Even as a very early employee (say number 20) of a unicorn probably will not make that much...you'd be lucky to get $2M if it sold for $1B...
Most people are better off just working at a big company if they want to build wealth.
My company sold for $100M and I got zilch – how can that be?
41–50 of 391 posts
Re: My company sold for $100M and I got zilch – how can that be?
#42I feel like legal manipulation is very bad for the startup ecosystem. Even here, at the YC forums, people assume their startup equity is worth $0 and advise you to go with a FAANG (or day that they broke even with friends at faangs after their exits). How is a legitimate startup supposed to recruit the best people under these conditions?
> How is a legitimate startup supposed to recruit the best people under these conditions?
Easy. Disclose the preference of the terms you got from investors to your early employees.
This problem is self created. If you don't tell them the terms of your deal, they rightfully assume the terms will screw them, since otherwise why wouldn't you be transparent? Good workers rationally and rightfully go to FAANG instead of a startup if it doesn't feel like the startup is being fair.
Honestly, startups should be more transparent, because they can't compete on money. If they can't even offer trust and upside, they are offering literally nothing over an established public company.
Re: My company sold for $100M and I got zilch – how can that be?
#43There should be a simpler way. All this crap is too complicated.
Even if you manage to somehow do the research and understand it well at some point, unless your working with options grants on a regular basis, you'll probably forget it all before you ever leave the company.
People don't have time to do all this stuff and not get fucked over.
Re: My company sold for $100M and I got zilch – how can that be?
#44Liquidation Preference. In very simple terms: "Liquidation Preference" is an agreement between a company and an investor that when the company is acquired or IPOs, the company will pay the investor some specific amount of money BEFORE any other shareholders get paid. If the company negotiated the funding well, the liquidation preference might be 1x (basically saying the company promises to pay back, in full, the inve…
So in your example, the investors are basically getting a 300% return if the company sells for 15M or more?
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Re: My company sold for $100M and I got zilch – how can that be?
#45Liquidation Preference. In very simple terms: "Liquidation Preference" is an agreement between a company and an investor that when the company is acquired or IPOs, the company will pay the investor some specific amount of money BEFORE any other shareholders get paid. If the company negotiated the funding well, the liquidation preference might be 1x (basically saying the company promises to pay back, in full, the inve…
Even more insidious: Participating Preferred, which is effectively double-dipping.
Re: My company sold for $100M and I got zilch – how can that be?
#46One thing to remember is that the acquirer has probably done this before while the acquiree is a first-timer. The details are almost certainly going to favor the party with the most experience.
I once worked for a company that was acquired. At the first all-hands meeting after the acquisition closing, the CEO was practically gloating about how cheaply he was able to get us. All because he knew how to structure the deal in a way that wasn't transparent to our company owner.
Re: My company sold for $100M and I got zilch – how can that be?
#47Earlier quoted context omitted.
Andy from Holloway here. Our equity comp. guide is 100% free. We also have a Guide on Raising Venture Capital (340 pages). We made sure to include an entire chapter on "Assessing Whether to Raise," which includes sections on alternatives to VC and how VCs can control your company. If anyone on here wants to buy it, you can get a 25% discount on it using this link: https://www.holloway.com/rvc?vip_code=VIP25
Quick thanks for making the equity comp guide free! It's come at the perfect time for me. I'm also on the wait list for the tech recruiting guide and will be happily purchasing it when it's available. Great stuff you guys are doing!
You heard it first here: Technical Recruiting and Hiring is coming out November 19th =)
Re: My company sold for $100M and I got zilch – how can that be?
#48This matters more now that the current crop of tech companies have taken so much money. In the old days, when software companies sold software rather than traditional services enhanced by software, it was common to get to profitability around the B round and then never take any more investment after that. Google took $25-35M and then nothing until IPO, running the company from 2001-2004 off cashflow. Microsoft took n…
It's also interesting to consider the role SoftBank has played in this shift. Whoever takes SoftBank money will have the deepest pockets and will be able to play hard against competition.
This means you're pretty much forced to either take SoftBank's money, or compete against someone else with SoftBank's money. They don't care much who takes their money, because either way they have the most funded pony in the race.
Re: My company sold for $100M and I got zilch – how can that be?
#49I highly recommend reading Venture Deals by Brad Feld - this book alone lays out perfectly how minuscule are your chances of getting rich, working for a startup.
The areas to lose money are: liquidation preferences, insuficient voting rights, dilution, different stock classes, general benefits to investor's equity compared to staff equity, investor drag-along, 409A valuation, options expiration or company staying private forever.
Re: My company sold for $100M and I got zilch – how can that be?
#50Basically if you are working at startup value your options at 0 and you will be right 99% of the time.