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When a Unicorn Startup Stumbles, Its Employees Get Hurt

nytimes.com

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

#211

Post by arbitrage314 »

czbond wrote: post #155
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…

The number is "high" as a single datapoint, but only due to an inflated SanFran economy. A $250k SF job adjusted to where I live in Dallas is actually considerably less than I make. I would need nearly $370k in SF dollars to do the same thing. http://money.cnn.com/calculator/pf/cost-of-living/

Actually, one small correction to your math.

You should adjust, for cost of living, only the part of your paycheck that you will be spending while living in that area.

E.g., supposed SF is twice as expensive as Dallas. If you make $100k in Dallas, and you typically spend $70k of it in Dallas while saving $30k (to spend later in life somewhere else), you would need to make $70k x 2 + $30k = $170k in SF (for an overall adjustment of 1.7) rather than $100k x 2 = $200k in SF (for an overall adjustment of 2).

Then again, if you're planning on living somewhere for the rest of your life, it's safe to assume that whatever money you make in that place, you'll also be spending in that place. Therefore, in that situation, multiplying by 2 would be correct after all.

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

#212

Post by nekopa »

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…

I think I may be one of the few people who up voted you, only because I think you raise an interesting point. Yes, the auto industry unions caused a shot storm. But do you honest, y think that a modern union, (which learns from the lessons of the past) would really be a bad thing?

I'm still not sure about the value of unions, but I think it is an area that should be explored with a modern mindset.

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

#213

Post by x0x0 »

dewitt wrote: post #110
blizkreeg wrote: post #100

This topic has been in conversation a lot recently. Yet I feel we only have anecdotal data. I was wondering if we can get some real numbers on employee outcomes. I created a spreadsheet that aims to capture this and hopefully, we can get some real insights and conclusive data. https://docs.google.com/spreadsheets/d/1bIYwuz3bhRWPYazVamMD... All data is anonymous. You don't even need to be logged in to edit. What do pe…

Real data is good, but that's not a good way to get real data. I'm not a stats person, but it would seem to suffer from both an extremely small potential sample (those who read your post), a self-selection bias (those who gain an advantage by participating, e.g., the aggrevieved), and an outright unsual candidate sample pool (Hacker News). Perhaps try something like Google Consumer Surveys, and ask a one-two question…

It's going to be functionally impossible to get good data. Not least because I suspect the vc industry really really doesn't want potential startup employees to see the numbers. Or to think to hard about the wave of upcoming ipo devaluations coming to unicorns (viz a recent discussion from Mark Suster where 5/7 of 2015 large ipo exits where down rounds compared to previous valuations [1]). If the numbers were amazing you'd see someone like First Round giving exit surveys to all their companies and trumpeting the mean or median outcome. Or even YC; they are probably in a position to collect that data.

The best you'll be able to do is a site like glassdoor, with all the sample bias that implies. But even with glassdoor, I've told a recruiter to go away because their company pays poorly according to glassdoor. The recruiter then whined about glassdoor, but since he didn't provide me with salary numbers, what does he expect?

I've also pondered building a site similar to glassdoor to confidentially discuss outcomes, but the best you'll ever be able to do is anecdata.

[1] http://www.bothsidesofthetable.com/2015/10/18/venture-outloo...

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

#214

Post by Aloha »

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…

You earn a union.

You earn a union by not treating your employees well, if you knew the history of the labor movement in the 30's you'd better understand how things got to be the way they are, and why the relationship is adversarial, instead of cooperative.

If your employees are trying to unionize its because of longstanding grievances held by a significant minority if not majority of your workforce - grievances that have either not been meaningfully addressed, or can't be aired, because there is no workable mechanism to air them. It's not just pay (though often is primarily pay - we'll put up with all sorts of shenanigans for a big paycheck) if often as much about working conditions and esprit de corps as it is pay.

If you don't want a union, pay your employees well (well above market), or have a great working environment and instill a sense of pride and appreciation in your management - and make it clear you value their contributions as well - it's this balance of pay and working environment that keeps a workplace healthy and union free.

The car companies stumbled because they had a high cost structure and they ziged when the market zagged - while the union contributed to the high cost structure, they had nothing do to with changing market conditions.

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

#215

Post by sangnoir »

Spooky23 wrote: post #24

If Good was a unicorn, that definition needs some work. Good was in a downward arc since 2011-2012 imo. How many new customers did they acquire compared to Airwatch/MobileIron/etc?

"Unicorn" is rather well-defined (if somewhat arbitrarily):any valuation north of $1bn qualifies a startup as a unicorn. In some cases - such as this, the $1bn+ valuation is fleeting / illusory.

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

#216

Post by Sikul »

tomasien wrote: post #123
mikekij wrote: post #116

This article highlights the need for two changes in the startup world: 1) We need a different term for the "post-money valuation" that VCs place on a company after fundraising. It is not a valuation in the same way that a public company is valued, due in large part to the preferred stock liquidation preference. Employees hear about a $1B valuation and assume that the IPO or acquisition price will be some multiple of…

I'm not sure we need #2 - we need companies to be better about not forcing their employees to exercise options when they leave the company and we need employees not to exercise options early to minimize the taxes they may have to pay in a windfall. This can simply be executed by every company without any government tax code reform needed.

The law states options lose ISO status 90 days after termination. http://www.mystockoptions.com/faq/index.cfm/catID/36274DB1-D...

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

#217

Post by nostrademons »

ScottBurson wrote: post #206
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…

This post is so good I think you should expand it into a longer blog post and submit it to HN for further discussion. "How to evaluate a startup job" or some such.

I'm tempted to start a blog someday, but my own startup takes precedence (or maybe it doesn't but should, I've been spending far too much time on HN lately), so when I do come up with ideas I often just post them as a HN comment or jot down a first draft in Google Docs for later cleanup. I can make note of this one and maybe come back to it someday, though.

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

#218

Post by gamble »

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.

A company I was working for was acquired and the first thing the new management said in the initial meeting was that they had no interest in owning us. They were only acquiring the company because another office had government contracts they wanted. Also, our equity was worthless now. But don't worry, because no one is getting fired! (Instead everyone resigned within a few months)

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

#219

Post by zaroth »

The biggest problem with employee equity is the taxes. Investors pay cash for their shares, and the transaction is completely tax neutral. When a company sells its own shares in exchange for cash, the IRS does not charge a penny.

But if an established company wants to get equity into the hands of its employees now you have a problem. The way the tax law is written, you have basically 3 choices. Either the employee is paying you "fair market value", or you are giving them options with a strike price at "fair market value" and they can hope for future appreciation. Otherwise, if you try to just give them shares, the IRS needs to be paid, and in cash! So, for example, to simply give 10% of outstanding common shares (an illiquid and diluting asset) to your employees, you would have to pay 4% of your company's "fair market value" in cash to the IRS!

The problem is all in how you define this "fair market value" thing. If you sell some VCs equity along with what's basically a note payable (liquidation preference) and then say the "value" of the company is equal to the total raised divided by the percentage equity stake they received, all while totally ignoring the 'note payable' -- that's complete madness! And it's the world we live it today.

If, alternatively, you first subtract off the top of any amount raised the full amount of any liquidation preferences, then only the remainder was divided by the percentage equity stake to arrive at a valuation... For example, raise $10m for a 10% stake with a $10m preference -- then for tax purposes your common stock valuation should still be $0. Now you can grant however many common stock shares you want all day long, and you don't bleed cash to the IRS in order to do it.

Employees would still have to pay the full load of taxes on any gains when they sell the shares. But this fixes a huge challenge of fairly compensating employees with equity without even dodging any fair share of taxes. Taxes should be due and payable when liquid value is actually received, not before.

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

#220

Post by adrianN »

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…

I'm fairly sure that most car company employees in Germany are represented by a union, the IG Metall. Germany's car industry is still doing fine.
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