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My company sold for $100M and I got zilch – how can that be?

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Re: My company sold for $100M and I got zilch – how can that be?

#211

Post by alecbenzer »

nikanj wrote: post #160
notimetorelax wrote: post #52

Earlier quoted context omitted.

That’s what I thought. The OP was hoping to receive 1mm for 4 years of work. VP role will give that easy in any sizable company.

Much easier to become a senior programmer at a 3-person startup than a VP at a sizable company.

$1M over 4 years is L4 at Google. https://www.levels.fyi/salary/Google/SE/L4/

edit: Oh, well I guess that's not counting the startup's salary. If they were getting paid $200k/yr, that's L6 at Google https://www.levels.fyi/salary/Google/SE/L6/. Less easy, but not as hard as getting to VP.

Re: My company sold for $100M and I got zilch – how can that be?

#212

Post by sand500 »

nighthawk648 wrote: post #165
dgzl wrote: post #96

Earlier quoted context omitted.

What's baffling about it? If someone were to only read the title and not the article and came to the comments section, a summary about the title would be desired. What you're probably baffled about is why do people only read the title and not the article.

I’m not sure... HN is supposed to be real time discussions of articles. summarizing the article not only is not discussion (read it is regurgitation / bastardization) but any argument / discussion had based on the summary will be inaccurate as they are going off of the words of another, who more than likely integrated logical fallacies that did not exist before the comment.

FWIW this happens on reddit too as so many posts have clickbait titles, people are trained to go directly to the comments to find out the non clickbait version.

Re: My company sold for $100M and I got zilch – how can that be?

#213

Post by hn_throwaway_99 »

nitwit005 wrote: post #183
jammygit wrote: post #20

I 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?

Those companies that have spent years building reputations as nice places to work, with high salaries, and good perks. It's a bit unreasonable to expect everyone to be tempted by some possibility of equity. I'd tend to assume that if you want highly skilled engineers at a reasonable price, you probably have to know them personally and sell the idea of building the company together to them.

But I think the main difference from today versus, say, the late 90s, is that the top companies will pay so much more for top talent. The old tradeoff used to be that mainstream companies would pay a little more, but if your startup went public you'd by like 10x ahead. Now though, I've seen cases where even if your startup does have a really strong exit, you're only looking to beat a FAANG salary by a modest amount (an amount that may lead to an extra nice vacation or two, but nothing that is going to qualitatively lead to a different standard of living).

Re: My company sold for $100M and I got zilch – how can that be?

#214

Post by user5994461 »

jariel wrote: post #67
nostrademons wrote: post #27

This 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…

Should be noted that Stripe et. al. are paying premium salaries and as they are well funded with customers and income, they're not very risky, or rather, probably the same amount of 'employment risk' as most other private entities. If they are not pushing everyone to work late hours and long weekends ... then there's little reason to expect that later employees should 'get rich' from a buyout - though they should get…

Not sure if you mean now or a few years ago. Either way, don't believe all the stripe marketing hype.

I was working at a small startup circa 2015, around 100 employees. We looked carefully into payment providers to try to reduce costs. Turns out Stripe was very small, we would be their main customer with a 2 digit percentage of all transactions if we moved our payments through them.

Stripe had (has?) few customers and little volume. Meaning very little revenues, because that's a small percentage fee of all that. It was a fairly risky business and it wouldn't be sustainable without a fair amount of capital upfront and many years.

Re: My company sold for $100M and I got zilch – how can that be?

#215

Post by dudul »

tyrust wrote: post #76
cj wrote: post #12

Liquidation 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…

It always baffles me when the top comment isn't discussing the article, but provides a response to the headline as if the article doesn't even exist.

If it saves me a click on medium, it's perfect.

Re: My company sold for $100M and I got zilch – how can that be?

#216

Post by tptacek »

arohner wrote: post #188
tptacek wrote: post #147

Earlier quoted context omitted.

As I understand it, from memory: I invest $100 for 20% of your venture. You sell for $200. Standard preference: I get $100, not $40, as my % would suggest, because I get at least every dollar I invested back. 2x preference: I get all $200, because I'm promised at least 2x my investment back. Participating preferred: I get $120 (I think?) --- I first get my invested dollars back, and then I still get my % of the ventu…

To expand on your example: I invest $100 for 20% of your venture, implicitly valuing the company at $500 . You sell for $200. - Standard preference: I get $100 or 20% of the company ($40) - 2x preference: I get $200 or 20% ($40) - Participating preferred: I get $100 and 20% of the company ($140) IMO, 1x preference, non-preferred is entirely fair. In the event the company sells for lower than the valuation, the invest…

Why moralize? It may be that there's nothing intrinsically unconscionable about it; it could just be a way of expressing the market power the investor and the company had when the funding deal was struck. You could similarly say a harsh down-round is unconscionable (a low valuation can just as easily wipe out returns for employees), but we tend not to think companies taking down-rounds are "unconscionable" so much as they are "distressed".

Founders don't like liquidation preferences for the same reason employees don't --- especially if the company limps to liquidity, which is probably the common case, as opposed to blowing the doors off things, in which case the prefs probably don't matter that much. They're incentivized not to accept high preferences; if they do accept them, isn't that just a sign that the company didn't have much bargaining power? Should the company not take the money under those circumstances, and RIF its team instead?

Re: My company sold for $100M and I got zilch – how can that be?

#217

Post by alecbenzer »

Florin_Andrei wrote: post #190
alecbenzer wrote: post #184

Earlier quoted context omitted.

You can't possibly actually values your shares at zero. Test: can I have all of your shares? No? Well then you must value them at _something_. What if I gave you $1? 10? $100? Just because something is (even incredibly) risky doesn't mean its value is zero.

How old are you?

Mid 20s, but that's not a useful way to tell someone you think they're wrong.

Re: My company sold for $100M and I got zilch – how can that be?

#218

Post by sabujp »

It's stupid that startups don't tell people going in what the overhang is, or that you won't get called back or get weird looks. Everyone is looking out for their bottom line, wtf would a startup expect any less from an employee that's about to spend 60+ hours a week toiling on the product? In any case, this is good info and I'll pass it onto my kids if they ever decide to join or build a startup. Hopefully they decide to be their own founders. I'll supply the garage :) .

Re: My company sold for $100M and I got zilch – how can that be?

#219

Post by harel »

charwalker wrote: post #203
harel wrote: post #128

This is why, for me, VC money is a last resort and an admission of defeat of sorts. If my business cannot be a business, i.e., an entity that earn's it's keep and makes profit, then maybe it's not meant to be. VC money might prolong it's life, but at that point, they are the real owners of this "entity".

With that, the founders/core group can deploy VC cash injections to stay paid and in charge vs closing shop. Quitting can be really hard for highly driven people or those thinking their idea is going to work even when the numbers say it isn't making money. There's an incentive mismatch then for them to pursue VC funding and keep going while employees with stock won't notice their probably worthless options becoming d…

I decline any offer that puts equity instead of pay. Options, equity etc. is worthless. The only way it's statistically worth anything is if it's your business.

On a side note, I wish Pud would revive fuckedcompany.com (with the last snapshot of the db before it went down). It's still relevant.

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