There are mercenaries, and there are Enron employees....

Sarah Lacy, writing in Businessweek says that Facebookers who opt to take 25% of their options now (there is a $100m share buyback scheme pre IPO in operation) are "mercenaries":

What has happened to the startup work ethic in Silicon Valley? Time was, the region was teeming with believers—be it believers in a company or believers in the sometimes naive, lottery-ticket hope that options would make them billionaires. People who work at the most highly valued startup in Silicon Valley and rush to sell for a smaller valuation—just as an IPO is starting to look likely—aren't believers. They are mercenaries. What's next? Giving up options altogether for a bigger paycheck?

Now, to be fair, Sarah is trying to debate the wisdom of giving employees cash early, and whether this is the End OF Days for the Silicon Valley model:

Silicon Valley was founded on the belief that stock options were worth something—and that something was a big windfall at an exit, when the whole company watched that ticker crawl across the Nasdaq for the first time, calculated their paper net worth, and popped open the champagne. Does it always work out? Of course not. But that is why it's considered high risk, high reward. How has this gotten so lost on people? Are we just so jaded that we can't believe in promises anymore, even at a company like Facebook?

But here's the acid test - a vote for all of you out there - would you:

(i) take 25% of your options now on an (over) valuation of $6 odd billion and wait for the (sure-fire) squillion dollar IPO in (insert your date for first pass profitability for Facebook) with the other 75%, or

(ii) put all you eggs in the basket for the IPO, knowing that for most Social Nets, time in the sunshine to date has been dazzling but brief and they may be yesterday's news before jam tomorrow comes.

Of course you would put all your eggs in one basket and vote for (ii). Not.

What is more interesting is to ask why founders, VCs and all are actually using these early payff models now - what has changed to make the old "Pot of Gold x very low probability" model falter. Why the moves to reduce the risks?. Given that Ms Lacy has apparently written the deep expose of how The Valley 2.0 works, its surprising that she hasn't talked about why this has occurred......

Thing is, in this year 9 AD (After Dotcom), employees aren't as naive and appreciate the risks far better. Once you are unlucky, twice you smarten up. There are mercenaries, and there are Enron employees......

And there must have been some form of power shift between founder and funder to create this change. My (top of digital napkin) hypothesis would be that:

(i) Consumer SocNet Tech is a butterfly game - they are all beautiful, but another more beautiful one will flit by any second now

(ii) The IPO market is far less certain, there is a Decession on

(iii) Most tech sales are trade these days, and no one is (probably) mug enough to hand over several billions for a SocNet after seeing the Friends Re-United, Bebo, MySpace, Friendster et a Great Depression in values.

(iv) There are many funders, all trying to shore up their portfolios, all chasing few founders of reasonable companies in this space, so the one with the biggest brib...- I mean, most jointly rewarding terms - wins

Update - interesting take on this over at CloudAve, who note:

....the vaunted “ecosystem” for startups in the Valley consists of two legs - 1) Capital and 2) talent that can be hired to build that innovation out. Number two has traditionally signed on for the long haul and been willing to hold out for the big win. But that group (in the Valley) appears to be changing; becoming more like the rest of the workforce.

That means there are now pockets where the community ecosystem is alive and growing (hire-able talent), and that the “distribution” of innovation out of the valley has really begun in force. You can see those pockets in places like the Twin Cities, Boulder, Austin, Portland, Boston, etc.

I must note that I use Enron as a graphic way of illustrating the perils of single baskethood (and my sympathy for its victims). This post in no way implies that Facebook is in any way run like........ By the way, the comments are worth a read too