How did the employees get screwed? Hardware is expensive and the company was sold for basically pennies. If anything is screwed here is people's expectations of how employment works.
Amazon bought Eero for $97M and employees still got screwed
31–40 of 93 posts
Re: Amazon bought Eero for $97M and employees still got screwed
#32I don't understand what people expect in this kind of situation. The company was bought for around the amount of money that they took in investment, or less. Why would the employees get anything? If preference didn't exist, and I could take $10M in investment at $100M in valuation, and then the next day liquidate the company, return $1M, and keep $9M, obviously that would just mean that nobody would invest in startup…
There's this idea that everyone is in the same boat together, for better or worse. Especially in a startup. And to see some get huge bonuses while others see large losses -- especially in the same company -- doesn't seem entirely fair.
> and I could take $10M in investment at $100M in valuation, and then the next day liquidate the company
True, but that's the CEO and board that can do that. The employees can't just liquidate the company.
The issue is that the investors and management get preferential treatment first. But the employees -- the ones that execute the corporate vision -- get shafted.
Re: Amazon bought Eero for $97M and employees still got screwed
#33I don't understand what people expect in this kind of situation. The company was bought for around the amount of money that they took in investment, or less. Why would the employees get anything? If preference didn't exist, and I could take $10M in investment at $100M in valuation, and then the next day liquidate the company, return $1M, and keep $9M, obviously that would just mean that nobody would invest in startup…
I had the same thought -- Amazon bought the assets of a failing company. The failure may not be the fault of the employees, but employees almost always lose when a company fails.
Why do the executives still succeed when a company fails?
Re: Amazon bought Eero for $97M and employees still got screwed
#34I don't understand what people expect in this kind of situation. The company was bought for around the amount of money that they took in investment, or less. Why would the employees get anything? If preference didn't exist, and I could take $10M in investment at $100M in valuation, and then the next day liquidate the company, return $1M, and keep $9M, obviously that would just mean that nobody would invest in startup…
> Final sale price was $97 million.
> Crunchbase reports that Eero took $90 million in venture capital (the Wall Street Journal put the number at $100 million). PitchBook, a highly accurate source of VC information, claimed a final $40 million Series D fundraising round from December 2017 brought that number up to $138 million. Eero declined to comment, instead pointing to a March 12 blog post confirming the sale.
> An additional $10 million debt line Eero took out brings the total money put into the company at $148 million — 150 percent of the Amazon sale price.
> after transaction costs and debt, the actual price will be closer to $54.6 million. > Amazon is covering around $40 million of the debt that Eero owes. Ex-employees believe the debt to be from hardware manufacturing costs
> Eero’s Series D investors, led by Qualcomm, will recoup 84 percent of their investments. > seed round and Series A-C investors will all get back 31 cents on the dollar.
Investors are taking a 16%-69% loss on invested capital. You're not going to make any money by exercising call options unless the strike price is absurdly low for some reason.
The employees might have done okay if they were holding put options on the company, but alas, one's employer probably isn't going to offer one put options as some kind of incentive...
Re: Amazon bought Eero for $97M and employees still got screwed
#35Re: Amazon bought Eero for $97M and employees still got screwed
#36Again, if your offer includes a stock grant/option/whatever stake that doesn't have the same priority as those owned by the executive team then you need to treat it as having zero value.
If a company believe its stock is sufficiently valuable to be worth being used as compensation then it shouldn't feel the need to give pre-IPO employees low-priority "equity".
I recognize people argue that you're taking a lower salary because the potential return, but it fails to acknowledge that there is additional risk and cost to the employee:
* the potential to suddenly have no employment or insurance
* vastly inferior insurance and benefits
* significantly reduced job mobility - often this "equity" is surrendered when you leave a company, but that equity is ostensibly to make up for a reduced salary. It's earned income that can be stolen from people who earned it.
The first also has a future cost as well, because subsequent salary negotiations will happen with your prospective employer knowing that you need your job.
So rather than trying to pretend that "equity" justifies a lower salary, employers need to recognize that equity is being granted to compensate for the risk their employees are taking on. The more risky the stock, the more stock needs to be granted - so if the equity is structured to put employees at the end of the spectrum of exercisable equity needs to represent vastly more of the post-investor-payouts equity.
Re: Amazon bought Eero for $97M and employees still got screwed
#37Earlier quoted context omitted.
I don't think that's the right way to think about it. Everyone got "screwed" on equity, including the founders. Separately Amazon decided to set up packages for employees they thought were to valuable to lose. If an early employee was valuable enough they were probably included in the 10 who received it.
I have been involved in M&A activity, and when we (owners) bought a failed competitor for clients and assets, we wiped out the owners (who had misstated some financial factors of importance) and made the employees whole (who had all been stiffed on pay). We didn’t have to, but it was the right thing to do . Everyone has different morals and ethics I suppose.
But if you're the guy doing M&A at Amazon how do you sell that to your boss, who has to sell it to Bezos, who at the end of the day has to sell it to stakeholders.
Re: Amazon bought Eero for $97M and employees still got screwed
#38It just shows that the real risk takers in a startup are not the founders but the early employees.
Re: Amazon bought Eero for $97M and employees still got screwed
#39I still don't understand why the last investor is the first one to be able to cash out. Is this common in startup?
I was thinking the first investor is the one that took the big risk investing in the company, shouldn't they have the rights to cash out first when there is a liquidation event?
Re: Amazon bought Eero for $97M and employees still got screwed
#40Earlier quoted context omitted.
I had the same thought -- Amazon bought the assets of a failing company. The failure may not be the fault of the employees, but employees almost always lose when a company fails.
Why do the executives still succeed when a company fails?
possibly because the people who acquired the company saw some quality in the executives that they judged to be positive, even in the face of failure.
Failure isn't really a great measure to judge individual performance or character. Companies can fail even with good executives and catch a lucky break with awful ones. In the technology space in particular were failure is very common, and to a degree encouraged.