Deedy Das: Look at the Founder Before Joining
Menlo Ventures partner Deedy Das stated that when joining a startup, whether the founder stands by the employees is more crucial than how good the company looks. He wrote that many employees are unaware that founders can deplete them through a series of compliance operations without their knowledge.
The paths he listed include: excluding employees from mergers, creating poor retention bonus pools, excessive dilution of employee equity, layoffs before vesting cliffs, unfavorable option exercise conditions, improper management of 409A valuations, failing to inform about qualified small business stock or early exercise, blocking employee participation in secondary stock transfers, and concealing the true operational status of the company. He said these decisions happen in meetings that employees cannot attend, leaving only one question: does the founder have your back?
His judgment is that good companies with untrustworthy founders often yield poor results; ordinary companies with trustworthy founders often yield good results. The choice of partners is about people, not narrative about the sector. The post did not name specific companies or provide new regulatory documents, but merely laid out common levers in Silicon Valley employee equity.
Deedy Das himself has walked this path. He worked as an engineer at Facebook and Google, then joined the founding team of enterprise search company Glean, progressing from engineer to product lead, as the company grew from fewer than 10 people to hundreds, with a valuation rising from zero to tens of billions, before transitioning to venture capital, participating in early AI projects. He moved from the side of receiving options to the side of writing checks to founders.
In U.S. startup employee compensation, cash is often lower than at large companies, with compensation written in options, vesting periods, exercise windows, tax rules, and secondary sale permissions. 409A determines the exercise price, cliffs determine whether you can receive your first shares, merger documents determine if common stock is included, and the board and founders control dilution, buybacks, and information disclosure. These are not abstract cultures; they are switches that can change documents.
In market mechanisms, this is a struggle for talent pricing power, not product launches. What is bought is the "trustworthy founder" premium: under equal valuations, employees are willing to accept lower cash and longer lock-up periods; what is sold is the person who joins based only on financing news. The beneficiaries are founder teams willing to clarify option terms, allow secondary sales, and permit early exercise, who can attract engineers with lower cash; the pressured parties are companies that maintain the illusion of options through information asymmetry, and early employees who are laid off before cliffs or excluded during mergers.
In the Silicon Valley labor market, equity documents are more solid than cultural posters. Founders' trust is written as a due diligence metric for joining, rather than a post-factum slogan for rights protection.
Source: Public Information
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The path from early employee at Glean to investor illustrates that those who have seen how options turn into money will consider whether "the founder has the employees' back" as a due diligence item. The equity at Google and Facebook is priced in the public market; in private companies like Glean, 409A, cliffs, exercise windows, and merger allocations are all in closed documents. He transitioned from the compensation structure of large companies to that of private companies, and then to the investor seat where these terms can be changed.
Capital in startups first flows to the option pools and preferred shares controlled by founders, then to employee common stock. Employee shares must go through vesting, exercise prices, tax events, and board approvals to be realized. Founders retain the power to issue new shares, modify pools, decide who can participate in secondary stock transfers, and when to initiate merger allocations. The motivation is straightforward: to keep employee compensation as much as possible in "paper promises" and liquidity for controlling shareholders and preferred stock. Trustworthy founders will open up early exercise, secondary sales, and QSBS pathways in advance, trading transparency for lower cash salaries.
Analogies include the equity and governance disputes before WeWork's IPO, common stock being pushed to nearly zero in some SPAC mergers, and the repeated occurrence of "optimization before cliffs". On the other side are companies that allow early exercise, plan for qualified small business stock, and provide employees with secondary sale quotas during financing, using the same legal tools to operate in reverse. The industry is in a bidding war for AI talent: cash salaries are being driven up by large companies, forcing startups to increase the nominal value of options, and the terms war is more intense than before.
Structural changes represent a transfer of pricing power. Company valuations can rise, but employee shares may still be diluted, frozen, or pushed to the back of the merger waterfall. The mechanism is that private companies do not have mandatory high-frequency information disclosure, and board resolutions can change pools and allocations without employee knowledge; yet the labor market treats "joining a star founder" as a status commodity. When the room with the greatest information asymmetry decides allocations, trust becomes not a cultural term, but a pre-judgment of that room.
ABAB News · Law of Cognition
- The unseen room determines the equity on your table.
- Trust is not culture; it is the way terms are executed.
- A good sector cannot save a bad allocation.