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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

#141

Post by harrisonjackson »

100% the investors are sophisticated + informed enough to understand the risks of convertible notes. There are similar risks for a founder when accepting convertible notes. I'd guess the investors could all call the debt in at this point (like one already did) but they have no incentive to do so since they'd rather hold out for a conversion event which could still happen.

The risk to a founder is having the debt called and not being able to pay it back and/or having the valuation of the company not where you'd predicted - depending on the terms a founder could actually lose their company in this case. NAL.

Really it just seems _too bad_ for the employees and cofounder that feel like they're getting screwed. It isn't like "get it in writing" is a new concept though. I'd guess they either drank the Koolaid early on or they had a gut feeling they were getting screwed for years before this all came out. Either way, a shitty place to be in but not new or uncommon with cut-throat founder/investor types.

They should go found companies themselves! Get a big ol' piece of the pie!

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

#142

Post by throaway5983 »

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…

You're assuming that this was a rational, conscious decision on his part. I've had some dealings with him that would lead me to conclude that this is just his personal inclination. He threatened me & my company over a wholly imagined transgression (and ceased completely when our attorney asked for documentation).

Believe me or not, the main point is that working backwards from behavior to the thought process that led to it is a difficult if not impossible endeavor, and there's no reason to assume rationality in the absence of information to the contrary. I wouldn't draw any great lessons from this particular situation.

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

#143

Post by pjdemers »

larrik wrote: post #23

How does he avoid it being a Sole Proprietorship and being on the hook personally for any lawsuits against it?

LLC's only need one owner. The liability protection is still there. The drawback to LLCs is their income is the owner's income. He must pay taxes on the profit every year, at his personal marginal rate. What's left after taxes is his, not the company's. He can avoid taxes by investing back into the business, but the company can't have retained earnings. If the company runs short of cash, he must loan the money back to the company (or find someone else to borrow from).

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

#145

Post by [deleted] »

klipt wrote: post #133
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…

Also this behavior might work in the US, but if you screwed over a bunch of rich and powerful people in say, Russia, you'd probably end up having an "accident", changing the leadership of your company to someone more favorable to said rich and powerful.

[deleted]

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

#146

Post by underwater »

chucksmash wrote: post #131
hnbroseph wrote: post #96

Earlier quoted context omitted.

> One guy chose 100% equity, and is now retired. being able to choose 100% equity would suggest a particular level of financial independence before even starting. how long did they work without a salary? did they regularly sell equity as a salary-replacement?

Or perhaps a working partner and a willingness to get by on one income. Know a couple who did this in NYC for a couple of years on non-dev salaries and the trade-off definitely opened doors for them.

How is this any different from taking your entire paycheck and dumping it into a single stock each month? It's effectively a gamble, and often employees are too emotionally invested to make a rational financial investment of that scale.

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

#148

Post by nosmokearea »

I would recommend to the staff to sabotage the company. Just steal the entire freelancer database, then upload it to many anonymous websites and this will crush the company. Yes, this is unethical, but so is the founder. This evil guy have to pay for everything he did.

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

#149

Post by cjlars »

klipt wrote: post #133
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…

Also this behavior might work in the US, but if you screwed over a bunch of rich and powerful people in say, Russia, you'd probably end up having an "accident", changing the leadership of your company to someone more favorable to said rich and powerful.

If he died, his estate's administrator would essentially be forced to sell some shares in order to pay the hundreds of millions of dollars his estate would owe in taxes. Presumably, this would trigger the SAFE for both the investors AND employees. I wonder if the guy realizes he has a defacto decamillion dollar bounty on his head.

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

#150

Post by Tehchops »

robocat wrote: post #117
bwoj wrote: post #68

Earlier quoted context omitted.

The funding was in convertible notes which convert to equity in the next funding round. Presumably these agreements don't have any provisions for other exits.

In which case the investors have not been screwed because they are sophisticated enough to know the possible outcomes - that's just business. I suspect the VC team would say "well played that man".

Do you really want to burn a bridge with a16z/AH in the tech industry?

They may say "well played" in so many words, in public. Privately? They may be marshaling their bottomless war chest to unmake you.

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