One thing I've always wondered about -- when a company pays employees partly in stock, where does that stock come from? Created by diluting all of its stock? Broken off of the holdings of the largest investors?
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In the case of options, do they buy options from someone else to sell, or do they back them with their own stock? If so, again, where did that stock come from?
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I guess if you start the company with 50% of the stock held by itself, slowly releasing that stock is equivalent to diluting all the stock. Can't quite wrap my head around a company owning its own stock.
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When you take VC, they force you to create an "options pool", which further dilutes the founders and is mostly used for big dog VPs who are brought in to provide "adult supervision". But early engineers get some crumbs too from this pool.
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