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For Airbnb employees, dream turns into disillusionment

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Re: For Airbnb employees, dream turns into disillusionment

#51

Post by throwitaway321 »

huac wrote: post #22
throwitaway321 wrote: post #19

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 men…

don't you owe taxes on the stock appreciation?

I did, but for most of my tenure the company’s valuation was pretty low, meaning my original grants were pennies and the company’s fair market value was depressed, so taxes were manageable.

The way I thought of it when exercising was who cares if I lost a few thousand buying lotto tickets.

Some of my former coworkers didn’t exercise regularly and are now semi golden handcuffed*

*The company extended the exercise period to 10y shortly after I left.

Re: For Airbnb employees, dream turns into disillusionment

#52

Post by everybodyknows »

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.

Similar doings at TopTal:

https://news.ycombinator.com/item?id=20707548

Re: For Airbnb employees, dream turns into disillusionment

#53

Post by jmastrangelo »

human20190310 wrote: post #44
almost_usual wrote: post #36

Earlier quoted context omitted.

Probably homes and enough to guarantee a comfy lifestyle if things went sideways.

If the founders are hedging their bets and asking (or requiring) others not to, it's a bad sign.

Often yes but in this case I don't think so. These guys are worth _billions_. It would be financially imprudent to not cash out a little bit purely for diversification and buying a nice house or two.

If you'rea a founder in a world where you can fundraise enormous sums from private markets, why deal with the headache of going public?

Re: For Airbnb employees, dream turns into disillusionment

#54

Post by toomuchtodo »

brenden2 wrote: post #33
toomuchtodo wrote: post #15

Earlier quoted context omitted.

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

There's a trick around this which is called a forward contract. It's a contract that basically says you agree to transfer the stock in the future when you're able to do so, and in exchange you get cash now. It's almost like a loan, in a way, except the principal isn't due until the shares are liquid.

Any pitfalls?

Re: For Airbnb employees, dream turns into disillusionment

#55

Post by kjksf »

human20190310 wrote: post #44
almost_usual wrote: post #36

Earlier quoted context omitted.

Probably homes and enough to guarantee a comfy lifestyle if things went sideways.

If the founders are hedging their bets and asking (or requiring) others not to, it's a bad sign.

If I had 500 million in paper valuation and could turn 10 million into real dollars, I would do it and so would you. I would have to be an idiot not to do it.

Not being able to sell shares in private companies is a standard practice. There are good reasons for that. The reason public market is heavily regulated is to prevent fraud.

The fact that large shareholders can sell shares in companies is also a standard practice. You might not like it but it's not capricious either. The founders created the company, the investors put money in it. They get better kind of shares than an employee because their contribution is materially different.

Re: For Airbnb employees, dream turns into disillusionment

#56

Post by dymk »

orbz wrote: post #29
dymk wrote: post #6

I don't understand this article one bit. Why is the article speaking in the present tense? Why have dreams turned into disillusionment now, once the company has already announced they're going to IPO in 2020? The article bellymoans about how employees can't cash out their shares yet - well yeah duh, that's kind of the whole risk/reward aspect of startups. Maybe they go public. Maybe they go under. Maybe they take a l…

Option expiry before they go public effectively blocking early employees from being able to realize the upside of going public.

Yes, that's why the company has stated it is going public.

I don't understand why this was written in response to the company announcing its intention to IPO before expiry.

Re: For Airbnb employees, dream turns into disillusionment

#57

Post by brenden2 »

toomuchtodo wrote: post #54
brenden2 wrote: post #33

Earlier quoted context omitted.

There's a trick around this which is called a forward contract. It's a contract that basically says you agree to transfer the stock in the future when you're able to do so, and in exchange you get cash now. It's almost like a loan, in a way, except the principal isn't due until the shares are liquid.

Any pitfalls?

Depends on the terms of the contract :) The main pitfalls/problems are probably the cost associated with trying to do this, because you may need to hire a lawyer etc.

Re: For Airbnb employees, dream turns into disillusionment

#58

Post by doublerebel »

H8crilA wrote: post #27
toomuchtodo wrote: post #18

Earlier quoted context omitted.

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.

Those are some really dirty rules - to have the company sanction the transfer of its own securities. In principle it should be the other way around (i.e. shareholders decide what the company does, not company decides what shareholders do). Do you have examples of such contracts?

This is 100% standard for private companies, particularly startups. The company often prefers to buy back the equity rather than have it go to a disconnected third party. This First Right Of Refusal is often also explicitly outlined in the shareholders/purchase agreement. The largest shareholders with voting rights are who create this agreement.

It's not dirty: it keeps incentives aligned because the shareholders have common goals, and the terms are stated clearly upfront.

Re: For Airbnb employees, dream turns into disillusionment

#59

Post by Judgmentality »

human20190310 wrote: post #30
dymk wrote: post #11

Earlier quoted context omitted.

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.

> [T]he reward at a liquidity event is large Does anyone have any numbers showing the typical employee being rewarded? Exactly how much money did the median employee at Uber, Lyft, or Slack make?

I encourage you to do your own research, but the general rule of thumb is you will make more money working for an established tech company even if you do pick a unicorn. Since most of the data I have for this isn't public I couldn't share it if I wanted to, but in addition to all of the public data you can Google I personally know about a dozen people who were employee #X (X is a single digit number) at companies that were acquired for more than their last valuation at over $1 billion and only 1/4 of them actually felt like it was good financial ROI.

Re: For Airbnb employees, dream turns into disillusionment

#60

Post by rco8786 »

Judgmentality wrote: post #39
jzl wrote: post #20

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…

> Airbnb is by all accounts a wildly successful company I remember 5 years ago when I turned down a lucrative offer from Uber because I just didn't believe in the company. People told me I was crazy, that Uber was the future of transportation, and how could I not understand how stupid I was? I just looked the fundamentals and said it will never make money. AirBnB and Uber are very different companies, the most notabl…

Uber the company will probably never make money. But you would have likely made plenty post-IPO
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