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Startups Rejecting Venture Capital

nytimes.com

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Re: Startups Rejecting Venture Capital

#191

Post by zby »

mschuster91 wrote: post #133
ngngngng wrote: post #100

One thing I don't understand about VC money, and i'm not even sure how to phrase this, are the founders of startups able to pay themselves enough that they're set even if the business fails? What's to stop intelligent people from getting funded, paying themselves large salaries, and then not really caring if it fails or not because you're a couple hundred thousand dollars richer?

> What's to stop intelligent people from getting funded, paying themselves large salaries, and then not really caring if it fails or not because you're a couple hundred thousand dollars richer? The same thing that many VC-backed companies like to ignore (Airbnb, Uber as the most egregious): laws and courts. This kind of behavior can be classified as fraud, intentional bankruptcy or securities law violations.

I am not a lawyer but beside some really crazy cases it seems very hard to prove at court.

Re: Startups Rejecting Venture Capital

#192

Post by dmoy »

megaman8 wrote: post #181
hn_throwaway_99 wrote: post #152

Earlier quoted context omitted.

What was your equity compensation at these companies? Given that many (most?) companies refresh equity grants, it's very possible that after a full vesting period (usually 4 years) that you would then have multiple RSU grants vesting every year. With ~150k annually in RSUs, 150-200k base salary and 15-25% bonus is how lots and lots of people attain compensation this high.

It was always worthless Options that could never be sold. One company's options I worked for 6 years, was worth about 4K after taxes, fully vested. Our typical bonuses were 1-2%. A 10% bonus was considered very high.

Well there's your problem. My comp is like 40% publicly tradeable stock.

Also bonus closer to 15-20%.

Re: Startups Rejecting Venture Capital

#193

Post by mi100hael »

woolvalley wrote: post #103
billconan wrote: post #80

Earlier quoted context omitted.

I’m about to join a startup. I just want to do meaningful work and learn new things. I view it as a learning experience. I am so fed up with corporation life. I don’t see a way out other than joining a startup or starting my own. I don’t want to deal with project managers and fill their spreadsheets anymore. The most valuable thing I have is the remaining time I have in this life. Not the number in my bank account.

I work at a big tech co. I almost never fill out any spreadsheet, use JIRA, use a ticketing system that strongly, worry about 'user stories', have 'hurry up and wait' deadlines and so on. Maybe go to another big co?

I wouldn't say all of those things are bad things.

I'd hope even the smallest of startups is thinking about how users interact with their software and organizing those interactions into some sort of prioritized backlog for development.

Re: Startups Rejecting Venture Capital

#194

Post by dawhizkid »

aliston wrote: post #177
dawhizkid wrote: post #64

Earlier quoted context omitted.

Best bet is a growth co that offers RSUs over options and a few years away from IPO. They will generally offer you a premium over what you'd make at a similar level in a public co (to make up for the illiquidity of the stock), and if you believe in the growth story it can pay off big time.

Why RSUs over options? In CA, in particular, if you're at a rocketship, the tax benefits of early exercised options can be huge, whereas with RSUs you're paying 30-40% to the government.

if you have the funds to early exercise, chances are you're joining a company that isn't yet a rocketship. and of course at that stage you can't make the same comparison with what you'd get at FB because your strike price is probably in the pennies and you're getting some small % of the overall company.

Real world example: low to mid level engineers at Uber joining in 2014/2015 at this point have stock worth over $2m over 4 years if Uber successfully IPOs at $100b+. By that time, Uber was already at "scale", offering RSUs (options strike price would be so expensive that it would be a huge risk to exercise), and that $2m is almost definitely more than what you'd otherwise have received in the same amount of time working at Google or FB.

Re: Startups Rejecting Venture Capital

#195

Post by badcede »

x220 wrote: post #108
billconan wrote: post #105

Earlier quoted context omitted.

the startup is in robotics, highly aligned with my interests.

All the startup employees I've talked to work 80 hours a week. Why is robots so important to you that you're willing to accomplish absolutely nothing in at least a few of the important areas of your life such as health and fitness, friendships, romantic relationships, extraneous interests, relaxation, or family?

They're not working 80 hours a week. They're just saying they are, because that's fashionable. Or rather it used to be fashionable. It isn't anymore, so I'm surprised you're still hearing this.

https://news.ycombinator.com/item?id=17003457

Re: Startups Rejecting Venture Capital

#196

Post by jon-wood »

aliston wrote: post #177
dawhizkid wrote: post #64

Earlier quoted context omitted.

Best bet is a growth co that offers RSUs over options and a few years away from IPO. They will generally offer you a premium over what you'd make at a similar level in a public co (to make up for the illiquidity of the stock), and if you believe in the growth story it can pay off big time.

Why RSUs over options? In CA, in particular, if you're at a rocketship, the tax benefits of early exercised options can be huge, whereas with RSUs you're paying 30-40% to the government.

Options are often not worth the paper they’re printed on. For pre-IPO, pre-acquisition, companies there’s no real market for those options. You may well be able to get better tax rates on them, but only if you can actually sell them. Compare that to RSUs which you can exchange the day they vest for actual cash, with a minimum of fuss.

For perspective here I, and everyone I know who have worked for startups as an employee, have never seen a single penny from stock options. Maybe one day I will, but I consider them to be nothing more than a potential pleasant surprise down the line.

Re: Startups Rejecting Venture Capital

#197

Post by ngngngng »

zby wrote: post #188
ngngngng wrote: post #100

One thing I don't understand about VC money, and i'm not even sure how to phrase this, are the founders of startups able to pay themselves enough that they're set even if the business fails? What's to stop intelligent people from getting funded, paying themselves large salaries, and then not really caring if it fails or not because you're a couple hundred thousand dollars richer?

VC try to filter out such founders - but it happens and it is the reason of why VCs want quick outcomes and avoid the middle ground of slow growth profitable companies. They want their companies either go down quickly or grow up enormously also quickly, because the more time it takes the easier it is for the founders to make good life out of it without giving back anything to the investors. This is the principal-agen…

Thanks for this, now I know exactly what I was trying to ask and the answer. I wonder if more companies moving away from VC opens the door for more founders to take advantage of the principal-agent issue.

Re: Startups Rejecting Venture Capital

#198

Post by ddebernardy »

peterlk wrote: post #18

This might be an unpopular opinion, but my view of VC money has changed significantly in the last couple years. Raising money is a failure mode. If you are raising money it is because you failed at something and you need the money to catch yourself. This is more true for software companies than, say hardware companies, but I think is still generally true. For example, if you are raising because you need to hire peopl…

I used to think the way you did ~10 years ago. Little did I know...

Back then I was running a very comfortable business. My main competitor, if there was any, opened shop with over $10M in the bank. It took a few years for things to play out but I never stood a chance.

A half dozen years later I was working on a product that I figured was original at the time. A year in or so, I learned I had two competitors that had raised over $100M to throw around. I stopped on the spot.

Measuring your company on the number of customers it has is meaningless if your possible competitor is raising 100x more than you'll earn in the next year or two.

Focus on profit and quality; yes. But then, unless you're onto something so supremely complex that essentially no one can reproduce it, rush to get money so you can focus on growing your market before someone goes after it while figuring out the former along the way.

Re: Startups Rejecting Venture Capital

#199

Post by tossaccount123 »

eis wrote: post #8

VCs win if enough of their bets make it big enough to offset the ones that go under. Naturally the big hits are few and the ones that fail are numerous. That means the big hits need to be huge and the failures need to have a certain cap. The latter also means you can't run a company for 10 years in slowmo until they get profitable. And the big hits need to be huge which means they need to take over a nice chunk of a…

You're operating under the assumption that most people have their choice of where to work. If you can work at Google or Facebook, then sure, don't go the startup route

On the other hand if you didn't go to an Ivy league you can prove yourself at a startup or advance your career faster before transitioning to a bigger company at a better position

Re: Startups Rejecting Venture Capital

#200

Post by SeanAppleby »

x220 wrote: post #145
SeanAppleby wrote: post #134

Earlier quoted context omitted.

Anecdotally, I worked as a software engineer at a very small (10-15 person) startup that just got acquired by FANG, and I, as well as almost everyone else there, generally worked 40 hour weeks. My relationships were fine, I went to the gym most days, and I worked on a masters in AI on the side, and I also learned a lot more than I would have at large companies since I got to own way more complex and interesting proje…

That's really cool. Any tips on identifying startups with this work-life balance?

I can't really say for sure, but some things that stood out:

People skewed older than I expected for a startup. Most people were in their 30s, and the C suite people were mostly in their 40s. No one other than me was below late 20s, and everyone seemed laid back but competent.

I probed at it during the interview and was told that everyone leaves between 5-6, and that the CEO wanted to go home to his family and didn't expect anyone to do differently. When I asked engineers things about how days and weeks went there they were very direct about how people didn't stay late and didn't dance around the subject.

The CEO had already sold multiple startups while raising his family, so I assumed that he would be able to make the company successful without setting a precedent of burning yourself out and without us being under constant threat of death.

Also yeah, I didn't make nearly what I make now that I'm at FANG. But I ended up in a higher role and with more leverage than would normally be possible at my age and experience level in the new company, and got some cash from the deal, so it's been pretty great. But yeah, if I was just trying to maximize short term dollars earned it wouldn't have made sense to work there, since I couldn't have realistically known that this was the outcome.

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