When a Unicorn Startup Stumbles, Its Employees Get Hurt • Hacker News Board

Re: When a Unicorn Startup Stumbles, Its Employees Get Hurt

#41

Post by jerf » Wed, Dec 23, 2015, 5:04 PM UTC

Is there some other industry where, when a company stumbles, its employees don't get hurt? I live in Michigan, and when the car industry "stumbled" everyone I locally know at least knew someone who got hit, at the very very least with long-term stagnant wages even as their responsibilities amped up to cover the missing people, and they were the ones who came out relatively unscathed.

I mean, the details of the article are all fine and dandy and interesting (no sarcasm, there's nothing wrong with the facts and they're at least worth a story), but the headline and framing seem to imply that there's some sort of alternative?

The only problem unique to the tech-unicorns here is exercising stock options when you can't pay for the taxes. Don't do that.

Re: When a Unicorn Startup Stumbles, Its Employees Get Hurt

#42

Post by sbov » Wed, Dec 23, 2015, 5:06 PM UTC

Ultimately the problem seems to be preferred shares driving the valuation of common shares. They obviously aren't the same, so I don't know why it happens. I'm not a lawyer so I don't know if there's a way around this.

Re: When a Unicorn Startup Stumbles, Its Employees Get Hurt

#43

Post by mathgeek » Wed, Dec 23, 2015, 5:06 PM UTC

caseysoftware wrote: post #27

mathgeek wrote: post #20

> To pay those taxes, some employees emptied savings accounts and borrowed money. Investing your life savings and/or loaned money into a single stock is always a huge warning sign that you're being foolish.

Yes, this strikes me as very Enron-ish throughout.

Interesting. In what ways? Enron was a public company that committed fraud.

Re: When a Unicorn Startup Stumbles, Its Employees Get Hurt

#44

Post by ajsharma » Wed, Dec 23, 2015, 5:06 PM UTC

encoderer wrote: post #31

sarciszewski wrote: post #5

> Even worse, they had paid taxes on the stock based on the higher value. That's the most annoying part of the entire article, and why I ask for salary rather than equity. Keep your stock, I'd rather pay my bills.

Joining public or late stage pre-IPO companies, equity provides the possibility of real wealth. There is a great Wealthfront article about this -- that if you live in the bay area and have a normal nuclear family, you need equity if you hope to pay for a house, college, etc. I've seen this in my own life and in many colleagues, friends, and people I've hired. It's not a guaranteed paycheck, but in the bay area gettin…

Wealthfront article mentioned (i think) https://blog.wealthfront.com/college-vs-retirement-savings-s...

Re: When a Unicorn Startup Stumbles, Its Employees Get Hurt

#45

Post by dsugarman » Wed, Dec 23, 2015, 5:07 PM UTC

I imagine this is going to be a lot worse now with unicorn craze. It seems like to some, any liquidation terms were acceptable to get to the $1b valuation mark.

Re: When a Unicorn Startup Stumbles, Its Employees Get Hurt

#46

Post by hkmurakami » Wed, Dec 23, 2015, 5:07 PM UTC

encoderer wrote: post #31

sarciszewski wrote: post #5

> Even worse, they had paid taxes on the stock based on the higher value. That's the most annoying part of the entire article, and why I ask for salary rather than equity. Keep your stock, I'd rather pay my bills.

Joining public or late stage pre-IPO companies, equity provides the possibility of real wealth. There is a great Wealthfront article about this -- that if you live in the bay area and have a normal nuclear family, you need equity if you hope to pay for a house, college, etc. I've seen this in my own life and in many colleagues, friends, and people I've hired. It's not a guaranteed paycheck, but in the bay area gettin…

Not exactly true since select bigcos pay quite well these days.

Re: When a Unicorn Startup Stumbles, Its Employees Get Hurt

#47

Post by Avshalom » Wed, Dec 23, 2015, 5:09 PM UTC

encoderer wrote: post #40

Avshalom wrote: post #37

Earlier quoted context omitted.

The problem here is that "the possibility of real wealth" is not "real wealth". Not being dead provides "the possibility of real wealth" to approximately the same degree as the equity offered to anyone past double digit employee count. Even before that it's only factor unity above the baseline of "not yet dead"

It's a subjective term. But IMO, a few hundred grand after-taxes is real wealth to somebody making $150k a year. It can bend the net-worth growth curve of your life -- a huge home downpayment, elimination of your student loans, etc. Be smart, take an educated risk, and IMO don't listen to people who say equity is worthless.

A few hundred grand net absolutely is real wealth. To anybody really. But how many people are seeing a few hundred grand after-taxes (after taxes!)?

Re: When a Unicorn Startup Stumbles, Its Employees Get Hurt

#48

Post by pinewurst » Wed, Dec 23, 2015, 5:14 PM UTC

brown9-2 wrote: post #2

Ms. Wyatt introduced BlackBerry’s chief, John S. Chen, who winkingly apologized for how his deal makers had driven Good’s final sale price down to $425 million, less than half of the company’s $1.1 billion private valuation. I've never been a CEO or acquired a company but I think there probably aren't too many worse things you could say to the employees of a company that you've just acquired.

Also can you imagine being an employee at that meeting?

Not only are your share values decimated (literally), you're now working for walking dead BlackBerry assuming you're not soon laid-off.

Re: When a Unicorn Startup Stumbles, Its Employees Get Hurt

#49

Post by ryporter » Wed, Dec 23, 2015, 5:14 PM UTC

ditonal wrote: post #33

Very glad the NYTimes ran this piece. The only part they underplayed is they made it sound like the startup "stumbled." No, it sounds like it went exactly as planned. Blackberry got the acquisitions, investors got their money, execs got their bonuses, and the rank-and-file got nothing. That isn't stumbling, that's the playbook. Tech employees need to wake up about common vs preferred shares, and that the former are w…

According to the article, employees had the opportunity to sell their "worthless" shares for $3/share.

Re: When a Unicorn Startup Stumbles, Its Employees Get Hurt

#50

Post by encoderer » Wed, Dec 23, 2015, 5:15 PM UTC

Avshalom wrote: post #47

encoderer wrote: post #40

Earlier quoted context omitted.

It's a subjective term. But IMO, a few hundred grand after-taxes is real wealth to somebody making $150k a year. It can bend the net-worth growth curve of your life -- a huge home downpayment, elimination of your student loans, etc. Be smart, take an educated risk, and IMO don't listen to people who say equity is worthless.

A few hundred grand net absolutely is real wealth. To anybody really. But how many people are seeing a few hundred grand after-taxes (after taxes!)?

Over a 4 year grant? This is just a guess, I don't have the IRS database at my hands. Maybe $200-300k after-tax sounds more reasonable? Like I said above -- "with some luck"