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At Booming Toptal, No Stock for Employees or Investors

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Re: At Booming Toptal, No Stock for Employees or Investors

#51

Post by staticautomatic »

jameslk wrote: post #30
coupdejarnac wrote: post #24

Is there anything about Toptal that isn't scummy?

Would love to know what you find scummy about them. I've been a freelancer in their network since 2014 and haven't found anything more egregious than any other agency from my dealings with them.

I've hired freelancers through a variety of platforms about which I have various complaints. I spoke at length with folks at Toptal and bailed because what they offered me was this: You have to pay us money right now. Then we're going to offer you a choice of something like 3 different people. They'll bill $90/hr and will probably be the same eastern European devs you can find on UpWork for $50/hr. Then you have something like 48 or 72 hours to choose one of them, and if you don't, we keep your money. Fuck that.

Re: At Booming Toptal, No Stock for Employees or Investors

#52

Post by scarmig »

staticautomatic wrote: post #45
scarmig wrote: post #22

Earlier quoted context omitted.

Whenever I talk to new grads, I tell them to value their equity compensation at zero for a small startup, for exactly that reason. But, it's similar to a lottery: you should expect to lose, but an organization can't run a lottery and pocket the winnings itself under the pretext everyone should have known they were throwing away their money.

But that's not what happened here. It's not that they were told one thing but should have known to expect another. They were told one thing, and that one thing happened/didn't happen. It's totally cut and dried.

Employees aren't sophisticated investors, particularly new grads entering the workforce.

If it was clearly monopoly money that was never going to be going into their pockets, why did the CEO bother to offer it to them? The obvious and accurate answer is he knew they would value it at sticker price (or, at least sticker price discounted by the usual startup lottery shenanigans) while it would never cost his company a cent.

The fact that he managed to con a bunch of people using what amounted to insider knowledge is likely legal, but we still call a legal con a con.

Re: At Booming Toptal, No Stock for Employees or Investors

#53

Post by 1123581321 »

bdcravens wrote: post #38
1123581321 wrote: post #29

Earlier quoted context omitted.

It’s still a separate legal entity. Sole proprietorship means there is no corporation, just a person doing business with their own assets and getting paid directly.

You can't just setup a corp and get immunity - that's a popular myth. There's many ways you can "pierce the corporate veil". However, as long as the company has officers, has all their paperwork in order, etc, it's a legit corp (regardless of how many investors there are)

I largely agree with your post, but I was only clarifying how sole ownership of a corporation is different than sole proprietorship.

Re: At Booming Toptal, No Stock for Employees or Investors

#54

Post by staticautomatic »

elsewhen wrote: post #47
staticautomatic wrote: post #20

Earlier quoted context omitted.

But they weren't lured with the promise of equity. The promise was that they'd get equity if there was a subsequent funding round . The investors, especially, have zero right to complain.

FTA: “I was told the conversion [of Toptal into a corporation] would happen in a number of months,” said Aaron Diek, who is based in central Texas and says he worked for Toptal in 2014 and 2015, when Toptal said it was generating $80 million in revenue per year. “I asked on a number of occasions, and the answer [from Du Val] was always ‘it’s coming, it’s coming.’

Maybe that employee has a case for relying on that statement to his detriment if it was a misrepresentation or an outright lie. On the other hand, it's possible that Du Val had a good faith belief that the conversion was going to occur. Who knows? We'll probably never find out unless there's a lawsuit.

Re: At Booming Toptal, No Stock for Employees or Investors

#56

Post by tschwimmer »

novok wrote: post #48
tschwimmer wrote: post #12

A lot of Sillicon Valley startup fundraising ends up resembling an iterated prisoner's dilemma. Most startups fail and it's likely that you might have to work with people a few times before you get it right. The [generally] dominant strategy for Iterated Prisoner's dilemma is tit for tat[0], and consequently you see a lot of people cooperating when when it might be more lucrative to defect is because they know that t…

But now the strategy is known, it would be harder for everyone to get investors and employees to even agree to work with him for any conditional future promise of equity on something like investment.

That's true. But it's not this guy's problem. He's super rich and therefore isn't interested in raising more money. I guess it's sort of like a tragedy of the commons type situation.

Re: At Booming Toptal, No Stock for Employees or Investors

#57

Post by scarmig »

bilbo0s wrote: post #34
scarmig wrote: post #22

Earlier quoted context omitted.

Whenever I talk to new grads, I tell them to value their equity compensation at zero for a small startup, for exactly that reason. But, it's similar to a lottery: you should expect to lose, but an organization can't run a lottery and pocket the winnings itself under the pretext everyone should have known they were throwing away their money.

But in this case the organization is pocketing the money because everyone joined the organization without being given any lottery tix at all. That's the issue. The boss told them that they would get lottery tickets later, but only if a hypothetical third person showed up and gave the boss even more lottery tickets. My point is not that the hypothetical third person never showed up, which in and of itself meant that t…

> It was entirely predictable that they would get none of the lottery tickets

No shit.

You've been in this space well over a decade. If someone offered this comp package to you, you'd likely anticipate exactly how it'd play out. (Maybe... looks like the investors got scammed this time too, so perhaps it was a practice that people typically respected.)

I guarantee that, when employees accepted their comp package, they weren't doing it with the understanding that they would never see a cent of equity if the Toptal succeeded well beyond anyone's expectations. So, yes, it was a devious move on the CEO's part, but at some point deviousness becomes sociopathic. Ripping off your workers is one of them.

Re: At Booming Toptal, No Stock for Employees or Investors

#58

Post by nostrademons »

henryfjordan wrote: post #41
nostrademons wrote: post #28

Earlier quoted context omitted.

You can have a one-person corporation where the founder is the sole shareholder, officer, and employee and still be protected from legal liability. A very large proportion of LLCs are in exactly this category, as well as a decent number of S- and C-corps. You just have to file the appropriate articles of incorporation, continue paying your taxes, and make sure that company business is done in the company name out of…

Don't forget throwing yourself a little "shareholders meeting" every year!

Yup, and re-electing yourself president of the board of directors.

Re: At Booming Toptal, No Stock for Employees or Investors

#59

Post by staticautomatic »

scarmig wrote: post #52
staticautomatic wrote: post #45

Earlier quoted context omitted.

But that's not what happened here. It's not that they were told one thing but should have known to expect another. They were told one thing, and that one thing happened/didn't happen. It's totally cut and dried.

Employees aren't sophisticated investors, particularly new grads entering the workforce. If it was clearly monopoly money that was never going to be going into their pockets, why did the CEO bother to offer it to them? The obvious and accurate answer is he knew they would value it at sticker price (or, at least sticker price discounted by the usual startup lottery shenanigans) while it would never cost his company a…

The fact that it might never happen doesn't make it monopoly money. I once had a company that issued a convertible note which basically said, "If we raise x amount of money then it triggers a conversion to preferred." We didn't raise x amount of money, so it didn't convert to preferred. Pretty simple stuff.

Re: At Booming Toptal, No Stock for Employees or Investors

#60

Post by scarmig »

okmokmz wrote: post #36
scarmig wrote: post #18

Earlier quoted context omitted.

At the very least, he ran a scam on his employees, who he lured into the company with the promise of a big payoff if it became successful. If "everyone knew" what they were getting into, why did he feel the need to give them what amounts to monopoly money to convince them to work their asses off for him?

>lured into the company with the promise of a big payoff if it became successful. Sounds par for the course for startups

Yes, but usually the employee sees something if the company is successful.

It's like playing Powerball, winning, and then the lottery agency saying "just kidding."

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