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Earlier quoted context omitted.
> In this timeline, employees got a few more years of cash salaries. I think most of their employees would have easily been able to get jobs elsewhere.
That's really a toxic assumption to make.
I'm not disagreeing with your statement, but "toxic" is a strong word and I'd like for you to elaborate.
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Okay, however, bear in mind that selling to investors a riskier class of equity than is their custom, will likely meet with lower valuations. In business, lower risk = more money, and vice versa.
Lower valuations also mean less extreme growth expectations in order for the founders and employees to get a successful exit. This may be a good tradeoff for a business with a long enough pre-investment runway, where the VC money is merely an optional accelerant, as the post you're replying to advocates.
OTOH, it would be very interesting to see how everything comes out in the wash. Suppose one needed to raise a hard floor of $5mm: a VC that might take 10% ownership for 1x preferred and a board seat, well, what will they demand when it's strictly common on offer for that $5mm--20%, 30%? Playing along with the idea of making it big, wouldn't it make more sense not to give up so much equity?
TL; DR FanDuel was sold for less than its liquidation preference, so common stock holders got nothing.
I'm curious - what happens to the current set of employees in this situation? Presumably some of them have vested stock, and it just got zeroed out. If there's ever a good time to ragequit, this seems like the appropriate hour.
Earlier quoted context omitted.
I'm curious - what happens to the current set of employees in this situation? Presumably some of them have vested stock, and it just got zeroed out. If there's ever a good time to ragequit, this seems like the appropriate hour.
Stock is worth zero, but good employees will get retention packages to stick around with the new company.
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.
That said, if one has the choice between a startup job vs. one with equity with real value, they should only consider taking any startup comp package with the intention of being fully okay with their decision if the equity goes to zero. And note that this is a decision you can reevaluate periodically.
Read https://github.com/jlevy/og-equity-compensation and ask all of the questions. Probably ask a couple more, like about liquidation preferences and conversion of vested ISOs to NSOs with long expiration if you leave before liquidity.
Earlier quoted context omitted.
I'm curious - what happens to the current set of employees in this situation? Presumably some of them have vested stock, and it just got zeroed out. If there's ever a good time to ragequit, this seems like the appropriate hour.
Stock is worth zero, but good employees will get retention packages to stick around with the new company.
Maybe. Often acquisitions are just for the customer list. Betfair is located in London (and Dublin for tax purposes IIRC), it has no office in Scotland.
Earlier quoted context omitted.
That's really a toxic assumption to make.
What do you mean by that? I'm not disagreeing with your statement, but "toxic" is a strong word and I'd like for you to elaborate.
In some ways, this story sheds light on the philosophical differences between private equity firms like KKR [1] and venture capital. At least when it comes to the fat parts of the Bell curve (and ignoring outliers), private equity investments tend to be premised on gaining control of the companies accepting investment and seek return on each investment. The fat part of the venture capital investment Bell curve (and i…
'Private Equity' and 'Founder' are terms that shouldn't really even cross. PE wants to incentivize leadership, but the concept of 'founder' and all that means, is somewhat beyond. That said - KKR etc. definitely want to incentivize company leaders to make money, and might likely put in significant bonuses for CEO's in the event of an acquisition. But yes ... PE entities may care less about this. But note that it will…
https://en.wikipedia.org/wiki/Corporate_raid
Wikipedia has a nice overview of the topic of this thread:
https://en.wikipedia.org/wiki/History_of_private_equity_and_...
and of course KKR was the most famous corporate raider in America:
https://en.wikipedia.org/wiki/Barbarians_at_the_Gate:_The_Fa...
Earlier quoted context omitted.
'Private Equity' and 'Founder' are terms that shouldn't really even cross. PE wants to incentivize leadership, but the concept of 'founder' and all that means, is somewhat beyond. That said - KKR etc. definitely want to incentivize company leaders to make money, and might likely put in significant bonuses for CEO's in the event of an acquisition. But yes ... PE entities may care less about this. But note that it will…
Not necessarily. One pattern of PE is to buy a company, make the company borrow money, spend that money on the PE firm's other interests, and then declare bankruptcy to discharge debts. https://en.wikipedia.org/wiki/Corporate_raid Wikipedia has a nice overview of the topic of this thread: https://en.wikipedia.org/wiki/History_of_private_equity_and_... and of course KKR was the most famous corporate raider in America:…
And yes - as part of the acquisition, it's usually loaded up with debt, which is the weird reason why a company should always take on debt (if they are cash flush, then 'raiders' can borrow money to buy the company and load up up with debt since there is room for it).
If you mean 'reputation' - well - yes, if you sell to a known 'raider' well, then they'll do as they please.
As far as 'spending on their own interests' - well that actually can create problems as minority shareholders can sue.
Earlier quoted context omitted.
Stock is worth zero, but good employees will get retention packages to stick around with the new company.
but good employees will get retention packages to stick around with the new company Maybe. Often acquisitions are just for the customer list. Betfair is located in London (and Dublin for tax purposes IIRC), it has no office in Scotland.