The incentives are precisely the same as they are today. And the argument, by the way, isn't that "you should sell 172 of your shares", its that "you should donate 172 of your shares back to the company, otherwise the value of the rest of your shares may go to $0".

I expect that the major differences you'd see are that you would need some kind of large pool of stock in reserve to save for future investments (or yes, to do buybacks which would give employees/investors early liquidity opportunities with each new round).

This way, at least, you aren't being lied to when they say you'll get X% of the company. My entire point here is that employees don't have enough representation in these kinds of negotiations, and thus almost always end with the shortest stick. So systematic changes, even if those changes make startups harder, are necessary to make them broadly enticing.

The incentives aren't the same because in previous system I can't try and hold out for a personal advantage,in yours I can.

I agree with your basic premise of some of the problems, I just don't see this as a practical way of addressing them. I can imagine explicit buybacks etc., as you suggest, but all those mechanisms will probably the funding side in similar ways to getting rid of liquidation preference.

Keeping a reserve stock for future investment is plausible (may give accounting headaches) but anything you do can't plan for all eventualities; when you are running out of money and all stock is committed you have a problem.

Probably worth pointing out that both stock buybacks and holding reserve stock occur in practice. Especially reserve stock - that seems to be fairly common, as otherwise every new offering of stock to employees means a fresh round of dilution. Which it sorta means regardless (it's less reserve for future investment to use without dilution), but I'd be willing to bet that explicit ~annual dilution along with your bonus is probably less palatable on an emotional level.

(whether or not that equals "founder-only dilution", I dunno. kinda? it's earmarking, it's at least mentally/structurally different)

Buybacks... I haven't personally seen them occur except to take more control back from investors or employees (e.g. to pay off the one(s) that won't agree to dilution), but either way that's the opposite of receiving funds / dilution as it costs the company money.

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I agree entirely that the argument for non-dilutable stocks is "... otherwise the value of the rest of your shares may go to $0". But unless they get voting power proportionate to their stock (like normal) or can be forced to accept buyouts, one person can decide to risk everything for everyone. Or do nothing, and benefit from non-dilution while everyone else gets diluted. Again: it's possible to do this! Founders often have exactly this kind of power! But I don't see that working in most cases for larger groups.

Both points true; I find it hard to imagine reserve stock suitable for all future investment though. Regardless, mostly these schemes end up in a similar place, so how you get there probably doesn’t matter. If employees were the largest voting block it would probably look different...