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

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

#81

Post by xkcd-sucks »

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…

What are the chances that the execs were actually forthcoming with details of the company's investors, valuation, and acquisition? Most likely, the leadership knew the situation for quite a while and strung along employees with vague talk of a big acquisition, while deflecting specific questions. And of course naive new hires were told that the leadership's financial success was tied to the success of the company and that the leadership did not have a conflict of interest with regard to value of employee stock options. So the whole affair just seems very unethical.

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

#82

Post by projectileboy »

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…

You’re not wrong. Then just don’t start a startup and expect me to buy your bullshit that I should take a job and work 80 hour weeks because one day there will be a big payout.

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

#83

Post by librish »

olliej wrote: post #69
librish wrote: post #58

Earlier quoted context omitted.

I don't understand why you think such black-and-white thinking is needed. The correct thing should be to appropriately discount the options to account for these things instead of saying it's zero. Sure, walking in with the naive approach will lead most people to vastly overvalue options, but I feel like the counter movement you're championing here acts as if no early employee has ever earned money on options no matte…

As the amount of risk in the equity increases, the expected value of the equity reduces to zero. So anything that reduces the priority of employee equity vs that of the original employees and investors implicitly increases the risk in addition to the explicit reduction in face value. The real problem to me has been the absurd notion that someone explicitly investing cash is somehow investing more on a dollar for doll…

That all startup employees work 80 hour weeks for 50% below market salary is not something I think is true at all. I would like to see a source on that start-up employees (not founders) work significantly longer hours than other tech workers in the area. While I understand your mental math I also think it's a weird way to think about things, because it is very clear going in that working extra hours is not going to give you any extra stake in the company, so any employee who chooses to do so are obviously doing it for other reasons.

Finally, $2M (which is for 10 employees in your example, not 1) would be considered a small round today.

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

#85

Post by wutbrodo »

bb88 wrote: post #56
wutbrodo wrote: post #49

Earlier quoted context omitted.

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…

> By your framing, employees get "preferential treatment" with respect to salary. Right because most people can't live on a 4 or 5 year option wait alone. And the likelihood of a company getting only rich employees to work for them seems small. If that were true, then you'd be right.

What? How does what you're saying contradict my point at all, or make me "not right" in the case of not-all-rich employees? You're just explaining the reason that investors choose equity and employees choose salary, which has nothing to do with my point.

Employees get cash flow heavy comp over equity, which is better during the company's existence and worse during its liquidation. Investors get equity heavy comp packages, which is worse during the company's existence (no cash flow) and better during its existence.

My complaint about the GP comment was that looking at one half of a tradeoff is obviously going to make it look better, just like saying that I'm ripping off Amazon at the time of delivery because I don't pay anything at that moment, while ignoring the fact that I paid them earlier. Your comment is a complete non sequitur

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

#86

Post by mamon »

librish wrote: post #53
munk-a wrote: post #18

Earlier quoted context omitted.

I am so confused, were the owners just idiots about judging the value of the sale? There is no reason that all the stockholders should have voted to approve this sale unless they were going to walk away with something to pad their pockets so... did some majority shareholder sell out to amazon and get some separate remuneration? I feel like that should definitely be illegal. Edit: Oh, so the founders assumed they'd be…

No, the company was failing and the board decided that this was the best way for the investors to recuperate some of their lost capital. If they waiting longer they would've had to sell for less or go bankrupt which would have lost everyone even more money. (Obviously employees were already at $0 so they couldn't lose more).

As someone else already noted in this thread: employees were the only ones who actually made money on this company, in form of their salary received over the years. It's only the equity part of their compensation that went to $0.

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

#87

Post by rhizome »

yjftsjthsd-h wrote: post #55
rhizome wrote: post #52

Earlier quoted context omitted.

> Why would the employees get anything? This may be the most tone-deaf thing I've read in a long-ass time. BECAUSE THEY DID THE (...) WORK!

Yes, of course they did work. For which they got a salary. Of course, if they worked for equity rather than cash, that was their call and one would expect them to bear the outcome.

I'll add to my previous: everybody at the company works for a salary. In the US it's essentially illegal to volunteer for an organization that is not some kind of 501(c), and in California it's illegal not to pay everybody at least minimum wage, so let's stop joking: nobody is working for free, and any employee taking minimum wage (or $1/yr) is wealthy already.

I don't have patience for the, "oh they had a salary so they're whole." BS, everybody is working to make things better, and if the leadership of the company is not helping their employees get a chunk of the back-end then they are bad bosses. To me it's ethically related to not tipping in a restaurant.

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

#88

Post by hjk05 »

Calling it “still got screwed” is a bit dishonest. The story goes “a company got sold at a huge loss” and sure execs and founders still made some money even though it was at a loss, but apparently Amazon feels that these people are a large part of the remaining value in the company, so without those bonuses to retain key employees, the company wouldn’t even have gotten the 97Mil.

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

#89

Post by hjk05 »

nytesky wrote: post #47
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?

Sports teams buy pro athletes from teams that loose all the time.

Why? Because the players themselves are world class even though their team is loosing. One player on their own is never enough to secure victory for the entire team. So you can’t inversly put the fault of a loose entirely on every individual player.

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

#90

Post by zaphirplane »

rhizome wrote: post #87
yjftsjthsd-h wrote: post #55

Earlier quoted context omitted.

Yes, of course they did work. For which they got a salary. Of course, if they worked for equity rather than cash, that was their call and one would expect them to bear the outcome.

I'll add to my previous: everybody at the company works for a salary. In the US it's essentially illegal to volunteer for an organization that is not some kind of 501(c), and in California it's illegal not to pay everybody at least minimum wage, so let's stop joking: nobody is working for free, and any employee taking minimum wage (or $1/yr) is wealthy already. I don't have patience for the, "oh they had a salary so…

Unpaid Interns are one exception
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