Amazon bought Eero for $97M and employees still got screwed • Hacker News Board

Re: Amazon bought Eero for $97M and employees still got screwed

#41

Post by kevinpet » Fri, Apr 05, 2019, 11:14 PM UTC

toomuchtodo wrote: post #17

librish wrote: post #13

Earlier 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.

Totally different situation. You can't think of this "getting screwed" as employees qua employees getting screwed. These are common stock holders getting screwed while creditors are made whole and preferred shareholders recoup some of their investment.

Employees who had been stiffed on pay are effectively the first priority creditors. Common stock is last.

Re: Amazon bought Eero for $97M and employees still got screwed

#42

Post by zamfi » Fri, Apr 05, 2019, 11:14 PM UTC

toomuchtodo wrote: post #7

zamfi wrote: post #5

For what it’s worth, this is what a fire sale / acqui-hire looks like for a large-ish hardware company. Were investors and early employees screwed? Sure. But these execs could likely have gotten similar payouts over similar timeframes by simply jumping ship. As for Eero the company? Sounds like it was dead. I don’t want to sound like I’m justifying this kind of behavior. But the main deceptive thing is calling this a…

The issue is founders won regardless of which side the coin landed on and the employees got screwed. I hope stories like this continue to break, and potential startup employees internalize the economic reality of working at a startup.

You make it sound like the founders winning while employees get screwed is specific to acquisitions on crappy terms — it’s not.

For most startups that raise a series A or beyond, founders win no matter what, even if not financially: they build connections with funders and founders, develop experience with management, extend their networks, and get a broader view of their sector. This is true even for companies that just straight go bankrupt.

Emoloyees usually get none of these things (but often get even less of those things at a big company).

Re: Amazon bought Eero for $97M and employees still got screwed

#43

Post by seattle_spring » Fri, Apr 05, 2019, 11:15 PM UTC

orasis wrote: post #31

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.

If you create a company that fails, and then take 100% of an 8 figure bonus while your employees get nothing, then yes your employees got screwed.

Re: Amazon bought Eero for $97M and employees still got screwed

#44

Post by shoo » Fri, Apr 05, 2019, 11:16 PM UTC

seattle_spring wrote: post #33

Johnny555 wrote: post #21

Earlier 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?

the failure of the company may have been largely unrelated to the performance and capability of the executives, and the value they may provide to an acquirer in the future (individually or part of the system of the company). e.g. the outcome is influenced by a variety of factors, the outcome can still be terrible due to factors outside of control even if the decisions and execution by the people involved were flawless.

on the other hand, you can say a similar thing about non-executive employees. it is perhaps just a question of how essential or replaceable they are perceived as being.

also, the executives will likely have a lot more power than employees when negotiating a deal with a possible acquirer and major investors, so it isn't terribly surprising that they cut a deal that favours the powerful parties involved in the negotiation, at the cost of less powerful parties such as employees. this isn't to argue it is the right thing to do, it is to argue that it isn't surprising when it happens.

Re: Amazon bought Eero for $97M and employees still got screwed

#45

Post by [deleted] » Fri, Apr 05, 2019, 11:16 PM UTC

bb88 wrote: post #32

aetherson wrote: post #15

I 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 l…

[deleted]

Re: Amazon bought Eero for $97M and employees still got screwed

#46

Post by Johnny555 » Fri, Apr 05, 2019, 11:18 PM UTC

seattle_spring wrote: post #33

Johnny555 wrote: post #21

Earlier 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?

They don't always, at least not all of them.

Re: Amazon bought Eero for $97M and employees still got screwed

#47

Post by nytesky » Fri, Apr 05, 2019, 11:19 PM UTC

aetherson wrote: post #15

I 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…

Honestly confused: why do you want to pay bonuses to retain execs of a failed company? Weren’t they responsible for that failure?

Re: Amazon bought Eero for $97M and employees still got screwed

#48

Post by wmf » Fri, Apr 05, 2019, 11:21 PM UTC

baoha wrote: post #39

I 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?

LIFO is designed to prevent Ponzification (for lack of a better term). Imagine if earlier investors could just vote to issue dividends after a later round, effectively taking money from later investors that was supposed to fund company operations and putting in their own pockets.

Re: Amazon bought Eero for $97M and employees still got screwed

#49

Post by wutbrodo » Fri, Apr 05, 2019, 11:21 PM UTC

bb88 wrote: post #32

aetherson wrote: post #15

I 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 l…

Investors lost money on the deal overall, right? While employees got paid a salary for however many years they were there? By your framing, employees get "preferential treatment" with respect to salary.

This isn't just theoretical: my current job is at a place who's known to be cash-heavy (ie equity-light) with their offers, relative to competitors. This suits me just fine, since I'm not sure enough about the company's ultimate success, or rather, not willing to deal with the risk and illiquidity to a much higher degree than I already do. As you can imagine, for a given level of compensation, equity and cash play against each other, and I'm getting much more in cash than my friend with equity-heavy comp packages do.

Equity and salary as forms of compensation each have advantages and disadvantages, and it really doesn't make any more sense to look only at the advantages of equity-heavy packages (priority during liquidation) than it would to complain that employees getting a salary was unfair to investors.

Re: Amazon bought Eero for $97M and employees still got screwed

#50

Post by giobox » Fri, Apr 05, 2019, 11:24 PM UTC

jonathanyc wrote: post #12

> Eero may have been first to mesh WiFi, but competition came fast. Multiple companies including Luma and NetGear launched similar products in the next year. Huh? Meraki had a mesh WiFi product out at least five years before this. How am I supposed to trust the rest of the article if the author can’t do basic fact checking?

This assumes we can even agree on the precise meaning of “mesh” given it isn’t a widespread technical standard. I typically can’t “mesh” Wifi products from different manufacturers that supposedly support “mesh”, for example.

There are several wireless networking products that offered “mesh-like” features before Eero, often under names other than “mesh”, and many of them failed to package and market the benefit of the feature as well as Eero did. Eero deserve credit for popularising the concept with ordinary consumers, and now “mesh” is a marketing buzzword as well as a feature everyone wants in on.

I’d argue mesh is still today really a “markitecture” concept more than anything else, with massive differences in implementation.

Also, I’m happy to give the author the benefit of the doubt, given the context of the article is clearly consumer level networking gear.