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

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

#191

Post by darod » Wed, Dec 23, 2015, 7:26 PM UTC

arbitrage314 wrote: post #143

acconrad wrote: post #133

Earlier quoted context omitted.

I think I asked this from you in another thread - but this advice feels difficult to follow. Are you in SF? Do you work at a company like Netflix which is known for paying very high salaries? Or are you not fully a developer, but in management? Because national labor statistics show that even the top quartile of salaries is still much lower than this, so I'm not sure how realistic it is for even the HN crowd to just…

Ah, sorry I didn't respond before. I live and work in SF at a large company (not Netflix, but something pretty similar). I'm 80% a coder, 10% a manager, and 10% a data scientist, and I love my job. $250k salaries are very common at large companies these days--you just need to stick around and work hard for a few years. Even if you make $150k, my advice stands, but you should probably invest smaller amounts than $100k…

I think it's funny that everyone is stuck on your $250k salary and not focusing on the point that you were making.

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

#192

Post by ChuckMcM » Wed, Dec 23, 2015, 7:28 PM UTC

rday wrote: post #182

ChuckMcM wrote: post #70

I remember clearly when I was in a similar situation with the sale of a company I helped start in 1999. All this gain on paper which required (because of the Alternative Minimum Tax rule) that I pay taxes on gains I had not realized. And then later realizing an actual loss. And the decade afterwards of getting $3,000/year that I could claim against my taxes. The only reason I'm not still claiming my $3,000 a year is…

>Employees don't cash out some of their holding at $3/share expecting a bigger IPO lift. Both angry because nobody came from the future to tell them, hey this is the best offer you are ever going to get for this stock, take it. Quoting from the article: >Employees had little idea that an outside appraisal firm had valued Good at $434 million and the common stock at about 88 cents a share as of June 30, according to i…

I'm not arguing, but I would like to point out that you've just fallen into the same trap I was discussing. According to the article the employees had a chance to sell shares at $3 a share, later it came out that an outside firm felt the shares were worth less. The trap is using information from later to beat yourself up about what you didn't do then.

It is an easy trap to fall into, you're in your own future looking back with more information than you had then, and you are seeing how you could have acted differently for a much better result. And then you beat yourself up for not acting differently. But the truth is it isn't your fault.

But the learning is, be more mindful of choices (and non-choices) and their future financial impact. It is much easier (and desirable) to see the "success" scenario, than it is the "failure" scenario, but if you work it out and sell half when you have the chance, then you reduce future outcomes to "only capturing half the value" and "giving up half the gain". Both of which are more tolerable than "losing all value".

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

#193

Post by rday » Wed, Dec 23, 2015, 7:33 PM UTC

ChuckMcM wrote: post #192

rday wrote: post #182

Earlier quoted context omitted.

>Employees don't cash out some of their holding at $3/share expecting a bigger IPO lift. Both angry because nobody came from the future to tell them, hey this is the best offer you are ever going to get for this stock, take it. Quoting from the article: >Employees had little idea that an outside appraisal firm had valued Good at $434 million and the common stock at about 88 cents a share as of June 30, according to i…

I'm not arguing, but I would like to point out that you've just fallen into the same trap I was discussing. According to the article the employees had a chance to sell shares at $3 a share, later it came out that an outside firm felt the shares were worth less. The trap is using information from later to beat yourself up about what you didn't do then. It is an easy trap to fall into, you're in your own future looking…

+1 :) Fortunately this comment is the least expensive way to learn that lesson.

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

#194

Post by ChuckMcM » Wed, Dec 23, 2015, 7:34 PM UTC

balls187 wrote: post #186

ChuckMcM wrote: post #185

Earlier quoted context omitted.

Actually by that time it was all employee purchase program (EPP) stock. You could put up to 10% of your post-tax income into a plan that every 6 months would buy stock at either 85% of the market price, or the 'lock in' price, which ever was lower, and the lock in price was set the first time you started the program, held for 2 years and then reset each 2 years after that. > What would your advice be to people who ho…

Awesome thanks for sharing. While working at Boeing, their EPP allowed you to purchase Boeing Stock, or invest in a managed fund. This was post 9/11 so their stock was hurting, so I invested 90% into their stock. These days in the startup world, folks are given Restricted Options, which don't offer a lot of flexibility. Even with a public event, employees have a 180 day lockup period before they can sell any vested o…

   > Even with a public event, employees have a 180 day 
   > lockup period before they can sell any vested options.

It varies, when I was acquired in 1999 we could choose to dispose up to half our proceeds, it was negotiated as part of the deal. I also had an insane 18 month lockout which took me from pre-crash to post-crash and a 144x difference in stock price ($120/share vs $0.83/share)

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

#195

Post by at-fates-hands » Wed, Dec 23, 2015, 7:35 PM UTC

ChuckMcM wrote: post #70

I remember clearly when I was in a similar situation with the sale of a company I helped start in 1999. All this gain on paper which required (because of the Alternative Minimum Tax rule) that I pay taxes on gains I had not realized. And then later realizing an actual loss. And the decade afterwards of getting $3,000/year that I could claim against my taxes. The only reason I'm not still claiming my $3,000 a year is…

>> The board turns down an $825M offer because they feel it is their duty, given they expect the company is worth more than that.

I remember when Blackberry was in its patent fight with NTP and they made them some insane offer and NTP turned them down, much to the shock of Blackberry. I remember one of the Blackberry lawyers saying, "I'm not sure what they're waiting for, the offer we gave them would give every employee of the company $40 million dollars."

It was a total PR stunt to show the company's employees they were getting screwed by the owners.

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

#196

Post by leoc » Wed, Dec 23, 2015, 7:42 PM UTC

nostrademons wrote: post #95

nemo44x wrote: post #51

Earlier quoted context omitted.

I agree 100% with this. Employees should be suspicious that they have access to an investment nobody else does - invest now! I've seen countless friends get burned in various ways believing they would be getting rich soon from their options and then fizzle. Either through the company just never having a liquidity event or being sold for less than previous valuation rounds. The worst is I've seen people reject job off…

Employees do have access to an investment to an investment nobody else does. It's just that they need to do due diligence on par with or better than an investor to avoid getting taken advantage of. I've turned down more startup jobs than I can count. When I interview at a startup, I thoroughly research their market, their competitors, their product, and their business model. I ask questions about how they came up wit…

Given the financial acumen and street smarts involved, it almost sounds as if there's a possible role for someone acting as an agent for potential startup employees: not an employment agency which gets a lump sum when an employer fills a vacancy, but a talent agent getting something like the traditional ten percent, or two-and-twenty, or whatever, of the employee's ongoing earnings. Not that dealing with talent agents is always a wonderful experience either, of course...

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

#197

Post by ryporter » Wed, Dec 23, 2015, 7:44 PM UTC

dradbdgj wrote: post #80

ryporter wrote: post #49

Earlier quoted context omitted.

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

Throwaway account, reporting on the secondary market! Companies will often do everything in their power, including running roughshod over their contractural and legal obligations, to prevent employees from selling stock on the secondary market. If they're not total jerks, they will encourage you to participate in "internal buybacks". Unfortunately, these buybacks are run as a service for investors, presenting them ma…

So, are these shares massively overvalued or massively undervalued?

It seems like the anti-equity crowd here will never be happy. They want cash when the company offers equity, and equity when the company arranges for an offer of cash.

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

#198

Post by snowwrestler » Wed, Dec 23, 2015, 7:47 PM UTC

rebootthesystem wrote: post #107

justinph wrote: post #67

Earlier quoted context omitted.

At least with the auto industry, the unions were able to offer some protections for the worker. How many programmers belong to a union?

> How many programmers belong to a union? Thankfully none. One of the main reasons the car companies stumbled are unions. The whole thing has degenerated to insanity squared. For example, GM had a clause in their contract requiring them to not fire employees displaced by technology or automation. In other words, if you improve your workflow and process and can do the same work with 25 people instead of 100, you can't…

The autoworkers are not really a good analog for what a programmers' union would be.

If a programmer's union formed it would probably be a trade union more similar to the NFL Players Association, or the Writers Guild of America, than a labor union for relatively unskilled workers. The NFL, Hollywood, and TV have obviously not been harmed by doing deals with these unions.

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

#199

Post by DocSavage » Wed, Dec 23, 2015, 7:51 PM UTC

arbitrage314 wrote: post #154

DocSavage wrote: post #146

Earlier quoted context omitted.

Doesn't this just apply to those with either sufficient net worth or earned income to qualify as an accredited investor? Or have you heard of startups taking the money of some new graduate making less than $200k/year with insufficient net worth?

Yeah, typically you have to make at least $200k/year or have a net worth of $500k (the term is "accredited investor"). Thanks to a new law, though, you no longer have to be accredited to invest small amounts.

I believe it's net worth of a million dollars (http://www.investor.gov/news-alerts/investor-bulletins/inves...). I've been following the crowdfunding legislation and it seems like there may be additional requirements to accept such investments if you are an early startup with just friends & family investments.

But the bottom line, I think, is that to do the strategy you suggest, you currently need to be an accredited investor if the startup is not already setup for crowdfunding.

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

#200

Post by nostrademons » Wed, Dec 23, 2015, 8:00 PM UTC

leoc wrote: post #196

nostrademons wrote: post #95

Earlier quoted context omitted.

Employees do have access to an investment to an investment nobody else does. It's just that they need to do due diligence on par with or better than an investor to avoid getting taken advantage of. I've turned down more startup jobs than I can count. When I interview at a startup, I thoroughly research their market, their competitors, their product, and their business model. I ask questions about how they came up wit…

Given the financial acumen and street smarts involved, it almost sounds as if there's a possible role for someone acting as an agent for potential startup employees: not an employment agency which gets a lump sum when an employer fills a vacancy, but a talent agent getting something like the traditional ten percent, or two-and-twenty, or whatever, of the employee's ongoing earnings. Not that dealing with talent agent…

As part of the market research for a previous startup, I talked with plenty of recruiters who would love for their to be a market for software talent agents. If you're curious why such a market doesn't exist, read Aline Lerner's article "Why talent agents for engineers don't exist":

http://blog.alinelerner.com/why-talent-agents-for-engineers-...

tl;dr: Agents exist when it's hard to get a job. It is not hard to get a job in software right now. If your company mistreats you, you figure that out pretty quickly and move on to a company that doesn't mistreat you. There's no need to pay anyone to make that happen; in fact, you can get paid a significant amount more just by asking around.

You hear about stories of startup employees getting screwed because the software engineering labor market (particularly for startups) is expanding rapidly now, and so there are a large number of employees who have no experience in the industry. These people are easy prey for a good salesman who wants to make their sham company seem like one of the winning startups. But it takes only a couple months for most smart employees to catch on, and move to another job.

My first couple tech jobs were at startups where I was paid below market rate. The first one had some serious shenanigans going on when it went down in flames; the second had no shenanigans, it just wasn't going anywhere. But I left, and my compensation very quickly caught up with and then surpassed what I thought possible. I probably ended up significantly better off, financially, by taking the hard knocks early and learning the lessons myself rather than paying an agent 10% to handle everything for me.

As they say, "when someone with no experience does business with someone with lots of experience, the person with no experience gains some experience."