Palantir Buyback Plan Shows Need for New Silicon Valley Pay System • Hacker News Board

Re: Palantir Buyback Plan Shows Need for New Silicon Valley Pay System

#21

Post by vonklaus » Thu, Jun 30, 2016, 3:26 AM UTC

bane wrote: post #10

vonklaus wrote: post #7

I can't find the source so this is from memory; but Karp or Theil said they wouldn't ever go public and essentially can't because they are essentially a DoD contractor. While other companies notably do similar things and other contractors are public, Palantir provides a unique platform to some extent and their customer base, much of their technology and operations are secret. It is known they will not likely go publi…

All is not friendly in the shire, remember this post from a few years ago? https://www.quora.com/When-will-Palantir-go-public

In his response on quora he said he:

* left palantir in 09

* is a major shareholder

* left after he "had successfully replaced myself in both parts of the company we'd created and had fully vested".

So I am not going to speculate whether he was pushed out, but it sounds like he has much less latitude for steering the company. Especially when you consider the power of the other founders and the initial VC capital that was put in. So this (claims of palantir going public) are what I would expect a major shareholder without control of the company to say. It is effectively the only way to put pressure on them.

Even if this is wildly incorrect, and it quite possibly is, that comment was made several years after he had little more than an advisory role at palantir.

https://www.quora.com/Why-did-Joe-Lonsdale-leave-Palantir

Re: Palantir Buyback Plan Shows Need for New Silicon Valley Pay System

#22

Post by argonaut » Thu, Jun 30, 2016, 3:33 AM UTC

jegutman wrote: post #20

sverige wrote: post #6

Earlier quoted context omitted.

Indeed it is. I particularly like the 'no longer contributing to the business' part, as if the work done by the original employees isn't what the current business was built on, at a discounted rate if their stock options are worthless. And as if the stock options were the only reason they're having trouble attracting quality talent. Stock options seem attractive as a form of compensation, since the hope is that you'r…

I actually disagree with the 10yr time frame (although will admit it has its merits), but also agree with some of your logic. I just think that the 10yr "fix" solves some problems and creates others. I think this issue is that you should: A) not rob former employees of accrued stock value B) probably try to somewhat reduce incentives to leave if the company is going to continue to do well There are a few problems I s…

There's a huge tax hit. Giving shares is taxed as ordinary income.

Re: Palantir Buyback Plan Shows Need for New Silicon Valley Pay System

#23

Post by argonaut » Thu, Jun 30, 2016, 3:35 AM UTC

codys wrote: post #8

Palantir's official reason of "improving employee moral" doesn't seem to really mesh with the conditions they are imposing on the buy-back: > [...] employees who sell their shares agree agree that they will not compete with Palantir for 12 months or solicit any Palantir employees during that time [...] [and] agree to a nondisclosure arrangement that forbids them from even talking about the repurchase and waive any cl…

Given that the buyback price is above market price, I don't see a problem with this. Palantir is compensating you for signing a noncompete/NDA. If you don't want to sign those things, you are free to sell on the private markets for less than what Palantir offers you.

Re: Palantir Buyback Plan Shows Need for New Silicon Valley Pay System

#24

Post by lbatx » Thu, Jun 30, 2016, 3:36 AM UTC

sverige wrote: post #6

birken wrote: post #2

Boy this article is a very friendly interpretation of Scott Kupor's blog post. From NYTimes: > He [Scott Kupor] also suggests a longer period for employees to exercise options after they leave, up to 10 years. That figure is endorsed by Y Combinator in an argument that any lesser period is unfair to employees. Makes it seem like Scott Kupor is on the leading edge of caring about employees, in agreement with YC (which…

Indeed it is. I particularly like the 'no longer contributing to the business' part, as if the work done by the original employees isn't what the current business was built on, at a discounted rate if their stock options are worthless. And as if the stock options were the only reason they're having trouble attracting quality talent. Stock options seem attractive as a form of compensation, since the hope is that you'r…

Exactly. Plus the phrasing of the criticism is so odd: "no longer contributing to the business." Let's all accept that as true, so allowing original employees' to purchase for a longer time period simply preserves their ability to be rewarded for their work. That's a good thing, not a bad thing. Plus, the dilution argument is pretty weak: the employee pool is usually 10-20%. So investors get diluted by 10%. Whoopee.

Re: Palantir Buyback Plan Shows Need for New Silicon Valley Pay System

#25

Post by solidsnack9000 » Thu, Jun 30, 2016, 3:44 AM UTC

> Mr. Kupor notes that extending the exercise time for former employees makes their options more valuable at the expense of employees and investors. (It does so because former employees have a longer time to exercise their options and dilute the other shareholders.)

This is simply a falsehood. Exercises of options of do not dilute shareholders -- new issuances do. Former employees do not issue new shares.

Re: Palantir Buyback Plan Shows Need for New Silicon Valley Pay System

#26

Post by ridgeguy » Thu, Jun 30, 2016, 3:59 AM UTC

codys wrote: post #8

Palantir's official reason of "improving employee moral" doesn't seem to really mesh with the conditions they are imposing on the buy-back: > [...] employees who sell their shares agree agree that they will not compete with Palantir for 12 months or solicit any Palantir employees during that time [...] [and] agree to a nondisclosure arrangement that forbids them from even talking about the repurchase and waive any cl…

If Palantir is a CA business entity (I didn't check, maybe it's a DE corp), its noncompete should be per se invalid (= automatically void) in CA. There are only a few circumstances in which noncompetition agreements are valid in CA, and this doesn't seem to be one of them. See section 2.1.2 in:

https://en.wikipedia.org/wiki/Non-compete_clause#Exceptions_...

Palantir's attorneys surely can't have missed this, but I don't see an alternative.

Re: Palantir Buyback Plan Shows Need for New Silicon Valley Pay System

#27

Post by CPLX » Thu, Jun 30, 2016, 4:10 AM UTC

sverige wrote: post #6

birken wrote: post #2

Boy this article is a very friendly interpretation of Scott Kupor's blog post. From NYTimes: > He [Scott Kupor] also suggests a longer period for employees to exercise options after they leave, up to 10 years. That figure is endorsed by Y Combinator in an argument that any lesser period is unfair to employees. Makes it seem like Scott Kupor is on the leading edge of caring about employees, in agreement with YC (which…

Indeed it is. I particularly like the 'no longer contributing to the business' part, as if the work done by the original employees isn't what the current business was built on, at a discounted rate if their stock options are worthless. And as if the stock options were the only reason they're having trouble attracting quality talent. Stock options seem attractive as a form of compensation, since the hope is that you'r…

Indeed. Other people no longer contributing to the business include the VC's and angel investors by the same logic.

Either the former employees were paid full market rate salaries during their employment, in which case the company colossally fucked up by giving shares to them for literally no reason, or those former employees made a capital contribution just like any other investor.

Re: Palantir Buyback Plan Shows Need for New Silicon Valley Pay System

#28

Post by CPLX » Thu, Jun 30, 2016, 4:14 AM UTC

vonklaus wrote: post #7

I can't find the source so this is from memory; but Karp or Theil said they wouldn't ever go public and essentially can't because they are essentially a DoD contractor. While other companies notably do similar things and other contractors are public, Palantir provides a unique platform to some extent and their customer base, much of their technology and operations are secret. It is known they will not likely go publi…

After seeing that name for probably half a dozen years, today for the first time I realized it's probably intended to be a cute mashup of the words "incubate" and "intel"

Go figure.

Re: Palantir Buyback Plan Shows Need for New Silicon Valley Pay System

#29

Post by argonaut » Thu, Jun 30, 2016, 4:23 AM UTC

ridgeguy wrote: post #26

codys wrote: post #8

Palantir's official reason of "improving employee moral" doesn't seem to really mesh with the conditions they are imposing on the buy-back: > [...] employees who sell their shares agree agree that they will not compete with Palantir for 12 months or solicit any Palantir employees during that time [...] [and] agree to a nondisclosure arrangement that forbids them from even talking about the repurchase and waive any cl…

If Palantir is a CA business entity (I didn't check, maybe it's a DE corp), its noncompete should be per se invalid (= automatically void) in CA. There are only a few circumstances in which noncompetition agreements are valid in CA, and this doesn't seem to be one of them. See section 2.1.2 in: https://en.wikipedia.org/wiki/Non-compete_clause#Exceptions_... Palantir's attorneys surely can't have missed this, but I do…

This is one of the exceptions to noncompetes in California - when you sell your interest in a company. They are a Delaware corp. They have tons of employees outside of California (New York?).

Re: Palantir Buyback Plan Shows Need for New Silicon Valley Pay System

#30

Post by ChuckMcM » Thu, Jun 30, 2016, 4:56 AM UTC

I could easily see the situation evolving that "unicorns" would either have to provide liquidity for options or pay over market rates. An engineer at FB or Google that getting paid in Restricted Stock units in addition to their salary sees it as "extra pay" and an employee who sees a company that will never let them sell options as not a smart place to work.

It does open up some creative financing though. Imagine a "common only" startup, one where every share bought by investors or earned as an option had the same rights and liquidation preference. Or my favorite[1] starting a company with a fixed 5 billion shares all at a par value of $1 each. Then only pay your employee in shares, only get investments by selling shares to investors.

[1] I call it a favorite since we joked at a party once that if you did this, and convinced a friend to buy a hundred shares for $100 you could call yourself a self made billionaire! And be completely truthful.