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Ask HN: What HN threads most influenced your thinking about startups?

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Re: Ask HN: What HN threads most influenced your thinking about startups?

#41

Post by dang »

snarkypixel wrote: post #7

The one that said "Dropbox will never work because I can do the same thing with rsync"

That's not what the comment said. It has been unfairly misconstrued.

What BrandonM actually said was that he had "a few qualms" about Dropbox's YC application (which is what the word "app" meant back then) - i.e. he was worried on their behalf and wanted it to succeed. He was clearly intending to be helpful. He had a nice exchange with Drew, as anyone can see if they would read the replies (https://news.ycombinator.com/item?id=9224).

In 2007, the conventional wisdom was that file sync was a solution-in-search-of-a-problem that would never be a successful business because the idea only appealed to technical users. Joel Spolsky famously wrote a blog post mocking technical people who wanted to work on file sync. That's the context in which the comment was posted.

That turned out to be totally wrong, but it took the success of Dropbox for everyone to know that (and then forget that anybody ever said otherwise). Brandon's comment ended up getting stranded like a little island in an ocean of hindsight fallacy.

It's hopeless, of course, to fight the internet once it has decided on a meme. But it bugs me when unfairness get repeated, especially when someone is being scapegoated, so even though it's hopeless, I still post about it from time to time.

https://news.ycombinator.com/item?id=28293146

https://news.ycombinator.com/item?id=27068148

https://news.ycombinator.com/item?id=23229275

https://news.ycombinator.com/item?id=24366316

Re: Ask HN: What HN threads most influenced your thinking about startups?

#42

Post by zeusk »

Sohcahtoa82 wrote: post #31
claudiulodro wrote: post #12

This question I asked when YC company Amplitude went public a little while back: https://news.ycombinator.com/item?id=28700409 It confirmed that these days if a startup is successful the founder gets almost all of the reward, the first handful of engineers get a few million bucks, and the thousand+ people that follow simply get a regular salary. There are only two real paths to wealth in tech nowadays: start your own…

I joined a startup a few months ago, and yeah...I don't know what my stock options are potentially worth. I can buy 20,000 shares at $3/share over 4 years. We got a second round of VC funding in Spring with a valuation of $250M. Let's say in 5 years, we go public, I had exercised all my options, and we end up being worth $25B. Would that mean the $60,000 I spent on shares would be worth $6M? Would another round of VC…

Usually new funding leads to dilution of existing investors, you might want to read the offering of your second round for relevant details.

Re: Ask HN: What HN threads most influenced your thinking about startups?

#43

Post by AYBABTME »

rfrey wrote: post #38
elwell wrote: post #35

Earlier quoted context omitted.

Sorry if this is a dumb question, but why would you want to exercise your options as fast as you can?

1. You pay tax on the difference between the current valuation and your strike price. So if you exercise before new valuation events you save tax dollars, potentially a lot of tax dollars. 2. If the company gets acquired there are several mechanisms founders and investors use to wipe out options holders. It is harder to wipe out common stock owners. If an acquisition event takes you by surprise you may not have time…

Good point about (2), I think that's also overlooked.

Re: Ask HN: What HN threads most influenced your thinking about startups?

#44

Post by s1artibartfast »

Sohcahtoa82 wrote: post #31
claudiulodro wrote: post #12

This question I asked when YC company Amplitude went public a little while back: https://news.ycombinator.com/item?id=28700409 It confirmed that these days if a startup is successful the founder gets almost all of the reward, the first handful of engineers get a few million bucks, and the thousand+ people that follow simply get a regular salary. There are only two real paths to wealth in tech nowadays: start your own…

I joined a startup a few months ago, and yeah...I don't know what my stock options are potentially worth. I can buy 20,000 shares at $3/share over 4 years. We got a second round of VC funding in Spring with a valuation of $250M. Let's say in 5 years, we go public, I had exercised all my options, and we end up being worth $25B. Would that mean the $60,000 I spent on shares would be worth $6M? Would another round of VC…

There is simply no way to tell. It all depends on how many shares there are at the time you sell. VC funding can change this. Do you know how many shares there are today?

If there is a 25B valuation and 25B shares at the time of sale, your shares would be worth 20K (and you overpaid).

If there is a 25B valuation and 25 million shares, you would be worth 20M

Re: Ask HN: What HN threads most influenced your thinking about startups?

#45

Post by Sohcahtoa82 »

s1artibartfast wrote: post #44
Sohcahtoa82 wrote: post #31

Earlier quoted context omitted.

I joined a startup a few months ago, and yeah...I don't know what my stock options are potentially worth. I can buy 20,000 shares at $3/share over 4 years. We got a second round of VC funding in Spring with a valuation of $250M. Let's say in 5 years, we go public, I had exercised all my options, and we end up being worth $25B. Would that mean the $60,000 I spent on shares would be worth $6M? Would another round of VC…

There is simply no way to tell. It all depends on how many shares there are at the time you sell. VC funding can change this. Do you know how many shares there are today? If there is a 25B valuation and 25B shares at the time of sale, your shares would be worth 20K (and you overpaid). If there is a 25B valuation and 25 million shares, you would be worth 20M

According to the stock options plan document, there are 2.5M shares reserved for issuance for the plan. Of course, that says nothing about total shares.

Re: Ask HN: What HN threads most influenced your thinking about startups?

#46

Post by muzani »

dang wrote: post #41
snarkypixel wrote: post #7

The one that said "Dropbox will never work because I can do the same thing with rsync"

That's not what the comment said. It has been unfairly misconstrued. What BrandonM actually said was that he had "a few qualms" about Dropbox's YC application (which is what the word "app" meant back then) - i.e. he was worried on their behalf and wanted it to succeed. He was clearly intending to be helpful. He had a nice exchange with Drew, as anyone can see if they would read the replies ( https://news.ycombinator.…

While I like the meme, this is the first time I've heard the context, so I appreciate that you wrote this.

Re: Ask HN: What HN threads most influenced your thinking about startups?

#47

Post by s1artibartfast »

Sohcahtoa82 wrote: post #45
s1artibartfast wrote: post #44

Earlier quoted context omitted.

There is simply no way to tell. It all depends on how many shares there are at the time you sell. VC funding can change this. Do you know how many shares there are today? If there is a 25B valuation and 25B shares at the time of sale, your shares would be worth 20K (and you overpaid). If there is a 25B valuation and 25 million shares, you would be worth 20M

According to the stock options plan document, there are 2.5M shares reserved for issuance for the plan. Of course, that says nothing about total shares.

This might be helpful:

https://carta.com/blog/equity-101-stock-economics/

If your options were priced at the $250 million valuation, and no dilution occurs, the stock value would be 3$*IPO valuation/$250M.

Dilution events are pretty common, even for companies that are revenue positive.

I would recommend viewing the options as a potential windfall, but not part of any compensation evaluation or financial planning.

Re: Ask HN: What HN threads most influenced your thinking about startups?

#48

Post by Jensson »

AYBABTME wrote: post #30
hedgehog0 wrote: post #24

What I Wish I'd Known About Equity Before Joining a Unicorn https://news.ycombinator.com/item?id=13426494

I've seen a lot of people lose a lot of money because they bought into the "value the equity at zero" mentality. It sure sounds great and edgy to be blasé and just take your pay, but if that was true, you'd be better off working at FAANG 99% of the time. IMO if you work for a startup company, you should only do so because you believe in it, and if you believe in it, you should exercise your option as fast as you can,…

> but if that was true, you'd be better off working at FAANG 99% of the time.

Pretty sure 99% of people actually would be better off working at FAANG, or at least the 99% number isn't far off. FAANG promote quickly so salaries will climb and you'll have millions in the bank by the time a start-up would go public, I doubt many start-ups beats that.

The main reason FAANG employees don't have those millions is that they consume them as they get them rather than invest it and then get all that money at once after 6 years.

Re: Ask HN: What HN threads most influenced your thinking about startups?

#49

Post by elwell »

rfrey wrote: post #38
elwell wrote: post #35

Earlier quoted context omitted.

Sorry if this is a dumb question, but why would you want to exercise your options as fast as you can?

1. You pay tax on the difference between the current valuation and your strike price. So if you exercise before new valuation events you save tax dollars, potentially a lot of tax dollars. 2. If the company gets acquired there are several mechanisms founders and investors use to wipe out options holders. It is harder to wipe out common stock owners. If an acquisition event takes you by surprise you may not have time…

Regarding #1, won't you have to pay tax on the gains anyways, if you ever sell the stock?

Re: Ask HN: What HN threads most influenced your thinking about startups?

#50

Post by rfrey »

elwell wrote: post #49
rfrey wrote: post #38

Earlier quoted context omitted.

1. You pay tax on the difference between the current valuation and your strike price. So if you exercise before new valuation events you save tax dollars, potentially a lot of tax dollars. 2. If the company gets acquired there are several mechanisms founders and investors use to wipe out options holders. It is harder to wipe out common stock owners. If an acquisition event takes you by surprise you may not have time…

Regarding #1, won't you have to pay tax on the gains anyways, if you ever sell the stock?

Sorry, I missed this when you posted it. Yes you're right, you certainly will pay tax. But you'll have the proceeds from the sale to pay it with. When you exercise options for (possibly non-liquid) shares, you have to find money to pay the tax elsewhere.

If you can exercise and immediately sell the shares, point 1 isn't relevant.

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