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For Airbnb employees, dream turns into disillusionment

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Re: For Airbnb employees, dream turns into disillusionment

#11

Post by dymk »

pmorici wrote: post #8

"two tranches of employee equity that are set to start expiring in November 2020 and in mid-2021; those shares will become worthless if the company is not trading publicly by then, they said." I don't understand the above statement. How does not being publicly traded make the options worthless? Doesn't it just make them more risky because you have to put up a pile of money w/o knowing when and at what value you will…

Yes, the article seems to not understand why people work at startups. The risk is high that your equity is worth nothing, the the reward at a liquidity event is large.

Re: For Airbnb employees, dream turns into disillusionment

#12

Post by H8crilA »

It is ironic that no one has disrupted this market yet. Pre-IPO shares can be traded - you just have to trade those with accredited investors, prior to the form S-1 filling. I'm sure there's plenty of accredited investors out there that would accept startup shares at, say, 5-10% discount. Put another 2-3% transaction costs on top of that and you got yourself a very nice and socially pleasing enterprise.

Re: For Airbnb employees, dream turns into disillusionment

#14

Post by [deleted] »

ummonk wrote: post #10

>Starting in 2011, when the young company topped a $1 billion valuation, Airbnb prohibited workers from selling shares, while allowing its three founders — Chesky, Nathan Blecharczyk and Joe Gebbia — to cash out a total of $21 million. This seems to be a common story with most startups. Founders making sure to get liquidity for themselves but not doing the same for employees.

[deleted]

Re: For Airbnb employees, dream turns into disillusionment

#15

Post by toomuchtodo »

H8crilA wrote: post #12

It is ironic that no one has disrupted this market yet. Pre-IPO shares can be traded - you just have to trade those with accredited investors, prior to the form S-1 filling. I'm sure there's plenty of accredited investors out there that would accept startup shares at, say, 5-10% discount. Put another 2-3% transaction costs on top of that and you got yourself a very nice and socially pleasing enterprise.

You have to have approval from the company to perform the transfer usually.

Re: For Airbnb employees, dream turns into disillusionment

#16

Post by H8crilA »

toomuchtodo wrote: post #15
H8crilA wrote: post #12

It is ironic that no one has disrupted this market yet. Pre-IPO shares can be traded - you just have to trade those with accredited investors, prior to the form S-1 filling. I'm sure there's plenty of accredited investors out there that would accept startup shares at, say, 5-10% discount. Put another 2-3% transaction costs on top of that and you got yourself a very nice and socially pleasing enterprise.

You have to have approval from the company to perform the transfer usually.

Why? What's so special about those shares?

Re: For Airbnb employees, dream turns into disillusionment

#17

Post by bgentry »

pmorici wrote: post #8

"two tranches of employee equity that are set to start expiring in November 2020 and in mid-2021; those shares will become worthless if the company is not trading publicly by then, they said." I don't understand the above statement. How does not being publicly traded make the options worthless? Doesn't it just make them more risky because you have to put up a pile of money w/o knowing when and at what value you will…

Incentive Stock Options (ISOs) apparently have a 10 year expiration window on them. If you were granted ISOs in 2010 but did not exercise them, you may have less than a year remaining to do so before they are lost forever.

You could exercise them, but for an early employee at a company like Airbnb that may mean literally millions of dollars in taxes that would have to be paid on an asset that can’t be sold, one that is still speculative in nature.

This doesn’t just apply to ISOs, either. I’ve learned from friends similar stage companies that even RSUs in a private company have some sort of expiration window on them, meaning if the company doesn’t IPO before that date those shares can also be lost.

There are many ways for startup employees to be screwed over on equity, especially when the company seems to be delaying IPO as long as they possibly can.

Re: For Airbnb employees, dream turns into disillusionment

#18

Post by toomuchtodo »

H8crilA wrote: post #16
toomuchtodo wrote: post #15

Earlier quoted context omitted.

You have to have approval from the company to perform the transfer usually.

Why? What's so special about those shares?

It’s typically a condition of your options agreement. Unless you get a (company sanctioned) secondary sale somehow, you’re locked up until IPO or an acquisition.

You can sometimes perform some clever financial engineering with a forward contract and a motivated investor to get around this though.

Re: For Airbnb employees, dream turns into disillusionment

#19

Post by throwitaway321 »

I spent most of my 20s (7+ years) at a startup that is currently a “unicorn”, and consequently have an ok amount of shares locked up in the same situation.

As the company’s valuation grew higher and higher the equity grants became significant lower. It was balanced out by my pay becoming more and more competitive vs other large companies. But eventuality I decided ~80% was as fully vested as I’ll ever be — Not to mention my boss and commute were driving me insane — and because I joined so early my options were cheap enough to exercise over time, so I called it quits.

Now I’m at a boring public company, commute via train, but with no hope of ever making big $$$ someday.

My overall mental health seems a lot better now. I hope I made the right call letting go of that 20%.

Re: For Airbnb employees, dream turns into disillusionment

#20

Post by jzl »

Hard to feel sorry for anyone there since it's extremely unlikely that Airbnb is going to leave hanging anyone with expiring options (i.e. the oldest and probably most valuable employees), and those people are almost all bound to make many, many millions of dollars. Not sure what the deal is with Chesky's hesitation to going public, but Airbnb is by all accounts a wildly successful company and folks are going to "get paid" as they they say in sports.

If you want to read about people with legit gripes about expiring options and lack of liquidity in an under-performing company, google any story about Palantir from the last five years.

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