It seems to me that a startup can reduce its risk by swapping stock with another startup. That way, if either startup has a liquidity event, then the founders of both startups get approximately half as rich as they would have without the swap. Of course, more than just two startups can participate in a stock-pooling arrangement, reducing the participant's risk further.
Of course a startup does not want to swap stock share-for-share with just any other startup, and there are startups whose prospects are so dim that even if they offer 5 or 10 shares for every share of yours, you would not want to swap stock with them. And learning enough about another startup to judge their expected earnings is a lot of work. But sometimes the work has already been done for you, by YC for example.
There exists what economists call a "moral hazard" here: namely, once a startup has swapped stock with more than one or two other startups, its optimal strategy is for its founders not to put themselves out (that is, to coast, to relax) and rely on the possibility that one of the other startups will make a lot of money. But this is the same concern any individual founder has when he takes on any co-founder, and the solution is the same: you have (or someone you can trust has) to watch the other startups with whom you have swapped stock closely enough to verify that they are working as hard as you are. (YC's requirement that the startups it invests in must all move to the same city makes it easier for YC startups to watch each other in this way.) Along with that you will want to give yourself a time frame (1 year seems about right) during which time you can back out of the stock swap deal if you believe the startup you are swapping stock with is not putting themselves out (or has misrepresented themselves in negotiations with you).
I can think of several way to refine this strategy to deal fairly for example with the situation in which one startup gives up after 18 months while another works hard for four years, but I will stop here for now.
That's a very interesting idea! This sounds like something that could be brokered more efficiently by YC or something similar - create an option pool for all the companies in a season (maybe 1% or 0.5% of each). 1% split 6 (8? how many companies per season?) ways isn't a ton, even in a big liquidity event, but's a nice hedge that would reduce risk for all the founders and make YC even more attractive.
For instance, 1% of a $10 mil acquisition would be $100K. If there are 8 companies that round, each would get $12.5K, which for 2-3 founders is like another infusion of YC cash and a few more months of runway.
Hardly enough to cause a moral hazard but still a significant benefit.
Of course a startup does not want to swap stock share-for-share with just any other startup, and there are startups whose prospects are so dim that even if they offer 5 or 10 shares for every share of yours, you would not want to swap stock with them. And learning enough about another startup to judge their expected earnings is a lot of work. But sometimes the work has already been done for you, by YC for example.
There exists what economists call a "moral hazard" here: namely, once a startup has swapped stock with more than one or two other startups, its optimal strategy is for its founders not to put themselves out (that is, to coast, to relax) and rely on the possibility that one of the other startups will make a lot of money. But this is the same concern any individual founder has when he takes on any co-founder, and the solution is the same: you have (or someone you can trust has) to watch the other startups with whom you have swapped stock closely enough to verify that they are working as hard as you are. (YC's requirement that the startups it invests in must all move to the same city makes it easier for YC startups to watch each other in this way.) Along with that you will want to give yourself a time frame (1 year seems about right) during which time you can back out of the stock swap deal if you believe the startup you are swapping stock with is not putting themselves out (or has misrepresented themselves in negotiations with you).
I can think of several way to refine this strategy to deal fairly for example with the situation in which one startup gives up after 18 months while another works hard for four years, but I will stop here for now.