Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

FanDuel founders to receive no cash from sale to Paddy Power Betfair

heraldscotland.com

Post reply on HN
Print view View original

81–90 of 187 posts

Re: FanDuel founders to receive no cash from sale to Paddy Power Betfair

#81

Post by oh_sigh »

yummybear wrote: post #61
WheelsAtLarge wrote: post #53

Just because you founded a company, it does not mean you get a cut of the final sale. Starting a company is hard. You can struggle to make it profitable, never get there, and end up deeply in debt years later. Fanduel became relevant mainly because of the marketing it was able to purchase without that it would have fallen by the wayside. You need lots of money for that. The founders must have needed cash at a critica…

Well yeah, legally - financially. Still, it doesn't seem "fair".

The question would be - how much compensation did they get out of the company before they left?

Re: FanDuel founders to receive no cash from sale to Paddy Power Betfair

#82

Post by olliej »

I will reiterate my prior statements: if you take a job that pays you (in part) in stock, with no path to sell it pre-IPO, you should never accept anything other than the highest class of preferred stock. If the company is unwilling to give you that, then you should assume that their, or their VC, long term plan is to screw you.

At this point there have been enough cases where startups have clawed back the shares the issues, never gone public even when they’ve “made it” so you can’t sell your stock, or in this case outright stolen from their employees by changing the company charter to retroactively devalue all the stock that they used to pay their employees.

[edit: charter is not spelled “charta”. I’d swear I used to be able to spell...]

Re: FanDuel founders to receive no cash from sale to Paddy Power Betfair

#83

Post by oh_sigh »

olliej wrote: post #78
Bahamut wrote: post #11

Stories like this seem to validate that people should choose real liquid equity of public companies over the paper equity of startups when considering employment.

I made a comment along those lines on HN a few years ago, and was told in no uncertain terms that I was unrealistic in expecting to be paid my worth unless I accepted payment in lottery tickets/stock-with-no-guaranteed-conversion-clause. This article further affirms my position: it’s not just founders that got no payout, the employees didn’t either. Cool beans, you work your ass off for a company at below market rate…

Selling for half a billion means nothing if you've taken hundreds of millions in outside funding

Re: FanDuel founders to receive no cash from sale to Paddy Power Betfair

#84

Post by Drdrdrq »

evgen wrote: post #75
yummybear wrote: post #61

Earlier quoted context omitted.

Well yeah, legally - financially. Still, it doesn't seem "fair".

It may not seem 'fair', but the reality is that the company that the founders had equity in died in the 2015 round of financing. It was replaced with a company which needed to make a big bet (lots of ad spending) to stay strong in this particular market and the bet did not pay off. If you take $200M+ of financing then the people writing the check are expecting you to exit no lower than $1.5B -- ~$500M is, to use the…

If it doesn't seem fair, it usually isn't. Maybe not even if founders knew this could happen and accepted it willingly (which I doubt they did). This is just the more powerful and experienced squeezing out the weaker ones to grab as much profit as possible.

Re: FanDuel founders to receive no cash from sale to Paddy Power Betfair

#85

Post by bsder »

gkoberger wrote: post #50
barbegal wrote: post #34

Earlier quoted context omitted.

The new CEO had previously been CFO since 2014. If his actions turned an unsalable company into a company that could be sold for $465 million then I'd say he's probably worth the $11 million. And the founding CEO surely drew a reasonable salary despite the company making a loss.

Yeah, to be clear, I'm not saying anyone did anything wrong.

Possibly, but how many more of these deals will it take until the employee pool goes away permanently?

If you have the skills to be good at a startup, you can go to one of the big boys for a lot of cash.

Re: FanDuel founders to receive no cash from sale to Paddy Power Betfair

#86

Post by JumpCrisscross »

olliej wrote: post #82

I will reiterate my prior statements: if you take a job that pays you (in part) in stock, with no path to sell it pre-IPO, you should never accept anything other than the highest class of preferred stock. If the company is unwilling to give you that, then you should assume that their, or their VC, long term plan is to screw you. At this point there have been enough cases where startups have clawed back the shares the…

> you should never accept anything other than the highest class of preferred stock. If the company is unwilling to give you that, then you should assume that their, or their VC, long term plan is to screw you

If this is your mentality, don't work for a start-up.

Employees don't get preferred stock. Founders don't get preferred stock. Your downside protection is your cash salary. Asking for preference as a non-capital contributing stakeholder conveys a fundamental mis-understanding of start-up financing's tradeoffs. (I would be highly suspect of a company throwing preferred stock at employees. It smells like something between incompetence and a scam.)

Re: FanDuel founders to receive no cash from sale to Paddy Power Betfair

#87

Post by deltateam »

Bahamut wrote: post #11

Stories like this seem to validate that people should choose real liquid equity of public companies over the paper equity of startups when considering employment.

its why people choose ICOs: immediate liquidity with the biggest "controversy" being that VCs get to buy at a lower price.

this is distinct from a decade+ long private equity drama, only to find out that you, all employees and even the founders get nothing from the exit event. This is where getting to the exit is wrought with landmines, just to find out your particular exit is horrible but a fairly standard affair.

now that there is competition lets talk about what we can do to make both markets better

Re: FanDuel founders to receive no cash from sale to Paddy Power Betfair

#88

Post by JumpCrisscross »

paulsutter wrote: post #59
JumpCrisscross wrote: post #12

Earlier quoted context omitted.

> Why did they accept such clauses? They're super standard and for the most part make sense. Liquidation preferences say if your firm is worth $90 million, and I invest $10 million, I get my $10 million back before you ( i.e. the common stock holder) get anything. If the firm sells for $200 million, I get $20 million and doubled my investment. If the firm sells for $20 million, I get $10 million back and the common s…

You're describing participating preferred (that is, investors get paid out once as preferred and again after conversion to common). A liquidation preference is more common than participating, where the preferred investors get paid out (for example) at least 2X their investment (can be any multiplier, the highest I ever heard was 5X). Most investments in Silicon Valley are clean deals, with a liquidation preference of…

> You're describing participating preferred

I'm describing non-participating preferred, which as you point out is far more common.

Here's how it would go with participating preferred. As before, I invest $10 million at a $90 million pre-money valuation. If the firm sells for $200 million, first I get back my $10 million. Then I convert to common and get 10% of the remaining $190 million, or $19 million. Before I got $20 million (10% of $200 million). Now I get $29 million. (In the down round scenario, the outcome is the same.) Participating preferred is--nowadays--increasingly confined to distressed finance.

TL; DR Participating preferred gets to have its cake and eat it too. Non-participating preferred must choose between (a) its preference or (b) converting to common.

Re: FanDuel founders to receive no cash from sale to Paddy Power Betfair

#89

Post by [deleted] »

startupdiscuss wrote: post #30

Quick math here: “the aggregate value being paid for FanDuel “is approximately $465m”.” “2014 and 2015 respectively led $70 million and $275m” (345 million) “Mr King is expected to receive a payment of up to $11.3m as a result of the Paddy Power Betfair deal. The firm’s current chief technology officer Robin Spira is due to make up to $3.5m, its legal officer Christian Genetski stands to make up to $6.2m, and it chie…

[deleted]

Re: FanDuel founders to receive no cash from sale to Paddy Power Betfair

#90

Post by icedchai »

olliej wrote: post #78
Bahamut wrote: post #11

Stories like this seem to validate that people should choose real liquid equity of public companies over the paper equity of startups when considering employment.

I made a comment along those lines on HN a few years ago, and was told in no uncertain terms that I was unrealistic in expecting to be paid my worth unless I accepted payment in lottery tickets/stock-with-no-guaranteed-conversion-clause. This article further affirms my position: it’s not just founders that got no payout, the employees didn’t either. Cool beans, you work your ass off for a company at below market rate…

It’s charter, by the way... not charta.
Post reply on HN