how it is in most countries, but in the United States, an employee gets unemployment when they get laid off. A founder gets nothing when the company goes under.
Also, I know of a lot of companies that consider self-employment the same thing as unemployment. I've made more money as a freelancer in the last 3 years than I ever made working for anyone, and I've produced more code in that time to boot, so I think it's been a pretty good measure of my productivity. But as far as your run-of-the-mill cunsoltoware company is concerned (and let's face it, the long-tail of such companies is the majority of places where your average software developer can expect to get hired), I might as well have been on a 3 year vacation.
So IDK, seems like there are a lot more implicit risks to being a founder other than just "everything could go belly up and I have no retirement".
> I don't know how it is in most countries, but in the United States, an employee gets unemployment when they get laid off. A founder gets nothing when the company goes under.
The $350 I got a week when I was unemployed three years ago doesn't affect much of anything compared to a developer's salary. I am fortunate in that I received 2 weeks severance and was able to get a new job within about a month; but not everyone is going to find a job within a time frame that having a drastically reduced income is trivial.
In Sweden (which is where the employees in question were), most workers are entitled to unemployment benefits of 80% of their full salary for 200 days, after which it's reduced to 70% for the next 100 days [1].
So a Swedish programmer will definitely be making much more than $350/week for almost a year while unemployed. Like someone else said, Mojang's employees did not take any real risks.
It's up to 80% of the full salary. While your typical Swedish programmer would get more than $350/week, they're not going to get 80% of their salary since they cap out well before that.
Oh, you're right. I missed the part about the 680 SEK / day cap.
Is that per calendar day or workday? I guess calendar day. That means the average programmer would get about 50% of salary on unemployment. (Just taking a wild guess that a programmer in Sweden makes 40k SEK / month.)
I lived in PA at the time, so maybe it's different in your state, but I got a lot more than $350 a week when I was on unemployment 4 years ago. It was about 1/2 of my previous wage. Considering I wasn't driving into an office every day, eating out all the time, etc., the money went pretty far. The rest of the shortfall was covered by just... not putting money into my retirement account.
And regardless, $350/wk is a lot more than the $0/wk a founder would get.
"I don't know how it is in most countries, but in the United States, an employee gets unemployment when they get laid off."
Thats assuming they were officially laid off, not let go for performance reasons even though it was actually company downsizing, and are eligible to collect unemployment. Since companies usually have to cover some of the unemployment payments they will fight unemployment claims or even fire a employee for a BS reason. So unemployment is far from guaranteed. IIRC IBM recently used those tactics in their latest mass layoff.
Competent developers near economic hubs like Stockholm should find jobs pretty easily (unless I'm mistaken). I fail to see the risk for employees, especially in a nordic wellfare state like sweden.
Startups are sometimes spread quite afar, Mojang was in Stockholm, and are not always likely to survive. While Notch was "rolling in the dough" there was no guarantee that it would continue indefinitely.
That risk is why employees, especially early employees, feel like they should get some equity. It's a trade-off: they are accepting a percentage chance that they are joining a company that could fail, but there's also a chance it could be wildly successful. The difference between equity and wage represents an assessment of risk and riskiness. And, of course, offering lower wages and higher equity shares creates positive incentives for employees to go above-and-beyond and ensure that the company is not just a mild success, but a multi-billion-dollar-buyout success. This is opposed to the perverse incentive that wage-only compensation creates, where a buyout potentially means losing your job. After all, if you weren't valuable enough to deserve equity, you may not be the talent the new company was seeking to acqui-hire.
In this case, it is almost certainly the case that any Mojang employee would have better off foregoing all wages in exchange for a small amount of ownership.
With hindsight biases, I suspect every Mojang employee would say they'd be willing to give up some wages for some equity. But before the acquisition, it was nowhere near clear that the company was worth $2.5 billion, so I wonder how many employees might still be willing to take that offer.
So, like I said, trade-offs. I think the tone at the end of your post represents how a lot of founders might look at it, and I realize it's hypothetical. But stepping back from the situation, there are complicated incentives involved in wage and equity compensation, and balancing those as a founder or an employee can be difficult.